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MarketScreener Homepage  >  Equities  >  Nyse  >  AT&T Inc.    T


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AT&T Again Exploring a Deal For DirecTV

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08/28/2020 | 05:23pm EDT

By Drew FitzGerald, Cara Lombardo and Miriam Gottfried

AT&T Inc. is taking a fresh look its DirecTV business, according to people familiar with the matter, exploring a deal for a service wounded by cord-cutting.

The telecom and media giant and its advisers at Goldman Sachs Group Inc. have been in talks with private-equity suitors about the satellite TV unit, some of the people said. Potential bidders include Apollo Global Management Inc., which had expressed interest last year, and Platinum Equity, these people said.

The process is at an early stage, and it's not clear what form any deal would take -- or if there will be one at all. It is possible some of the suitors will team up or submit joint proposals. Other investors that were approached have decided not to pursue bids, some of the people said.

AT&T executives have previously explored parting with DirecTV assets, including a potential spinoff or combining assets with rival Dish Network Corp., but obstacles, including antitrust concerns, have gotten in the way.

Any deal for the satellite TV service would be sizable, but likely a far cry from the $49 billion AT&T paid for it in 2015. The pay-TV unit has lost millions of subscribers in recent years as viewers switch to on-demand entertainment services like Netflix Inc. A deal could value the business below $20 billion, some of the people said.

If a deal is reached, it would start to streamline a company that used a series of acquisitions in the last decade to shift from a phone service provider into a media conglomerate. It also left the enlarged AT&T with roughly $180 billion of net debt.

The purchase of DirecTV made AT&T the biggest U.S. pay-TV provider, a title it later ceded to Comcast Corp. as satellite customers canceled. In 2018, a roughly $80 billion takeover of Time Warner added HBO, the Warner Bros. film studio and cable channels like CNN to AT&T's portfolio.

The latest deal talks were spurred by Chief Executive John Stankey, an AT&T veteran who took the corner office in July from longtime boss Randall Stephenson, who remains chairman. Mr. Stankey has said the company should sharpen its focus on core connectivity services.

Cellphone service and wired broadband remain AT&T's biggest profit engines and account for more than half of the company's over $180 billion of annual revenue. Those telecom units have played a key role stabilizing overall earnings this year as the coronavirus pandemic drained revenue in its satellite arm and in its WarnerMedia division.

AT&T shares have missed out on the stock market's recent rally. The shares are down more than 20% year-to-date, compared with a roughly 8% advance in the S&P 500 index.

The talks aren't certain to yield a sale, and the structure of any deal could result in AT&T retaining a stake in DirecTV. The Dallas company has tested market interest in several pieces of its empire only to decide to keep the units in-house. The company recently paused a sale process for its Warner Bros. Interactive Entertainment videogame unit, according to a person familiar with the matter.

Shedding a majority of the shrinking pay-TV business could offer a cash boost, while also triggering a costly write-down for AT&T. Cord-cutting has caused the most damage at AT&T, which shed 7 million U.S. video connections over the past two years. AT&T doesn't break out revenue or profits for DirecTV.

Executives say the customer-loss trend is exacerbated by the pandemic. Many bars, hotels and airlines that use satellite feeds are operating at diminished capacity -- if at all -- sapping more of the unit's revenue.

The company could still retain pay-TV customers if it decides to drop the satellite infrastructure. Executives earlier this year launched a service called AT&T TV, which delivers DirecTV channels over the internet through a cable box that customers install themselves.

"To the extent that we're able to get those customers engaged with us on those platforms, then we're in a good place and we're OK with that," Mr. Stankey said in a July interview on CNBC. "And if that takes us down a path that says satellite delivery is less important, so be it."

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com, Cara Lombardo at cara.lombardo@wsj.com and Miriam Gottfried at Miriam.Gottfried@wsj.com


Stocks mentioned in the article
ChangeLast1st jan.
APOLLO GLOBAL MANAGEMENT, INC. 0.02% 40.1 Delayed Quote.-15.82%
AT&T INC. -1.15% 27.025 Delayed Quote.-29.94%
COMCAST CORPORATION -0.43% 43.56 Delayed Quote.-2.67%
DISH NETWORK CORPORATION -1.07% 25.96 Delayed Quote.-25.99%
DJ INDUSTRIAL -0.40% 27569.95 Delayed Quote.-2.99%
NASDAQ 100 0.74% 11586.492444 Delayed Quote.31.74%
NASDAQ COMP. 0.63% 11429.870592 Delayed Quote.26.60%
NETFLIX, INC. -0.75% 484.75 Delayed Quote.50.89%
S&P 500 -0.05% 3398.39 Delayed Quote.5.27%
THE GOLDMAN SACHS GROUP, INC. -1.51% 197.81 Delayed Quote.-12.52%
THE PLATINUM GROUP PUBLIC COMPANY LIMITED -0.98% 2.02 End-of-day quote.-50.49%
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Financials (USD)
Sales 2020 171 B - -
Net income 2020 12 728 M - -
Net Debt 2020 145 B - -
P/E ratio 2020 15,5x
Yield 2020 7,63%
Capitalization 195 B 195 B -
EV / Sales 2020 2,00x
EV / Sales 2021 1,96x
Nbr of Employees 234 630
Free-Float 93,4%
Chart AT&T INC.
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AT&T Inc. Technical Analysis Chart | MarketScreener
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Technical analysis trends AT&T INC.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus HOLD
Number of Analysts 30
Average target price 32,33 $
Last Close Price 27,38 $
Spread / Highest target 38,8%
Spread / Average Target 18,1%
Spread / Lowest Target -37,9%
EPS Revisions
John T. Stankey President, CEO, COO & Director
Randall L. Stephenson Executive Chairman
John J. Stephens Chief Financial Officer & Senior Executive VP
Matthew K. Rose Lead Independent Director
Scott T. Ford Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
AT&T INC.-29.94%195 091
T-MOBILE US42.54%138 362
NTT DOCOMO, INC.28.01%119 731