AT&T’s DirecTV sale is ahead of schedule

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Even after AT&T sells its struggling pay TV businesses, it will still retain a substantial interest in DirecTV, U-verse and AT&T TV. (DirecTV)

When AT&T announced plans to sell its TV distribution business—DirecTV, U-verse and AT&T TV—it provided only a broad forecast for when the deal might close.

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 week’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.”

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If AT&T does indeed close the DirecTV divestiture in early August, it’s already mapped out the expected impact from excluding five months of DirecTV on its consolidated financial guidance. The company said it expects revenues drop by $9 billion and EBITDA will drop by $1 billion.

Even after AT&T sells its struggling pay TV businesses, it will still retain a substantial interest in DirecTV, U-verse and AT&T TV.

AT&T and TPG agreed to establish a new company named DirecTV that will own and operate the three video services. The companies said that the deal implies an enterprise value for the new company of $16.25 billion. AT&T will own 70% of the common equity and TPG will own 30% for New DirecTV.

AT&T expects to receive from $7.8 billion from New DirecTV, which it will use to reduce its debt. TPG will contribute $1.8 billion in cash to New DirecTV in exchange for preferred units and a 30% interest in common units of New DirecTV.

AT&T lost 473,000 video subscribers in its second quarter, substantially better than the 954,000 premium and streaming TV subscribers it lost in the same quarter of 2020.