AT&T hired investment bank Goldman Sachs to advise it on the sale of its pay TV operation, DirecTV.
AT&T bought DirecTV in 2015, and including the operator's loans, paid about $ 67 Billion in total ($ 49 Billion + more debt).
However, the purchase of AT&T came with the emergence of rival content bouquets from companies like Netflix and Amazon Prime, not to mention the latest OTT rivals from HBO, Hulu, Disney, Comcast, YouTube TV, Sling and Apple +.
In addition to consumer temptations, there are very low-cost devices such as Roku, Fire TV, NVIDIA Shield and others, each seeking user loyalty.
The Wall Street Journal claims that Apollo Global Management and Platinum Equity are seen as potential buyers. In addition to asking '' why would anyone be foolish enough to buy DirecTV? '"The answer is probably in the platform's free cash flow.
In January 2020, AT&T told the LA Times that DirecTV has generated about $ 22 billion of free cash flow since 2015. This is real money, and even in a "managed decline" (a phrase used by many observers) ), can be useful for a new buyer looking to cut costs.
However, about 7 Million AT&T television subscribers (composed of DirecTV, U-Verse and AT&T TV and AT&T Now services) have left the business since mid-2018. The overall number of AT&T third quarter 2020 subscribers was of just 18.4 million.
There is also a question about the value of DirecTV's expensive sports rights. Globally, sports rights are falling in value and are seen by some operators as being less important. Cutting these costs can benefit a new buyer.
WSJ says AT&T's plan is to keep 50% of DirecTV, but the big question is how much a new buyer would pay for a declining division in terms of number of subscribers.
Most observers suggest that any payment would be much less than the $ 49 Billion paid in 2015, with some pessimists, including John Butler of Bloomberg Intelligence, speaking at just $ 20 Billion.
There is always the possibility that Charlie Ergen could intervene and propose a merger between his DISH Network and DirecTV. A CNBC report on August 31 said AT&T was not speaking to DISH Network.
An earlier attempt in 2001 to merge the two DTH rivals was thwarted by arguments that a monopoly would be created. That argument would not work today, given the number of rivals on Pay TV.
However, perhaps a new buyer would take the business back to its original basics, which was providing multi-channel TV to non-urban areas and millions of Americans living in smaller, isolated rural communities.
Launched in 1994 on DirecTV, then owned by Hughes Electronics and with the help of Thomson Consumer Electronics, it made much of its digital images (using the then sexy new MPEG-2 compression technology) and a truly massive choice of channels and services.
AT&T must urgently change its $ 178 Billion net debt, not helped by its purchase of Time Warner (now WarnerMedia) for $ 109 Billion in 2018 and the TV and Film production outages because of the COVID-19 virus, it means that something will be done sooner or later.
The WSJ was also told that AT&T is investigating selling other parts / divisions of WarnerMedia, as the company announced yesterday that it will no longer sell its video game unit, Warner Bros. Interactive Entertainment (WB Games), citing that it is very valuable for that.
Analysts suggest the company may be getting rid of unnecessary assets from WarnerMedia, such as the conglomerate's IP, or its subsidiaries, DC Comics and HBO, such as Vertigo, Adult Swim or WB Pictures Animation.