As the problems surfaced at AT&T Inc.'s DirecTV subsidiary, Wall Street bankers have been inundated with the telecom giant with proposals to sell the satellite TV operator with Charlie Ergen & # 39; s Dish Network as a potential freer, Fox Business Network learned.
The bank ideas that are flowing come at a prime time for the country's largest satellite TV company, providing services to around 22.9 million subscribers. Despite its huge reach, DirecTV has bleed customers – and lost 2.5 million subscribers in the past year alone. The company is targeting activist investor Elliot Management, which has snapped up a $ 3.2 billion stake in AT&T and urged management to release DirecTV.
Meanwhile, AT&T has been sued in federal court for allegedly false number of subscribers to the streaming service DirecTV Now ̵
But Wall Street investment bankers tell AT&T that it's a simple solution that will involve selling DirecTV or a merger, people familiar with the matter say. Among the deals being pushed is one where DirecTV merges with Dish Network by spinning the companies into a separate entity or merger that can be financed with private equity companies since Dish – with 12 million subscribers – is a significantly smaller company than DirecTV, these people add.
It is unclear how seriously Randall Stephenson, CEO of AT&T, takes such overtures.
A spokeswoman for AT&T declined comment, and a spokeswoman for Dish did. But media analysts believe the two companies would be stronger together since they would share the hefty costs of satellite infrastructure.
Such a combination can help merged companies to squeeze costs, increase scale, and compete with tech and media giants entering the content streaming world.
"There has to be an appetite between the two companies to merge," said Peter Adderton, a veteran telecommunications manager and founder of prepaid wireless service Boost Mobile. "The biggest concern I would think about dishwashing and direct TV is the huge infrastructure costs both companies have, there are clearly new competitors in the video room: Youtube, Disney, Amazon and others who do not have these old infrastructure costs."
|Ticker||Security||Last  Change||% Chg|
|DISH  DISH NETWORK CORPORATION||35.30||-0.78  -2.16%|
Shares of Dish, which had been down four percent today, received two percent on a FOX Business report on A possible merger Shares for AT&T closed at $ 37.16
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Stephenson, CEO of AT&T, has not addressed Elliot Management's call to sell DirecTV. to AT & T's board, however, he recommended cost cuts and other disposals to strengthen the balance after the $ 85 billion acquisition of Time Warner, which closed in June 2018 and survived a challenge from the Federal Justice Department's antitrust division.
But Wall Street has been a bit skeptical of telecom screens. The company has mountains of debt and cultural differences between AT&T – a diversified telecom company – and Time Warner's most important business in news and entertainment. Shares have basically been flat since the deal was announced in the fall of 2016.
Stephenson has continued to defend the strategic feel of the deal and DirecTV's role in the company. Stephenson spoke on Tuesday at the Goldman Sachs Communacopia Conference, saying that AT&T “gets a fantastic premium for selling the small advertising inventory in DirecTV.” Stephenson also noted that DirecTV plays a key role in distributing AT & T's content: “We've always been great believers of distribution and the power of it. ”
The acquisition of DirecTV cost $ 67 billion, and AT&T took over its debt when it terminated the deal in July 2015. But DirecTV lost 2.5 million subscribers during the last 12-month period. The number of subscribers dropped to 22.9 million in the second quarter of 2019 from 25.4 million subscribers in the second quarter of 2018.
Because of that, bankers say that if Stephenson were to download it now, he would be lucky to recover half of the the purchase price.
And the potential sale price for DirecTV may fall further if Trump's boycott effort proves to be even mildly successful. In June, President Trump proposed a boycott of AT&T on Twitter because of CNN's coverage of the White House, and more recently advisers have suggested to the president that in order to pull maximum pressure on the company, he should target the boycott on DirecTV.
A White House spokesman declined comment on the matter, and it is unclear whether the president will focus any boycott on the company.
A potentially devastating blow could come if the NFL decides not to renew the so-called "Sunday Ticket" contract with DirecTV – a package that allows viewers to watch out-of-network games with their DirecTV -subscription. Failure to renew may mean that DirecTV loses 10% of its subscriber base, according to some estimates.
If DirecTV did not nab the contract, they would have to file an annual bill of $ 1.5 billion for the rights, which is the second largest amount the NFL charges any network. The only channel that pays more is ABC, which has exclusive rights to Monday Night Football for about $ 2 billion a year.
And no one guarantees that Dish, or any other freer, will seek to buy an asset that clearly drops in value. While some bankers are hopeful that a merger with Dish will solve DirecTV's problems, Dish may not be able to complete a merger as it is already involved in buying spectrum and prepaid wireless businesses from Sprint Corp. as part of DOJ's approval of the T -Mobile-Sprint merger.
Dish is seeking a partner to help expand and fund their current agreement with T-Mobile and Sprint to create a fourth major wireless carrier, based on comments Ergen today made at the same Goldman Sachs event Stephenson spoke at 1 p.m.