AT&T to Exit From Costly Push Into Media With DirecTV Sale

AT&T to Exit From Costly Push Into Media With DirecTV Sale·Bloomberg
Kelcee Griffis
2-min read
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(Bloomberg) -- AT&T Inc. announced its final exit from a costly plunge into the entertainment business with the sale of its remaining stake in satellite television operator DirecTV.

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Under the terms an agreement announced Monday, AT&T is selling its 70% stake in the business to the investment firm TPG Inc. for $7.6 billion in cash spread out over five years. In addition it has received $19 billion in distributions from DirecTV since 2021, including from the initial sale of a 30% stake in DirecTV to TPG.

The deal coincides with DirecTV’s agreement to acquire Dish, the satellite-TV division of EchoStar Corp., by absorbing $9.75 billion in related debt.

AT&T’s sale ends an expensive foray into entertainment by what was once the largest US phone company. AT&T agreed to pay total of $67.1 billion for DirecTV in 2014, including debt of almost $19 billion, to become the biggest provider of pay television. At the time, AT&T was seeking to diversify away from the wireless market, which had become saturated and subject to price wars.

Two years later, AT&T agreed to purchase Time Warner, the parent company of HBO, CNN and Warner Bros. for at total of $108.8 billion, including debt, betting it could prosper by delivering films and TV shows through its own phone lines and satellite TV hookups.

But that dream was never realized.

By the time Chief Executive Officer John Stankey took the helm of AT&T in 2020, the company was burdened with debt from the two big deals and under pressure to expand its wireless service and broadband capabilities.

DirecTV and the company’s renamed WarnerMedia unit — like many other traditional TV providers — were suffering from an accelerating loss of subscribers to a new generation of streaming services like Netflix and Amazon Prime Video.

In a stunning reversal, AT&T announced plans in May 2021 to sell WarnerMedia to Discovery Inc. for cash and stock worth $82.5 billion. Three months later it agreed to the sale of the 30% stake in DirecTV to TPG.

DirecTV’s subscriber losses tells much of the story. When AT&T bought the company in 2014 it had more than 18 million video subscribers. By the time of the first transaction with TPG, DirecTV was down to 15.4 million. Now it’s about 10 million.

AT&T said the sale of its remaining DirecTV stake will allow management to focus on being a wireless 5G and fiber connectivity company and strengthen its balance sheet.

Over almost six years of full ownership, DirecTV generated significant cash flow that should also figure into any accounting of its impact on AT&T’s finances, the phone company said.

The company expects the deal to close in the second half of 2025.

(Updates terms in second paragraph, adds AT&T comment in penultimate paragraph.)

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