AT&T completed the spinoff of the satellite provider to private equity firm TPG Monday in a deal valued at $15 billion. The transaction includes streaming provider AT&T Now and U-verse systems, which are being rebranded as DirecTV Stream. In a three-way split, AT&T gets $7. 8 billion, $1.8 billion from investment company TPG and borrowing a sum of $5.8 billion from the new DirecTV. AT&T has a 70 percent stake in the new company, despite its new status as a standalone company.
TPG once had a stake in RCN parent Astound Broadband, which it sold several years ago. The current parent company of RCN is purchasing Wide Open West, or WOW!
The Dallas-based AT&T is also spinning off WarnerMedia and is merging with Discovery Communications, in a deal expected to close next year. With these exits, AT&T once again becomes a phone company and is focusing on rolling out 5G (AT&T is the old SBC, the one-time owner of Ameritech, a baby bell spun off from the original AT&T.)
AT&T currently has 14.5 billion video customers, down from 24 million in 2015 as more and more are cutting the cord to use cheaper Internet packages such as YouTube TV, Fubo, Hulu Live + TV, and others. AT&T purchased DirecTV for $67 billion in 2015.
“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 in a press release. “Building on our recent momentum, we are well-positioned to bring unparalleled choice and value to all of our customers under one iconic brand whether they beam it or stream it.”
As part of the deal, DirecTV subscribers will keep their discounts and any bundled services under AT&T including streamer HBO Max, which remains with Warner Media and is included in the Discovery merger. In other words, the current packages you have if you are a DirecTV subscriber won’t change and you won’t need new equipment either.
DirecTV was formed by Hughes Electronics in 1994 as a satellite-TV service delivering the same type of channels physical cable systems did, with digital stereo sound and a crystal-clear picture (as clear as it got in the analog era.) DirecTV went on a spending spree, acquiring rivals USSB in 1998 and PrimeStar in 1999. The former NewsCorp. also once had a stake in DirecTV. Since AT&T took over DirecTV in 2015, many claim the quality of service has gone down while prices have gone up. Like other video providers, DirecTV has gotten into its share of retransmission consent spats with broadcasters, notably the former Tribune Broadcasting in 2012 and CBS in 2019.
The rollout and new logo and rebrand is expected to take about several months. AT&T’s video services are in the process of being rebranded as DirecTV Stream from AT&T Now, to be completed by the end of the month with no contracts or hidden fees. As of this writing, DirecTV’s website has been revamped but on-screen, the old DirecTV logo from the AT&T era (with the blue AT&T ball logo) is still present.
While DirecTV has returned being an independent entity, they will have to compete with other video service providers – especially the cheaper internet-based ones – not to mention rival satellite provider Dish, who could once again attempt a merger between the two. DirecTV still has the NFL Sunday Ticket package as a draw, but the contract expires after 2022. Given the numerous subscriber losses over the years, reinventing themselves as a streamer is easier said than done.
Note of disclosure: The person writing this is a DirecTV subscriber.