AT&T is reportedly exploring a sale of DirecTV, its struggling satellite TV business. However, a potential deal may not involve Dish Network, which has been linked to previous divestiture rumors.
According to CNBC’s David Faber, there is “no way” that AT&T is going to negotiate with Dish on a DirecTV deal. However, that doesn’t rule out a private equity firm buying DirecTV and then seeking a tie-up with Dish.
Rumors of AT&T’s reluctance to work with Dish on a DirecTV deal contrast with statements made by Dish Chairman Charlie Ergen, who has repeatedly said that it makes sense to combine the two satellite businesses.
“It’s inevitable that those two should go together because the growth in TV is not coming from linear satellite TV providers,” said Ergen during a Dish earnings call in February. He said the regulatory environment is usually behind the marketplace and that there still could be some regulatory issues there but warned that the two satellite providers can’t keep competing alone.
AT&T is reportedly hoping to have a deal for DirecTV on the books by the end of the year.
Late last week, the Wall Street Journal reported that AT&T is once again looking into a deal to offload DirecTV, which lost another 846,000 subscribers in the second quarter, according to Leichtman Research Group. AT&T and its advisers have been discussing a possible deal with private equity firms including Apollo Global Management and Platinum Equity.
AT&T is reportedly looking to sell a little more than 50% of the business so it can remove it from its financial reports but still hang onto its distribution network. However, any potential deal for DirecTV likely won’t value the company near the $49 billion that AT&T paid for it.
This is not the first time AT&T – which is looking to shed some debt – has been linked a potential divestiture of DirecTV. Last year, Fox Business’ Charlie Gasparino said AT&T was approached by Apollo, which proposed creating a new company and having AT&T offload DirectTV to the new company. Then, Dish Network would sell itself to the new company. The entire deal would have been financed by Apollo, and AT&T would have maintained control of this new company as a majority owner.
As DirecTV continues to lose subscribers, AT&T has placed its focus on AT&T TV and HBO Max as its core video products. During AT&T’s second-quarter earnings call, CEO John Stankey described the software-based video products as the “optimal way to meet customer needs” for both live, linear and on-demand content.
“Do I think satellite is necessary to respond in that area? You can go back and look at comments I made very early on, post-transaction of DirecTV, that we didn’t necessarily make that move because we love satellite as a technology to deliver premium entertainment-based video content. We like the customer base and it was an opportunity to move that customer base into the right technology platforms moving forward and that’s clearly where we’re investing,” Stankey said.