DirecTV's Future Uncertain as AT&T Mulls Over Divestment Strategies

AT&T Inc T is reportedly considering various strategies for its 70% ownership in DirecTV, America's third-largest pay-TV provider. 

This development surfaces as the telecom giant nears the expiration of an agreement that permits the sale of its stake in the pay-TV company.

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Insiders revealed that AT&T is contemplating different options, including a dividend recapitalization, introducing a new investor, or potentially selling its stake by August 2024. However, these discussions are preliminary, Bloomberg reports.

AT&T and private equity firm TPG Inc co-own DirecTV, a partnership established in 2021, valuing the business at approximately $16 billion. 

Like its counterparts in the pay-TV sector in the U.S., DirecTV faces stiff competition from streaming services, resulting in a declining subscriber base. 

The company reported a loss of around 400,000 customers in Q2, tallying its total subscribers at 12.4 million, a significant drop from over 15 million in 2021.

The reduced subscriber numbers have impacted the revenue AT&T derives from DirecTV. In H1 2023, payments to AT&T from DirecTV plummeted to $1.9 billion, down from $2.7 billion the previous year. 

This decline underscores the challenges faced by traditional pay-TV providers with the rising popularity of streaming platforms like Netflix Inc NFLX.

AT&T's exploration of options for DirecTV aligns with its broader strategy to divest significant assets, marking a shift towards focusing on its core wireless and broadband services competencies. 

In the joint venture with TPG, AT&T had garnered $7.6 billion for its DirecTV satellite and streaming service and its U-verse TV operations.

Furthermore, AT&T had previously considered merging DirecTV with Dish Network Corp's DISH satellite TV service.

Price Actions: T shares traded lower by 0.14% at $14.63 premarket on the last check Thursday. 

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.