Bidders line up for AT&T’s troubled DirecTV business

AT&T has received at least three offers that value its troubled satellite division DirecTV unit at more than $15bn, a fraction of the sum the US telecoms group paid for it in a high-profile deal five years ago.

Churchill Capital Corporation IV, the latest special purpose acquisition company set up by ex-Citigroup dealmaker Michael Klein, and private equity firm Apollo Global Management are among the bidders, said three people familiar with the process.

A deal, which could be announced early next year, would allow AT&T to draw a line under one of the worst-performing acquisitions made by the group’s recently retired chairman and chief executive Randall Stephenson, whose legacy has been stained by poor acquisitions.

AT&T acquired DirecTV for nearly $50bn in 2015 and later spun-off its Latin American business into a new company called Vrio, which is not for sale. The more than $15bn valuation that the bids give DirecTV include the unit’s debt.

The telecoms group, which has been trying to reinvent itself as a diversified media and technology company following last year’s $85bn acquisition of Time Warner, has focused most of its efforts on creating a streaming service, HBO Max, able to rival Netflix.


Fall in revenues at AT&T’s pay-TV division in the third quarter 

The DirecTV deal drew stinging criticism from activist investor Elliott Management, which last September acquired a $3.2bn stake in AT&T. Elliott, which has since exited its stake, said the deal had led to “damaging results” and AT&T had bought DirecTV “at the absolute peak of the linear TV market”.

The Wall Street Journal first reported the news of the bids for DirecTV. 

AT&T declined to comment.

The pandemic has weighed heavily on AT&T’s media business, which includes the Warner Bros movie studio, as cinemas across the US have remained closed and production suspended.

Speculation about a potential sale of DirecTV began almost as soon as AT&T closed the deal in 2015. Soon after, cord-cutting ended subscriber growth and the service has haemorrhaged roughly 7m customers since 2017. Revenues at AT&T’s pay-TV division fell about 10 per cent in the third quarter to $10.1bn. 

Concluding that cord-cutting would likely continue, AT&T has redirected resources that would have been used to retain customers towards its streaming services and other projects.

John Stankey, who succeeded Mr Stephenson as chief executive this year, helped engineer AT&T’s expansion into pay-TV and media. But since taking over, he has looked to unwind several of the deals, in part to pay down the group’s heavy debt load. 

Mr Stankey has said there are “no sacred cows” in the review of assets he is overseeing. People close to the company say it explored options to sell its digital advertising division Xandr as well as Crunchyroll, the anime streaming service.

AT&T has received expressions of interest in CNN but has played down reports of a potential sale. It also looked at options for disposing of Warner’s gaming decision, but pulled back from a sale. 

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