What happened
Shares of AT&T (T 0.99%) fell as much as 6% early Friday, then settled to close down around 2.7% following a report that the company is weighing whether to divest its stake in DirecTV next year.
NYSE: T
Key Data Points
So what
According to Bloomberg, AT&T has begun exploring options to divest its 70% ownership stake in DirecTV once it's legally able to do so. The telecommunications giant co-owns DirecTV along with private equity firm TPG through a joint venture formed in 2021. DirecTV was valued at around $16 billion at the time, and the terms of that joint venture included a three-year commitment giving AT&T the option to sell its stake after July 31, 2024.
AT&T and TPG declined to comment on the news, and DirecTV representatives stated they're not aware of "any such exploration."
Now what
AT&T could also opt for inaction, continuing the joint venture with its current structure intact. But it's no mystery that DirecTV has struggled to compete with the rise of alternative streaming media platforms, losing around 400,000 customers last quarter to bring its current subscriber count to around 12.4 million. Cash distributions from DirecTV to AT&T consequently declined nearly 30% year over year in the first half of 2023 to $1.885 billion.
AT&T might be keen, then, to maximize the value of its DirecTV stake by selling as soon as it's allowed. This would enable the company to refocus on its core wireless and broadband businesses going forward. While the market may not seem happy that AT&T is willing to divest a shrinking cash cow in DirecTV, I think it might be the best course of action.
