AT&T pondering future of DirecTV stake – report

AT&T has begun to explore options for its 70% stake in DirecTV as it nears the end of an agreement that would enable the company to sell its interest in the satellite, IPTV and streaming TV service, Bloomberg reported Wednesday.

Word of that exploration arrives more than two years after AT&T spun out DirecTV via a transaction with TPG valued at about $16.25 billion at the time. The deal effectively took DirecTV off of AT&T's books, with AT&T retaining 70% of the spun-out company and TPG owning 30%.

Bloomberg, citing unnamed people familiar with the situation, said AT&T has multiple options to consider, including a dividend recapitalization, adding a new investor or selling its stake and exiting the joint venture as early as next August. Or AT&T might ultimately decide to stand pat.

A deal isn't imminent and the talks are in the early stages, the report added, noting that a clause in the original AT&T-TPG agreement gives AT&T the option to sell its stake after July 31, 2024.

AT&T declined comment. DirecTV reiterated what it told Bloomberg – that it is not aware of “any such exploration” by AT&T.

The report also comes about amid persistent speculation that DirecTV will ultimately merge with Dish Network, a scenario that Dish Chairman Charlie Ergen has repeatedly called "inevitable."  The two sides reportedly entered "fresh talks" last year.

Related:DirecTV separates from AT&T, unveils 'DirecTV Stream' brand

AT&T's purported exploration of its DirecTV stake comes about as DirecTV and other pay-TV providers continue to shed subscribers. Leichtman Research Group (LRG) estimates that privately held DirecTV lost about 400,000 subscribers in Q2 2023, ending the quarter with 12.35 million.

Bigger picture, LRG reported this week that just 64% of US TV households have some form of pay-TV service, down from 78% in 2018, 86% in 2013, and 87% in 2008.

Bloomberg said the decline in subs at DirecTV is cutting into the cash distribution AT&T receives from the video service provider, with payments to AT&T dropping to $1.9 billion in the first half of 2023 compared to $2.7 billion in the year-ago period.

In January, DirecTV laid off about 10% of its managers as part of a process to reduce costs and right-size its business.