AT&T is considering the sale of its DirecTV division, among other strategic options, the Wall Street Journal reported, citing sources familiar with the matter. The company has been bleeding pay-TV customers over the past many quarters, with losses expected to increase in the third quarter by 300,000 to 350,000. The company also faces a class action suit regarding the unit, with allegations it made false claims about the DirecTV Now service from September 2016 to January of this year. Finally, activist investor Elliott Management called earlier this month for a strategic rethink of the company, saying AT&T should look closely at its portfolio and see what assets no longer fit.
Sources say AT&T has considered different moves, including a spinoff of DirecTV into a separate public company and a combination of DirecTV’s assets with satellite TV competitor Dish Network. The company may also choose to keep the pay-TV operations. AT&T acquired DirecTV in 2015 for USD 49 billion. Any spinoff of the unit would be unlikely until mid-2020 at the earliest, five years after the deal closed, to make it a tax-efficient transaction for AT&T, one source said.
For CEO Randall Stephenson, who has headed AT&T for 12 years, letting go of DirecTV would be an acknowledgment that a major cornerstone of his diversification strategy hasn’t gone as planned. It also adds pressure for AT&T to do well with the Time Warner deal. Stephenson has signaled he is prepared to step down as CEO as soon as next year, the WSJ said last week. Stephenson earlier this month named John Stankey the company’s new chief operating officer, a move that sparked Elliott’s decision to go public with its grievances about AT&T’s year-long buying strategy. Stankey was put in charge of DirecTV after AT&T acquired it and later moved to lead WarnerMedia, the renamed Time Warner unit inside AT&T. He is widely viewed as the heir apparent for the CEO job. Elliott viewed his recent promotion to COO as hasty, people familiar with the matter said.
