What Happened: AT&T acquired DirecTV in 2015, and the total purchase price including assumed debt was about $67.1 billion.
With the rise of various digital and OTT platforms like Netflix Inc. (NASDAQ:NFLX) there has been a steady decline in the subscriber base of DirecTV, and this is said to be the reason AT&T is exploring a sale.
Advisors from Goldman Sachs and officials from AT&T have been in talks with private equity companies, WSJ said in a late Friday story, citing unnamed people familiar with the matter.
Apollo Global Management Inc. (NYSE:APO) and Platinum Equity are seen as potential suitors, the report said.
Why It's Important: AT&T is planning to hold on to 50% of the assets, which would allow the telecom giant to enjoy the benefits of DirecTV’s distribution network.
If AT&T can sell half of DirecTV’s stake at $34 billion, it would be a no-profit, no-loss scenario for the company, and it could still generate revenue from the remaining half of DirecTV’s assets, according to WSJ.
What's Next: AT&T CEO John Stankey made his intentions about the deal clear when he said that the company should focus more on core competencies like connectivity services.
Cell phone and broadband services have been the main revenue-generating segments for AT&T, accounting for more than half of the company’s annual revenue.
The company could still retain the pay-TV customers even if they decide to drop the satellite infrastructure, according to the report.
Photo by HurricaneGeek2002 via Wikimedia.