AT&T has sold a 30% stake in DirecTV to private equity group TPG, in a deal valuing the struggling TV business at $ 16.25 billion – a third of what AT&T has paid six years ago.
As part of the transaction, AT&T splits DirecTV and its other pay television units into a separate company, of which the telecommunications group will control 70%.
Randall Stephenson, former CEO, acquired DirecTV to nearly $ 50 billion in 2015, in what has turned out to be one of the worst moves in a number of acquisitions by the executive since his retirement.
Shortly after the deal closed, subscriber growth stagnated as customers moved away from cable and satellite in favor of online streaming. The service has bled more than 7 million customers since 2017.
In a statement Thursday, AT&T admitted, “It is fair to say that certain aspects of the [DirecTV] transaction did not go as we expected. ”
Elliott Management, the activist hedge fund which bought a $ 3.2 billion stake in AT&T in 2019, criticized the purchase of DirecTV, arguing that AT&T bought “at the absolute top of the linear TV market.”
John Stankey, CEO of AT&T, said the DirecTV spin-off would “deliver optimal value.”
The deal will help AT&T reduce debt, a key priority for the group after a series of costly acquisitions, including Time Warner’s $ 85 billion purchase.
This transaction transformed the Texas-based telecommunications group into a considerable media enterprise, as the owner of HBO, Warner Bros. movie studio, and CNN.
He also charged AT&T with net debt of $ 180 billion when the deal closed in 2018, which the company has reduced in recent years through divestitures and other measures. AT & T’s net debt stood at $ 147.5 billion at the end of December.