AT&T to Sell Minority Stake in DirecTV

By McKenzie Carpenter Friday, February 26, 2021

The tides have been slowly turning in the last decade or so from traditional cable and satellite television to online streaming platforms. As a result of this changing trend, AT&T is selling its minority stake in DirecTV to TPG Capital. In doing so, AT&T is creating a new platform, New DirecTV, set for a $16.25 billion valuation.

An AT&T store.

AT&T and TPG Capital Deal

On Thursday, the telecom company announced it would be selling a 30% minority stake in the satellite TV business to TPG Capital. In this new deal, the telecom company will still retain a 70% majority stake in the satellite TV business but will be working hand-in-hand with TPG to create a new company, New DirecTV. Rumors of the deal started swirling earlier this week when CNBC reported the telecom company has more than $150 billion of debt.

The current deal of $7.8 billion values DirecTV, AT&T TV, and U-Verse at roughly $16 billion — less than one-third of the original expense the telecom company paid for the satellite TV business. The telecom company purchased the satellite TV business six years ago for $49 billion.

Regarding the satellite TV business deal with TPG, AT&T Chief Executive John Stankey said, “We certainly didn't expect this outcome when we closed the DirecTV transaction in 2015, but it's the right decision to move the business forward consistent with the current realities of the market and our strategy.”

Furthermore, the satellite TV business deal comes on the heels of a rough year for the telecom company. According to the Associated Press, AT&T’s video business lost 6.7 million customers over the last two years and claimed about 17 million subscribers at the end of 2020. Additionally, AT&T lost more than 600,000 customers in Q4 of 2020 alone.

The DirecTV sale is expected to close in the second half of 2021.

About the Industry

At one point in history, cable and satellite TV were innovative and exciting new technology. However, since the dawn of the Internet, the way people view media and entertainment content has shifted drastically and continues to affect traditional entertainment viewing methods.

Streaming platforms like Netflix, Disney+, HBO Max, Hulu, Amazon Prime, and numerous others are chipping away at satellite TV subscribers and offer convenient, commercial-free content that can be viewed anytime, anywhere.

The Associated Press reported that the number of US and Canadian subscribers to cable or satellite TV dropped by 27 million between 2010 and 2020, 6 million in 2020 alone. Conversely, streaming platform subscribers continue to rise. HBO Max launched in May 2020 and already has 17.2 million subscribers, and Disney+ has around 95 million subscribers, 9 million more than in 2019.

Since content is available at peoples’ fingertips, satellite TV and cable providers may struggle for quite some time until they, too, can figure out how to adapt to this shifting landscape.

About the Author

Headshot of McKenzie Carpenter

McKenzie Carpenter is a graduate of Central Michigan University with a B.A.A. in Integrative Public Relations and French. McKenzie has previously worked for small businesses and nonprofit organizations.

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