AT&T is closing a deal to sell a stake in DirecTV to TPG, a private equity firm.
Unfortunately for customers who expect AT&T to relinquish control of DirecTV, a Reuters report on Friday said the pending deal would give TPG a “minority stake” in AT&T’s satellite TV subsidiary. On the other hand, a private equity firm looking to extract value from a declining business would not necessarily be better for DirecTV’s customers than AT&T.
It is also possible for AT&T to cede DirecTV’s operational control, even though it remains the parent. In November, CNBC reported on a proposed agreement under which “AT&T would retain the majority economic ownership of [DirecTV and U-verse TV] companies and retain ownership of the U-verse infrastructure, including plants and fiber, “as long as the buyer of a DirecTV stake” would control pay-TV distribution operations and consolidate the business in its books. “
The latest negotiations between AT&T and TPG are “exclusive”, with other bidders out of the race for now, Reuters wrote last week, citing anonymous sources. “The advanced negotiations with TPG are the culmination of an auction that AT&T held for DirecTV for several months,” said the report.
DirecTV has lost most of its value under AT&T ownership
AT&T bought DirecTV in 2015 for $ 49 billion and reportedly was unable to obtain proposals that would rate the TV provider even at half that amount. “It was not possible to know the exact price that TPG is willing to pay, but sources said the deal could value DirecTV at more than $ 15 billion,” wrote Reuters, suggesting that the months auction did not raise the price much. , if any.
Bloomberg also reported that AT&T and TPG are in exclusive negotiations for DirecTV. “A potential deal is weeks away, and negotiations can still fail … The deal under discussion is highly structured and would include preferred shares,” wrote Bloomberg, citing an anonymous source.
TPG says it manages $ 85 billion in assets, including investments in dozens of technology companies.
AT&T lost 8 million customers
AT&T has lost nearly 8 million customers since the beginning of 2017 with its Premium TV services, which include DirecTV satellite, U-verse wired video and the latest online service from AT&T TV. The total number of customers in this category decreased from more than 25 million at the beginning of 2017 to 17.1 million at the end of September 2020.
While the shift across the cable and satellite TV industry to online streaming has hurt business, AT&T itself has accelerated DirecTV’s customer losses by repeatedly raising prices and removing promotional offers. AT&T just raised TV prices again last week. AT&T is scheduled to report earnings – including the latest numbers of TV customers – on Wednesday.