AT&T Completes DirecTV Spinoff; Satellite Operator Unites Its Internet-Delivered Bundles Under New Brand DirecTV Stream

AT&T has completed the spinoff of DirecTV into a new entity part-owned by private equity firm TPG, capping a costly six-year adventure in the satellite TV business.

The new entity, whose financials will no longer be included on the AT&T balance sheet, unveiled new branding and a new home for its internet-delivered TV packages. Later this month, DirecTV Stream will become the umbrella for streaming offerings like the one formerly known as AT&T TV Now (originally DirecTV Now).

AT&T is getting $7.8 billion in cash in the transaction, including $1.8 billion from TPG and and $5.8 billion from the new DirecTV, which is borrowing that sum. Since closing the $81 billion Time Warner acquisition in 2018 (after a protracted antitrust fight with the U.S. government), AT&T has battled to make the math work. Its deal-related debt load has unsettled investors, and it has undertaken multiple efforts over the past three years to reshape its media and entertainment assets, jettisoning 2,000 workers. It also has sold off an array of assets, from real estate to digital and international holdings, in order to pay down debt.

As of June 30, AT&T had 15.4 million video customers across DirecTV, its streaming offshoots and the U-verse cable system. At the time of the original DirecTV acquisition in 2015, the satellite service alone had 24 million customers in the U.S.

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Viewers have cut and shaved the cord as the number of stand-alone streaming options has increased. One major new streaming entrant is HBO Max, which AT&T’s WarnerMedia division launched in May 2020. AT&T has announced plans to merge WarnerMedia with Discovery into a new company, Warner Bros Discovery. Regulators are reviewing the deal, which is expected to close next summer.

Between the purchase of Time Warner (which was rebranded as WarnerMedia) and the $49 billion DirecTV deal, losses to shareholders have been estimated at $50 billion. Strategically, AT&T is narrowing its scope to telecom investing heavily in 5G technology to support its financially vibrant wireless network.

Since announcing the DirecTV spin last February, AT&T has emphasized that the transaction is not expected to have any negative impact on customers. It will not require any action on their part, the company reaffirmed in announcing the transaction close.

“This is a watershed moment for DirecTV as we return to a singular focus on providing a stellar video experience,” DirecTV CEO Bill Morrow said.

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