Advanced Television

AT&T, TPG close DirecTV deal

August 3, 2021

US multiplay telco AT&T and TPG Capital, the private equity platform of global alternative asset firm TPG, have closed their transaction establishing a new company named DirecTV. This new company will own and operate the DirecTV, AT&T TV and U-verse video services previously owned and operated by AT&T. DirecTV had approximately 15.4 million premium video subscribers at the end of the second quarter of 2021.

AT&T contributed its US video business unit to the new entity in exchange for preferred units as well as a 70 per cent interest in the common units of DirecTV. TPG contributed approximately $1.8 billion in cash to DirecTV in exchange for preferred units and a 30 per cent interest in common units of the new company. The DirecTV board will include Bill Morrow, CEO of DirecTV, and the following additional voting board members: Steve McGaw and Thaddeus Arroyo, appointed by AT&T; and David Trujillo and John Flynn, appointed by TPG.

At close, AT&T received $7.1 billion (€6bn) in cash ($7.6 billion net of approximately $470 million cash on hand) and transferred approximately $195 million of video business debt. AT&T expects this transaction will help support its debt reduction efforts, with plans to reach a net debt-to-adjusted EBITDA of below 2.5x by year-end 2023.

Not included in this transaction are WarnerMedia’s HBO Max streaming platform and regional sports networks, both of which are part of the pending WarnerMedia-Discovery transaction; Vrio (AT&T’s Latin American video operations, which are being sold to Grupo Werthein); U-verse network assets; and AT&T’s Sky Mexico investment. DirecTV will continue to offer HBO Max to subscribers along with any bundled wireless or broadband services and associated customer discounts.

The effects of this transaction are reflected in the guidance AT&T provided when it announced its second-quarter 2021 results on July 22nd, 2021.


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