Awful transaction and timing: AT&T finally ditches DirecTV (2024)

Inept corporate stewardship —

AT&T owns 70% of DirecTV spinoff but won't be managing it anymore.

Jon Brodkin -

Awful transaction and timing: AT&T finally ditches DirecTV (1)

AT&T has completed its spinoff of DirecTV after six years of mismanagement in which nearly 10 million customers ditched the company's pay-TV services.

AT&T bought DirecTV for $49 billion ($67 billion including debt) in July 2015 even though DirecTV and other traditional TV services were already losing subscribers in the face of competition from online streaming. Customer losses were inevitable, but DirecTV's losses under AT&T ownership went far beyond anything experienced by other major TV providers.

AT&T revealed the spinoff plan in February and announced the deal's completion yesterday. AT&T partnered with private-equity firm TPG to create a new company called DirecTV, which "will own and operate the DirecTV, AT&T TV, and U-verse video services previously owned and operated by AT&T," the announcement said.

AT&T will no longer run DirecTV, perhaps allowing it to succeed under better management. But AT&T will own 70 percent of the new company's stock, with TPG owning the other 30 percent. AT&T will receive $7.1 billion in cash to help pay down its debt, which consists of $160.7 billion in long-term debt and $19.5 billion of debt maturing within one year. TPG paid $1.8 billion for its 30 percent stake.

AT&T’s massive customer losses

In one period of just over four years, AT&T lost more than 9.5 million customers from its Premium TV services division, which includes DirecTV satellite, U-verse wireline video, and the newer AT&T TV online service. The category decreased from over 25 million subscribers in Q1 2017 to 15.4 million halfway through 2021. AT&T continually raised prices and eliminated promotional deals as the company sought a higher average revenue per customer but fell from first place to third in total TV subscribers.

DirecTV's value rapidly declined under AT&T's stewardship, as the company reported a $15.5 billion impairment charge in January 2021. AT&T last month said the DirecTV/TPG deal will lower AT&T's expected revenue for the remainder of 2021 by $9 billion. The DirecTV deal will also lower AT&T's expected EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) by $1 billion.

AT&T offloading Time Warner, too

AT&T is separately spinning off WarnerMedia, as previously reported, admitting failure in its other giant merger. AT&T bought Time Warner for $85 billion ($109 billion including debt) in 2018 and now has a pending deal to combine WarnerMedia and Discovery's assets into a "standalone global entertainment company." AT&T expects to receive $43 billion in the all-stock transaction while relinquishing ownership in the media division. AT&T shareholders are set to receive stock in 71 percent of the new media company, while Discovery shareholders would own the other 29 percent. That deal is expected to close in mid-2022.

AT&T yesterday noted that the DirecTV transaction does not include "WarnerMedia's HBO Max streaming platform and regional sports networks, both of which are part of the pending WarnerMedia-Discovery transaction; Vrio (AT&T's Latin American video operations, which are being sold to Grupo Werthein); U-verse network assets; and AT&T's Sky Mexico investment. DirecTV will continue to offer HBO Max to subscribers along with any bundled wireless or broadband services and associated customer discounts."

DirecTV and AT&T to separately focus on strengths

In its first announcement after the spinoff, the DirecTV standalone company said the new operational structure will work better than the AT&T-managed one. "This is a watershed moment for DirecTV as we return to a singular focus on providing a stellar video experience," DirecTV CEO Bill Morrow said. (Morrow's LinkedIn profile says he "is known for his global expertise in leading complex turnarounds and capital-intensive start-ups.")

The AT&T TV streaming service is being renamed DirecTV Stream. Existing customers don't have to make any changes to their streaming or satellite plans if they don't want to. "It's important to note that as a part of the deal, AT&T satellite, streaming, or IP video customers will automatically keep their video service, any bundled wireless, Internet or HBO Max services, and associated discounts with no action needed," DirecTV said.

After the WarnerMedia spinoff, AT&T CEO John Stankey will have significantly reshaped the company he took over from former CEO Randall Stephenson, who led both major mergers in an effort to turn AT&T into a media giant. Stankey has said the telecom company will shift back to its core area of expertise, becoming "one of the best capitalized broadband companies, focused on investing in 5G and fiber to meet substantial, long-term demand for connectivity."

Awful transaction and timing: AT&T finally ditches DirecTV (2024)

FAQs

Awful transaction and timing: AT&T finally ditches DirecTV? ›

AT&T owns 70% of DirecTV spinoff but won't be managing it anymore. AT&T has completed its spinoff of DirecTV after six years of mismanagement in which nearly 10 million customers ditched the company's pay-TV services.

Why is AT&T getting rid of DirecTV? ›

DirecTV was one of several large divestitures by AT&T at the time when it was trying to reverse its $100 billion strategic swerve into the media business and return to its wireless and broadband roots.

Why is DirecTV losing so many customers? ›

There are two major reasons why DIRECTV has lost so many customers over the years. Like other pay TV services, DIRECTV has raised prices every year for the last several years, causing many subscribers to defect to cheaper streaming services which have become available in abundance.

Is AT&T separating from DirecTV? ›

https://forums.att.com/ as AT&T and Directv are 2 separate companies now. As for the charge for Directv, you should be able to go back and look at your bills to see if you owe them money.

How many customers has AT&T and DirecTV lost? ›

Since AT&T Bought DIRECTV It Has Lost 14 Million Subscribers and Is Now Reportedly Looking at Selling It. 2023 was not a good year for DIRECTV. The Leichtman Research Group reports it lost 1.8 million subscribers. Now, according to the TVAnswerMan, since AT&T bought it in 2015, total losses of subscribers is 14 million ...

Is DIRECTV being phased out? ›

DIRECTV NOW service wasn't discontinued, but the name changed to AT&T TV NOW in 2018. Similarly, AT&T TV NOW and AT&T TV were rebranded to DIRECTV STREAM in 2021. The mobile app was reintroduced as the DIRECTV STREAM app.

Is AT&T TV replacing DIRECTV? ›

Yes, on August 26th, 2021, the names of AT&T TV and AT&T TV NOW have both changed to DIRECTV STREAM. Only the names have changed. New and current customers can expect the same excellent service, same great selection of channels and on demand library, same great Cloud DVR, and same great app functionality.

Who bought DirecTV from AT&T? ›

DirecTV was spun off into an joint venture 30% owned by private equity firm TPG in August 2021. The deal, which valued the business at about $16 billion, came six years after AT&T bought the service for $49 billion.

Why is my DirecTV bill so high? ›

You added additional equipment, or upgraded your current equipment (e.g., You upgraded an SD receiver to Genie, or added a Genie Mini) You incurred additional fees (e.g., Phone transaction fee, late fee, disconnection fee, Protection Plan cancellation fee, etc.)

Is DirecTV declining? ›

As of the fourth quarter of 2023, the number of DirectTV video subscribers was around 11.3 million in the United States. Like many similar providers, DirecTV is a casualty of the increasing dominance and success of streaming services, a phenomenon not just isolated to the U.S. but which has spread across North America.

How much is DIRECTV a month? ›

DirecTV subscription plans
PlanPrice
Entertainment$64.99/mo
Choice$84.99/mo
Ultimate$109.99/mo
Premier$154.99/mo
Jan 10, 2024

How to dispute DIRECTV charges? ›

How do I dispute a directv charge? To file a dispute about a bill, visit billing.directv.com/ and provide the requested information.

Does AT&T bill for DIRECTV? ›

Combined bill: One bill with one account number for multiple services. For example, you can have DIRECTV service and AT&T Internet service under one account number, and on one bill. You can combine wireless, DIRECTV, U-verse TV, or AT&T Internet services on one account.

Who has more subscribers, DirecTV or Dish? ›

Leichtman estimates that DirecTV led the pack with 11.3 million subscribers, including DIRECTV, U-verse, and DIRECTV Stream. Dish followed closely behind with 6.471 million subscribers, while Verizon Fios and Frontier reported 3.012 million and 234,000, respectively.

What channels are DirecTV losing? ›

DirecTV customers lost access to local NBC, ABC, CBS or Fox TV outlets in dozens of cities over a fee dispute between DirecTV and broadcast company Tegna, —the latest corporate battle that has resulted in viewers losing TV channels.

Who bought DIRECTV from AT&T? ›

DirecTV was spun off into an joint venture 30% owned by private equity firm TPG in August 2021. The deal, which valued the business at about $16 billion, came six years after AT&T bought the service for $49 billion.

What happens when you cancel DIRECTV? ›

Your TV Package, add-ons, and streaming services will be canceled. – Your recordings will be erased. – Your package price may increase if you restart. – If you have a contract, you may need to pay a fee for the number of months left on your contract.

Is DIRECTV in financial trouble? ›

Directv's likelihood of distress is above 80% at this time. It has very high risk of going through financial hardship in the upcoming years.

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