Selling DirecTV Could Simplify AT&T's Business: BofA Analyst

AT&T Inc. T is in talks with private equity investors to potentially sell its DirecTV business, The Wall Street Journal reported Friday. 

AT&T’s efforts to sell its stake in the satellite TV unit may outweigh the financial benefits expected from the sale, according to BofA Securities.

The AT&T Analyst: David Barden maintained a Buy rating on AT&T with a $36 price target. 

The AT&T Thesis: The Wall Street Journal article said AT&T had previously considered combining the DirecTV business with DISH Network Corp DISH, but there were regulatory and other overhanging issues, Barden said in a Monday note. (See his track record here.)

The newspaper indicated a price of below $20 billion for the sale, the analyst said. Such a deal would be only “slightly accretive” to AT&T’s free cash flow and earnings, with estimated synergies of $2 billion in the first year after the divestment versus the company’s EBITDA of around $55 billion, he said.

While such a sale would not alter AT&T’s financial position in the near-term, it could improve the longer-term trajectory and simplify the company’s business, which could focus on mobile broadband and media with 5G prospects, Barden said.

“We believe reducing the complexity of the AT&T business and its absolute debt load would be welcomed by investors.” 

T Price Action: Shares of AT&T were trading down 0.75% at $29.82 at last check Monday. 

Related Links:

Return On Capital Employed Overview: AT&T

AT&T Eyeing Sale Of Half Its DirecTV Stake: Report