CEO John Stankey (pictured) confirmed in a call with investors that last week’s deal, in which TPG will buy a 30% stake in DirecTV and other video operations, is confined to the US business only.
“If the right opportunity popped up and we thought that given the value associated with it was better than us operating, would we be open to a structural change?” said Stankey in response to a question about the Latin American DirecTV operation. “Yes, we would, and we’ve said that. But right now, this is about the domestic business, and that’s all we’re announcing here at this point.”
AT&T said that TPG Capital — a division of the US private equity group TPG, which is not connected with the Australian telco of the same name — will pay US$7.6 billion in cash and take on $200 million of DirecTV debt for the stake, leaving AT&T with the remaining 70%.
The acquisition includes two other video services, AT&T TV and U-verse, as well as the main DirecTV brand, which AT&T bought for $49 billion in 2015. The deal does not include Time Warner — now Warner Media — which AT&T bought for $60 billion two years ago and which now offers the streaming service HBO Max.
Bill Morrow, CEO of AT&T’s video unit, will run the acquired business “at closing”, said AT&T’s statement. Former Vodafone executive Morrow — whose career includes “successfully leading operational transformations of telecom and utility companies, including serving as CEO of Vodafone Hutchison Australia, Vodafone Europe and Pacific Gas & Electric”, said AT&T — will oversee the day-to-day operations of the new DirecTV company.
Stankey said: “This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fibre and HBO Max. And it supports our deliberate capital allocation commitment to invest in growth areas, sustain the dividend at current levels, focus on debt reduction and restructure or monetize non-core assets.”
He said the deal was done “as the pay-TV industry continues to evolve”, a phrase that hides the fact that the pay-TV industry is in steep decline, as customers are moving to streaming services such as Netflix and HBO Max.
He said: “Forming a new entity with TPG to operate the US video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability. TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”
