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AT&T faces more pressure to jettison DirecTV – report

John Stankey, AT&T's incoming CEO, has said that the struggling DirecTV business isn't for sale. However, it appears that bankers are preparing to change his mind and recommend AT&T blast DirecTV from its balance sheet, posthaste.

Fox Business's Charlie Gasparino reports that bankers are set to approach AT&T with a strong suggestion to offload the underperforming DirecTV "soon" as AT&T continues to grapple with rising debt loads following the acquisition of Time Warner, the need to slash costs and push ahead with ambitious (and expensive) 5G commitments.

"This is coming from bankers. This is a deal they're going to pitch," Gasparino said. While he couldn't say whether AT&T will go for the idea, "they might not have much choice. At least that's what the banks are telling us," he added.

AT&T declined comment to Fox Business.

AT&T has heard this idea before, but has resisted it. Last fall, activist shareholder Elliott Management urged AT&T to overhaul its management ranks and explore a divestiture of DirecTV, which AT&T acquired nearly five years ago for $49 billion.

Last September, Stankey stressed that AT&T had no plans to sell DirecTV, noting that it will play a key role in the company's streaming strategy and its advanced advertising business. HBO Max, WarnerMedia's new subscription SVoD service set to launch May 27, has already salted away a distribution deal with DirecTV and AT&T's other pay-TV units.

And a lot else has changed with AT&T's pay-TV business, which lost a whopping 1.03 million subscribers in Q1 2020, including 897,000 plucked from its "premium" (DirecTV satellite and U-verse TV) base.

Following the development and national launch of AT&T TV, an Internet-delivered service that is now AT&T's pay-TV centerpiece, the telco has halted sales of U-verse TV, its managed IPTV product. AT&T also has largely relegated sales of the DirecTV satellite TV service to rural areas and other regions that lack access to decent broadband.

"They have to figure out how a way to get [DirecTV] off its balance sheet and get some of the debt off its balance sheet," Gasparino said.

He also brought up an option that has been speculated – spinning out DirecTV and attempting to combine with Dish Network, even though such a combo might have trouble getting past US regulators. Fox Business reported last fall that private equity firm Apollo Global Management had proposed such a restructuring and combo with Dish, with AT&T retaining control of the newly formed company.

Meanwhile, Dish also has its hands full. It's also wrestling with steep pay-TV subscriber declines as it prepares to onboard and integrate Sprint's prepaid mobile business in the wake of the recently completed the T-Mobile/Sprint merger. Dish is also gearing up to build its own 5G network.

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— Jeff Baumgartner, Senior Editor, Light Reading

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