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AT&T May Sell a Large Minority Stake of DIRECTV

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AT&T is in talks to possibly sell a significant stake in its pay-TV businesses DIRECTV, AT&T Now, and U-Verse. The potential deal would likely value DIRECTV at less than $15 billion, according to CNBC

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Is DIRECTV going out of business?

In 2015, AT&T acquired DIRECTV in a $67 billion deal, which included the company’s debt. Since then, subscriptions to the service have dropped. DIRECTV isn't going out of business, but a partial sale would help reduce AT&T’s total debt load. The total debt load was estimated at $149 billion at the end of September. 

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Source: AT&T
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AT&T is considering a sale of parts of its holdings in DIRECTV as well as U-Verse and AT&T Now. The Latin American DIRECTV business wouldn't be impacted. Private equity firms including Apollo Management are said to be potential buyers.

What could AT&T's deal include?

Final bids for the sale of these pay-TV businesses are due in early December. The total percentage of shares that might be transferred through the deal is between 30 percent and 49 percent, according to CNBC. 

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Under the terms of the possible deal, AT&T would remain the majority owner of the businesses and keep ownership of U-Verse’s infrastructure including plants and fiber. “The buyer would control the pay-TV distribution operations and consolidate the business on its books,” according to CNBC.

DIRECTV and similar paid television subscription services have felt the pain of recent trends of “cutting the cord” or getting rid of cable TV memberships. Combined, DIRECTV and U-Verse have lost 16 percent of their continued subscriber base year-over-year in the third quarter of 2020, which left them with about 17 million subscribers.

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AT&T Now also experienced a 40 percent drop in subscriptions down to 683,000.

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Source: istock
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The Motley Fool reported that although AT&T has generated strong cash flow, the loss of subscribers is a big hit and may not bounce back. “Unloading significant minority stakes in DIRECTV, U-Verse, and AT&T Now could allow the company to take another significant chunk out of its debt load.”

Institutional investors including Elliott Management have been recommending that AT&T reduce its ownership of DIRECTV in order to decrease its debt load since it acquired DIRECTV and paid $100 billion on Time Warner. With reduced debt, AT&T might also be better positioned to focus on promoting its HBO Max subscription streaming service. 

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Investors may be reassured by the company’s continued dividend payments. Reduced debt through the potential deal should also help the company's prospects. AT&T’s next dividend declaration is expected in mid-December, according to SeekingAlpha

Craig Moffatt, a telecommunications analyst at MoffattNathanson, wrote to clients about AT&T’s difficult task ahead. The company has to manage declining businesses, cut costs, maintain a dividend, pay down debt, and invest in growth, according to CNBC

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What channel is FOX News on DIRECTV?

FOX News airs on the DIRECTV 360FOX News Channel in both HD and SD.

What channel is CNN on DIRECTV?

CNN airs on the DIRECTV Channel 202CNN in both HD and SD. 

What is AT&T's stock price today?

AT&T, which trades on the NYSE under the ticker symbol "T," closed on Nov. 3 at $27.46 per share. The stock has a current price of $27.02 as of 9:35 a.m. ET on Nov. 4. 

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