The satellite TV business has been losing subscribers amid a worldwide shift to streaming modes of media. An activist investor has recently pressed AT&T, which owns CNN’s parent company WarnerMedia, to evaluate a sale of DirecTV.
On Wednesday AT&T declined to comment on whether it is, in fact, doing that. But the Journal said the company is looking into “various options” for DirecTV including a spinoff of the unit. The telecommunications giant is also exploring the option of combining DirecTV’s assets with rival Dish Network, according to the paper, citing sources.
After the story was published, a source familiar with the matter downplayed on the notion of a DirecTV-Dish merger. The source told CNN Business that no discussions are underway with AT&T and Dish because such a deal is not realistic in the current regulatory environment.
DirecTV and Dish are the two main satellite TV providers in the United States.
“That’s been tried” in the past and rejected by regulators, AT&T Chief Financial Officer John Stephens said at an investor conference last week. “It hasn’t been successful and I don’t know that there’s any change in that regulatory perspective.”
Dish chairman Charlie Ergen made a similar point at a different investor conference on Tuesday. According to SeekingAlpha, Ergen said the “synergies and economics” make sense, but cited the regulatory hurdles as a hindrance.
So if Dish is off the table, is there another interested buyer for DirecTV? That’s unclear. The source familiar with the matter declined to say whether there are other options for AT&T’s satellite business.
The Journal reported that one option is to do nothing — AT&T may “ultimately decide to keep DirecTV in the fold.”
Some of AT&T’s top initiatives, like its advanced advertising business, benefit from the corporate connections to DirecTV.
AT&T purchased DirecTV for $49 billion, or $67.1 billion including debt, in 2015. Since then, DirecTV’s subscriber base has shrunk, so much so that it found itself in the middle of an activist shareholder revolt against AT&T’s business strategy.
Elliott Management, an activist hedge fund, released a letter to AT&T’s board last week in which it said that it has taken a 3.3% position in the company and wants to see changes. It specifically called out the DirecTV acquisition in the letter, saying the deal has had “damaging results.”
“Unfortunately, it has become clear that AT&T acquired DirecTV at the absolute peak of the linear TV market,” the letter stated.
The hedge fund urged AT&T to “divest distraction,” including possibly DirecTV.
AT&T said in response that “we look forward to engaging with Elliott. Indeed, many of the actions outlined are ones we are already executing today.”