AT&T Explores Parting Ways With DirecTV

According to The Wall Street Journal, AT&T is exploring parting with its DirecTV unit as customers are leaving the service in droves. From the report: The telecom giant has considered various options, including a spinoff of DirecTV into a separate public company and a combination of DirecTV’s assets with Dish Network, its satellite-TV rival, the people said. AT&T may ultimately decide to keep DirecTV in the fold. Despite the satellite service’s struggles, as consumers drop their TV connections, it still contributes a sizable volume of cash flow and customer accounts to its parent. AT&T acquired DirecTV in 2015 for $49 billion. The company’s shrinking satellite business is under a microscope after activist investor Elliott Management Corp. disclosed a $3.2 billion stake in AT&T last week and released a report pushing for strategic changes. Elliott has told investors that AT&T should unload DirecTV, The Wall Street Journal has previously reported. Jettisoning DirecTV would be an about-face for Mr. Stephenson, who billed the acquisition of the company as a bold move to diversify beyond the wireless phone business and tap into a growing media industry. The deal made AT&T the largest distributor of pay TV channels, ahead of Comcast. DirecTV is now part of an entertainment and consumer wireline unit that made up 27% of AT&T’s $173.3 billion 2018 revenue. For Mr. Stephenson, who has helmed AT&T for 12 years, parting ways with DirecTV would be an acknowledgment that a major cornerstone of his diversification strategy hasn’t gone as planned. It also adds pressure for AT&T to deliver on the promise of the Time Warner deal. Mr. Stephenson has signaled he is prepared to step down as CEO as soon as next year, the Journal reported last week. The Journal goes on to say that AT&T may ultimately decide to keep DirecTV because of “AT&T’s towering net debt load, which stood at more than $160 billion earlier this year. The cash generated by the pay-TV giant has helped pay down that debt and fueled other investments in the rest of the company.” “Any spinoff of DirecTV would be unlikely until mid-2020 at the earliest, five years after the deal closed, to make it a tax-efficient transaction for AT&T,” the report adds.