AT&T has officially closed on its deal with private equity firm TPG Capital to spin off DirecTV into a new company that owns and operates the DirecTV, AT&T TV and U-verse video services in the United States.
The new DirecTV had about 15.4 premium video subscribers, as of the end of the second quarter, AT&T reported. AT&T retains a 70% interest in the company, and TPG has a 30% stake. AT&T received a payment of $7.1 billion in cash at closing, plus the new company assumed about $195 million in existing DirecTV debt.
AT&T has indicated that it will use the proceeds from the DirecTV transaction to reduce its debt, including its $23.407 billion in C Band spectrum purchases.
The deal does not include the HBO Max streaming platform, AT&T’s regional sports networks, its Latin American video operations (Vrio) or Sky Mexico, or AT&T’s U-Verse network infrastructure. AT&T is also paring down those businesses in separate, pending transactions. Vrio is being sold to global private holding company Grupo Werthein. Vrio provides primarily video services, including DirecTV services and broadband and has 10.3 million subscribers across 11 countries in Latin America and the Caribbean; Vrio’s broadband operations in Colombia and AT&T’s interest in Sky Mexico are not included in the transaction.
AT&T is also spinning off its WarnerMedia business and combining it with Discovery in a transaction in which AT&T will receive $43 billion and hold 71% of common equity in the combined company. WarnerMedia’s flagship product is the HBO Max streaming service; the company also controls CNN, TBS, TNT, TruTV, Cartoon Network, the DC catalog of intellectual property, and the Warner Bros. film studio. Discovery’s portfolio includes the eponymous brand as well as HGTV, Food Network, TLC, Animal Planet and other properties.
The telco is also in the midst of a pending sale of its WarnerMedia mobile games studio, Playdemic, to Electronic Arts for $1.4 billion.
AT&T has been up-front about its intent to reduce its debt by offloading non-core businesses and has made a number of those transactions in the past year or so. In addition to the previously mentioned deals, last November, AT&T closed on the $1.95 billion sale of its Puerto Rico and Virgin Islands operations; in October, it had finalized a deal to sell Central European Media Enterprises (which it acquired as part of Time Warner) to investment group PPF in a cash deal valued at about $2.1 billion.
DirecTV’s current CEO, Bill Morrow, will take the reins at the new DirecTV. Morrow has been with A&T since 2019 and was previously CEO of Vodafone Hutchison Australia, Vodafone Europe and Pacific Gas & Electric.
AT&T will still be able to leverage the various video services that the new DirecTV now owns, in its bundles. The carrier has said that the new DirecTV will have a commercial agreement with AT&T to continue offering bundled TV services for AT&T’s wireless and internet customers, and that both companies will serve customers through multiple distribution channels; they will also have agreements in place to give the new company’s video customers continued access to HBO Max.
The new DirecTV is headquartered in El Segundo, California and Denver, Colorado. In terms of workforce, the two partners have said that “substantially all” of AT&T’s U.S. video operations employees will become part of the new DirecTV and that the new company will recognize, assume and honor the existing union contracts in place.
