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AT&T Is Looking to Unload Its $1.6 Billion Ad-Tech Boondoggle

By Danny Vena – Sep 3, 2020 at 3:34PM

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The telecom giant is feeling the weight of its heavy debt load.

AT&T (T -0.99%) is looking to sell off its digital ad business as a way to reduce the company's massive debt, according to a report in The Wall Street Journal earlier this week. The company acquired AppNexus for $1.6 billion in mid-2018, and is now interested in offloading its ad-tech operations in a move designed to improve its balance sheet. 

The negotiations are still in the early stages, according to the report, which notes that AT&T is unlikely to recoup what it paid for the business just two years ago.

Two hands touching digital globe showing various consumer advertising touchpoints.

Image source: Getty Images.

AT&T's digital ad business, which was rebranded Xandr, has struggled to make headway against entrenched online advertising giants Facebook (META -0.93%) and the Google division of Alphabet (GOOGL -0.21%) (GOOG -0.19%), which together control about 60% of the U.S. digital ad market. Xandr generated about $2 billion in revenue in 2019, up 16% year over year. To give those numbers context, Facebook and Google produced ad revenue of $70 billion and $135 billion, respectively, in 2019. 

Ad-supported streaming services were reluctant to sell their advertising inventory on AT&T's platform because they viewed the company as a competitor. The recent launch of HBO Max earlier this year confirmed those views.

AT&T's balance sheet is mired in debt, which totals nearly $169 billion. The company ended the second quarter with nearly $16 billion due in the coming year and more than $153 billion owed over the longer term. 

The company is also exploring the sale of other assets to raise cash. It is considering unloading its DIRECTV satellite television business and has been in discussions with private equity companies about a potential sale. AT&T is also entertaining offers for Crunchyroll, its anime-focused streaming service.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares) and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. The Motley Fool has a disclosure policy.

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