AT&T Inc. (NYSE:T) has opened discussions as it seeks to trim its stakes in legacy assets. The second-largest carrier is reportedly in talks with Apollo Management as it eyes a deal for its minority stake in DirecTV, AT&T Now, and U-Verse pay-Tv business.
AT&T Divestment
According to people familiar with the talks, the company is looking to maintain a majority of economic ownership in the businesses. The carrier is also insistent on maintaining ownership of the U-verse infrastructure. However, the ultimate buyer could control the pay-tv distribution operations while consolidating them in their books. Likewise, the final deal could include 30% to 49% of the combined pay-tv distribution business.
While final valuations for the businesses up for sale are yet to be determined, AT&T is open to accepting bids until early December. AT&T acquired DirecTV in 2015 in a deal worth $67 billion inclusive of debt. While the company is looking for a deal of less than $15 billion for a minority stake, the deal will not include DirecTV’s Latin American business.
In the recent past, AT&T has pivoted away from the legacy pay-TV business, opting to focus more on the HBO Max streaming service. With content streaming pilling pressure on cable TV, AT&T has seen a good number of its customers flee to other cable companies offering high-speed broadband services.
Growing Pressure
The divestment drive does not come as a surprise as the cable business has come under pressure in recent years. In the recent quarter, AT&T confirmed that its legacy TV unit made up of DirecTV and U-verse has about 17 million subscribers down by 16% year to date. AT&T Now subscribers have already dropped by 40% to 683,000.
AT&T is under growing pressure from investors, including activist hedge fund Elliot Management to divest some of the assets belong to DirecTV in a bid to generate shareholder value. The sell-off should result in additional cash that should allow the carrier to pay down its debt.