AT&T Considering Options for DirecTV Unit

September 19, 2019 | Headlines, Hedge Funds

AT&T may sell DirecTV, among other options, as consumers drop TV connections.

Telecom giant AT&T, which bought DirecTV for $49 billion in 2015, maybe considering a U-turn on the unit.

According to sources in the know, the satellite TV service is seeing a diminishing subscriber base. This trend is a result of consumers ‘cutting the cable cord.’

Activist hedge fund Elliott Management has assailed AT&T for the transaction and demanded that it unload the TV unit.

However, AT&T may have considered several options regarding DirecTV.

Telecom giant AT&T may sell DirecTV after spinning it off

According to sources, one option AT&T thought of was to spin off DirecTV and then to sell or combine its assets with Dish Network Corp., its primary rival in satellite TV.

However, regulators may view the transaction unfavorably, going by the previous history. Regulators have previously rejected satellite TV mergers such as the 2001 transaction between EchoStar and Hughes on anti-trust grounds.

Again, recall that Dish TV, in 2014, discussed a merger proposal with DirecTV in 2014, before AT&T walked away with the latter.

AT&T Finance chief John Stephens is also wary of the regulatory scrutiny: “From a regulatory perspective, it hasn’t been successful, and I don’t know if there is any change in that.”

Ultimately, AT&T may also decide to retain the satellite service unit.

DirecTV a mistake

Despite the falling subscriber base, DirecTV has been a cash cow for AT&T and helped cut its massive debt load. AT&T reported debt of over $ 160 billion earlier this year.

Besides, chief executive Randall Stephenson may be unwilling to admit the DirecTV transaction as a mistake. According to the Wall Street Journal, he may be prepared to step down as soon as next year.

That’s probably not soon enough for Elliott Management. The hedge fund said the sliding fortunes at the DirecTV were overshadowing the stronger results from AT&T’s telecom unit.

AT&T’s DirecTV transaction had provided only “damaging results,” Elliott said.

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