Almost six years on from one of the most ill-fated acquisitions in media history, DirecTV is heading for a new lease of life after AT&T struck an agreement with private equity firm TPG at the tail end of last month. The U-verse and AT&T TV services will also be brought under a new standalone DirecTV organization, in which TPG will hold a 30% stake and AT&T 70%.
It means that the main AT&T operation will become a one-man band when it comes to video, selling only HBO Max via its WarnerMedia arm. That means over-the-top video will become AT&T’s primary TV business once DirecTV is cut loose, a significant change of focus for an operator that has consistently kept faith with traditional TV delivery (though of course, AT&T is still the majority shareholder in DirecTV, for now at least).
The deal was agreed just days after activist investor Elliott Management returned to the fold, reinvesting an estimated $100m in AT&T. Elliott had called for the sale of DirecTV, and the TPG transaction seems to have been the best AT&T could do in that regard, given the shortage of willing buyers for the whole of DirecTV.
Of course, even with the new DirecTV business being valued at $16.2bn, no one can forget that DirecTV ended up costing AT&T $61bn. But TPG will be able to take the pay-TV unit behind the private equity curtains, and dice it in any which way it sees fit, restructuring to try to achieve a streamlined, and possibly more valuable and saleable, asset.
AT&T’s MVPD U-verse offering, its IP-based AT&T TV service, and the DirecTV brand itself, will soon be dashed from the AT&T books, much to the relief of shareholders.
While AT&T will retain 70% in the new business, it may hope the TPG deal will be a precursor to full divestment of DirecTV, with some analysts still clinging to the idea of a merger with the other satellite TV provider, Dish Network, further down the line.