AT&T is reportedly having bother promoting DirecTV at an something however huge loss


Enlarge /. AT&T corporate office on November 10, 2020 in El Segundo, California.

Getty Images | AaronP / Bauer-Griffin

AT&T is disappointed with the $ 15 billion bids it received for DirecTV and has "advised potential bidders that they can cancel the auction altogether if they don't get better bids," the New York Post reported yesterday, citing "sources close to the situation". ""

AT & T started looking for a buyer for the difficult satellite division months ago. News reported in October that DirecTV was valued at around $ 15.75 billion in the first round and that AT&T apparently couldn't get better bids in subsequent rounds of auctions. On Dec. 9, the Wall Street Journal reported that DirecTV's latest deals "valued more than $ 15 billion including debt". (Actual sales price could be less than $ 15 billion as AT&T appears to intend to maintain a stake in DirecTV.)

The top bidders included the investment firms Churchill Capital and TPG. "Apollo Global Management, long considered a front-runner by many, has submitted an offer valued at less than $ 15 billion," the Journal wrote, citing its own anonymous sources. The journal said the auction was in a late stage and a sales contract could be closed in early 2021.

One deal doesn't seem certain, however, as the New York Post's story yesterday said "AT&T has postponed the deadline for final deals on DirecTV to January" as deals are low.

"(I) nsiders inform Swiss Post that AT&T – dissatisfied with these offers – has invited private equity giant TPG Capital to study the books in the hope of making a binding offer that will support the price "reads the Post's article. The Post described bidders as "surprised by AT & T's threat to pack and go home, in part because the DirecTV business faced increased competition from video streaming platforms like Netflix and, more recently, the HBO Max – AT&T service continues to shrink ".


According to previous reports, the business talks included scenarios such as AT&T maintaining a minority stake in DirecTV, or even maintaining a majority stake while a buyer takes control of the pay-TV distribution.

Millions of DirecTV users fled AT&T.

AT&T has lost nearly 8 million customers to its premium TV services since early 2017, which include DirecTV satellite, U-verse landline video, and the newer AT&T TV online service. The total number of customers in this category fell from over 25 million in early 2017 to 17.1 million at the end of September 2020.

AT&T has driven many of these customers out by repeatedly raising prices and reducing the availability of special offers, and has already announced another round of DirecTV and U-Verse TV price increases for January.

It would be a "bitter pill" for AT&T to sell DirecTV for less than a third of the $ 49 billion it paid for the company in 2015, financial journalist James Brumley wrote in the Motley Fool last week. But AT&T should still take an offer at this level, Brumley wrote:

Bloomberg Intelligence's John Butler estimated in August that DirecTV would raise around $ 20 billion. Any plausible offer is still less than half of the $ 49 billion AT&T paid for the cable operator in 2015, not including taking on DirecTV's $ 17 billion debt.

Such a deal would be a bitter pill for AT & T's management (as well as its shareholders) to swallow and mean a loss to the deteriorating television platform. Given DirecTV's lack of options and problems, an offer in the range of $ 15 billion to $ 20 billion plus a portion of AT & T's $ 153 billion debt burden would be an acceptable exit from the business. This is especially true when you consider that AT&T is reportedly looking to retain much of DirecTV and just remove ownership from its balance sheet and transfer management of the business to the buyer.


Steven Gregory