Your browser is not supported. Please update it.

21 January 2021

AT&T acts in possible precursors to wrapping up DirecTV sale

AT&T has made a – shall we say – predictable yet contentious start to 2021, with milestone moves swept in at the tail end of last week from opposing ends of the US operator’s video strategy spectrum.

This first was to belatedly fold AT&T TV Now into the simpler moniker of AT&T TV, something Faultline called for from day dot of DirecTV Now being rebranded to the seven-syllable marketing car crash back in August 2019.

The second, from within the WarnerMedia division, has aimed to smooth over the backlash received from scheduling 17 movies for launch directly on HBO Max this year, essentially offering more favorable contracts to filmmaking and acting communities to cover its back.

Both were absolutely necessary business decisions from AT&T, as the operator edges ever closer to offloading the burdensome DirecTV satellite business and sculpts itself for a life without satellite. But will it ever happen?

Without Covid-19, AT&T might have already secured a buyer for DirecTV by now for a suitable sum. Unfortunately for AT&T, DirecTV’s market value continues to crash ahead of the operator’s impending January deadline for offers. Something that no one would have predicted pre-pandemic, is that AT&T might actually prefer to persevere with DirecTV rather than settle for the latest in a paltry round of <$15 billion bids for the assets.

While AT&T has desperately sought to prop up this price point, bringing in private equity firms to scrutinize DirecTV’s financials for desperate crumbs of value, a damning report from New Street Research has projected DirecTV’s EBITDA to plummet from $4.5 billion in 2020 to $3 billion in 2022. No business can sustain that rate of earnings decline.

While many sources suggest AT&T won’t budge from this $15 billion baseline, we think it’s becoming painfully obvious how the operator will be forced to take a lower offer – but not necessarily for the whole pie. Thankfully, sources speaking to The New York Post are inclined to agree, reporting that bidders would pay approximately $3.75 billion for a 49% stake in DirecTV, leaving AT&T to finance and maintain its controlling stake, and some $7.5 billion financed with new debt.

In the meantime, changes are afoot further field following an executive reshuffle at WarnerMedia Latin America in preparation for HBO Max’s arrival in the continent later this year.

As for how AT&T’s technology stack is shaping up in 2021, dispatching of Quickplay Media technology last year was one of several clues to what was in store for AT&T TV Now. Quickplay Media played a pivotal role in AT&T’s OTT video transformation over the last few years, working on app development, encoding, packaging, and security. AT&T has since shifted many of these services to AWS with sizable cost savings over running various in-house software divisions.

That said, AT&T did just acquire Canadian UI developer You.i TV just before the new year, which may appear a little contradictory, but You.i TV has impressed with its cross-platform credentials. Its Engine One technology has been fine-tuned for the best part of a decade to be expert at equipping developers with a single codebase for creating multiscreen app ecosystems.