AT&T is reportedly under renewed pressure to sell DirecTV.
Fox Business reporter Charlie Gasparino said he’s heard from unnamed bankers recently who said, “They believe AT&T will offload its DirecTV satellite unit soon.”
The consensus opinion, according to the reporter, is that DirecTV will be sold to private equity firm Apollo Management, which will merge it with Dish Network’s also-struggling satellite TV business, take on all associated debt, and make the entire enterprise private.
You can see Gasparino’s Wednesday segment here.
Gasparino’s report isn't exactly breaking news. Activist equity firm Elliott Management pushed AT&T last fall to sell the struggling satellite division it acquired in 2015 for $49 billion. And Apollo Management already made a proposal to execute what Gasparino outlines last October.
Under outgoing CEO Randall Stephenson, AT&T hasn’t made the big move. But Gasparino’s report reiterated that the pressures for AT&T haven’t gone away.
“AT&T is coming under tremendous shareholder pressure to cut cost,” he said. “It had high debt loads already. It has to get into 5G. They have a very underperforming asset known as DirecTV, losing subscribers left and right. They have to figure out a way to get it off its balance sheet and get some of the debt off its balance sheet. They way overpaid for it. They are not going to get the tens of billions of dollars they paid for it. The best they can hope for is something along the lines of what was pitched earlier in the year.
Dish Network, meanwhile, is now on the clock to build out its own 5G network, facing government fines and the forfeiture of wireless spectrum if it doesn’t meet government deadlines.
Both DirecTV and Dish have reliably lost well over 100,000 pay TV customers in every quarter recently. In fact, DirecTV had around 22 million customers when AT&T closed on it five years ago. It finished Q1 with only around 15 million.
“[It’s] Probably inevitable that those two should go together just because the growth in TV is not coming from linear satellite TV providers,” Dish Network chairman Charlie Ergen told investors in February. “It's coming from huge programmers, and trillion-dollar companies. So, I think the regulatory environment, usually it's behind the marketplace, but I think that becomes increasingly likely that that makes logical sense.”
Ergen conceded that “there still could be regulatory issues there”—a factor that has restricted DirecTV and Dish from being combined in the past.
Given the emergence of OTT competition, however, most analysts believe regulatory hurdles to such a combination are now gone.