AT&T is in talks with private equity firms, including Apollo Management, to sell a significant minority stake in their DirecTV, AT&T Now, and U-Verse pay-TV businesses in a complex transaction. The trash will move legacy assets off the wireless carrier’s balance sheet, according to people familiar with the matter.
Under the terms of the proposed agreement, AT&T will retain majority of economic ownership over the businesses and will retain ownership of U-question infrastructure, including the plant and yarns. Buyers would control pay-TV distribution and consolidate the business on their books. The deal could cover 30% to 49% of all pay-TV distribution businesses, they said, who requested anonymity because discussions were private.
These people said the final bid will come in early December. While the valuation has not been determined, a deal could price DirecTV under $ 15 billion including debt, two of them said . AT&T acquired DirecTV in 2015 for $ 67 billion. A deal would not cover DirecTV’s Latin American business, the people said.
AT&T ended the third quarter with about 17 million legacy TV subscribers (DirecTV and U-Verse combined), down more than 16% from a year earlier. AT&T Now customers fell 40% to 683,000.
AT&T has come under pressure from investors, including hedge fund Elliott Management, to divest after it acquired DirecTV and then spend more than $ 100 billion on Time Warner. The proposed deal structure would give AT&T cash to pay off debt while keeping the equity test low enough that a fund, such as Apollo, could execute the deal on its own, the two of them. they said.
AT&T has abandoned its old pay-TV since it acquired DirecTV, focusing instead on adding HBO Max streaming subscribers. The satellite TV provider has drawn in millions of subscribers in recent years as customers turn to cable companies that also offer high-speed broadband or completely abandon traditional bundled television. .
Craig Moffett, a telecom analyst at MoffettNathanson, wrote in a customer note after AT&T third-quarter profits, writing in a customer note. “They have to manage a portfolio of businesses that are in decline by cutting costs, while still not hurting their cash-generating prospects too much, and looking to maintain dividends, pay down debt. enough to appease the rating agencies, and always, invest in some of the growth areas they deserve (wireless, HBO Max and broadband based fiber optics). “
Spokesmen for AT&T and Apollo declined to comment.