AT&T is shutting down part of its TV business, with private equity firm TPG owning the DirecTV, AT&T TV and U-verse brands as it sheds assets to deal with a burdensome debt burden and Streaming business focusing on mobile telephones.
The deal, which will give TPG a minority stake, values the TV business at $ 16.25 billion – nearly a third. $ 48.5 billion AT&T paid just for DirecTV In 2015.
As of December AT&T has borrowed $ 157 billion in debt, in addition to the purchase of DeresTV and TimeCaner as a result of megadeals. For which he paid $ 85.4 billion In 2018. The entertainment industry has been disrupted by Netflix and an array of competitors fighting for audience attention, complicating plans for DirecTV, which lost more than 3.2 million subscribers in 2020, and is considered for HBO is. Crown jewel Business of Time Warner.
Investors have worried that AT&T will not become profitable enough to manage the debt burden. The company made approximately $ 53.8 billion in pretax profit last year, meaning it accounted for slightly more than $ 3 of total debt for each dollar of pretax profit. Traditionally, AT&T prefers that ratio to be close to 2.5 to 1.
Under the terms of the deal with TPG, AT&T will own 70 percent of the new stand-alone company, which will go through DirecTV, and TPG will own 30 percent. The board of the new unit will consist of two representatives from each company and chief executive of AT&T’s video unit Bill Morrow.
Companies hope to fix the challenges facing DirecTV – namely a subscriber base that bleeds subscribers faster than most pay-TV services. DirecTV Group’s annual sales fell 11 percent to $ 28.6 billion last year and operating profit was down 16.2 percent to $ 1.7 billion. The company is also relying on AT&T TV, the company’s development New service that streams TV over the Internet on set-top boxes.
“We certainly did not expect this result when we closed the DirecTV transaction in 2015, but this is the right decision to take the business forward,” said John Stankey, AT & T’s chief executive, who WarnerMedia Led both DirecTV and Time as an executive at. Warner deals.
TPG has substantial experience with corporate partnerships, including Intel has a joint stake in McAfee Computer Security Unit And teaming with In its deal for Hampas Holidays provider Kindred. Is part of Spotify, Creative Artist AgencyCable provider Astound Broadband, and Entertainment Partners, which provides software to the entertainment and video industry.
AT&T has not rejected more divisions.