AT&T and TPG Capital have officially closed their transaction and established a new company named DirecTV.
This new company will own and operate the DirecTV, AT&T TV and U-verse video services that were previously owned and operated by AT&T. DirecTV had approximately 15.4 million premium video subscribers at the end of the second quarter of 2021.
AT&T contributed its U.S. video business unit to the new company in exchange for a 70% interest in the common stock of DirecTV. TPG contributed approximately $1.8 billion in cash to DirecTV in exchange for a 30% interest in common stock of the new company. The DirecTV board will include Bill Morrow, who is also CEO of the new combined company, along with additional voting board members: Steve McGaw and Thaddeus Arroyo, appointed by AT&T; and David Trujillo and John Flynn, appointed by TPG.
As part of the deal, AT&T received $7.1 billion in cash and transferred approximately $195 million of video business debt.
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“This is a watershed moment for DirecTV as we return to a singular focus on providing a stellar video experience,” said Morrow in a statement. “Building on our recent momentum, we are well-positioned to bring unparalleled choice and value to all of our customers under one iconic brand, whether they beam it or stream it.”
Customers who choose satellite service will get the current DirecTV service including access to live sports in 4K HDR and NFL Sunday Ticket along with the DirecTV mobile app. Customers who want a streaming option will get DirecTV Stream, the new single brand for video streaming services previously launched by AT&T.
The companies said the transition will happen later this month and customers will be allowed to either bring their own streaming device or use DirecTV’s streaming device, which the company said can be used to build an integrated and customized experience in the home with the ability to watch and pause live TV on up to 20 devices.
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Although the deal does not include WarnerMedia’s HBO Max streaming platform and regional sports networks—both of which are part of the pending WarnerMedia-Discovery transaction—DirecTV will continue to offer HBO Max to subscribers along with any bundled wireless or broadband services and associated customer discounts. The deal also does not include U-verse network assets.
In February, the company said it expected the deal with TPG Capital to spin off its fraught pay TV segment would close in the second half of 2021. During last month’s earnings call, the company indicated that closure could come fairly early on in the back half of the year.
“And speaking of good execution, we're seeing indications that our DirecTV deal with TPG might close in the next few weeks ahead of what we expected,” said CEO John Stankey, according to a Motley Fool earnings transcript. “I think we moved through the DirecTV process a little bit faster than what we had expected. It's not a complicated transaction.”
With DirecTV, AT&T TV and U-verse off its books, AT&T said it expects its revenues will drop by $9 billion and EBITDA will drop by $1 billion.