Saddled with debt from its acquisitions of DirecTV and Time Warner, telecom giant AT&T is looking at new ways to offload one of those two properties.
The Wall Street Journal reported this week that the phone and media company has held discussions with several private equity firms about acquiring part or all of its satellite TV service.
After years of failing to attract consumer demand for its U-Verse fiber-delivered TV service, AT&T acquired DirecTV in 2015 for $49 billion plus around $20 billion more of DirecTV’s debt.
The acquisition gave AT&T a significant boost in the pay TV landscape, particularly with respect to DirecTV’s existing carriage agreements with local broadcasters and national programmers. Those agreements helped AT&T reboot its U-Verse service into two Internet-based streaming alternatives: AT&T TV, which was designed to resemble cable television, and the standalone service AT&T TV Now.
But the deal also came at a time when consumers were starting to ditch costly cable and satellite services in favor of cheaper alternatives like Netflix, Hulu and Amazon Prime Video. Upstarts Sling TV and YouTube TV grabbed a slice of the streaming pie with low-price cable alternatives, though they’ve steadily increased in price over the years to something resembling more like cable.
In recent years, AT&T has leaned hard on DirecTV‘s exclusive arrangement with the National Football League (NFL), ViacomCBS and Fox Corporation to provide out-of-market television access to every regular season football game. But that wasn’t enough to retain subscribers: As of earlier this year, DirecTV had just over 16 million paying customers, according to some estimates.
A deal with a private equity firm would help AT&T erase some of the debt from its books while still enjoying the benefits of a large pay television distribution network with lucrative deals like its exclusive agreement with the NFL, the Wall Street Journal said. At least one private equity firm, Apollo Global Management, expressed interest in the idea last year, the Journal said.
AT&T’s discussions with the firms aren’t guaranteed to result in a deal, and an agreement could be conditioned on acquiring other AT&T properties like CNN.
A deal with a private equity firm that allows AT&T to retain some control over the business would be a blow to rival satellite provider Dish Network, which has tried several times over the last three decades to acquire its competitor. In February, Dish Network chief executive and chairman Charlie Ergen told investors he felt a merger was “probably inevitable.”
Disclosure: As of the publication date of this story, the author of this article owned stock in AT&T.