DALLAS & NEW YORK—AT&T and the private equity firm TPG Capital have completed their deal to spin off DirecTV from AT&T, creating a new company, DirecTV that will own and operate DirecTV, AT&T TV and U-verse video services.
It will also unify its streaming services under one brand, DirecTV Stream.
At the end of Q2 2021, DirecTV had approximately 15.4 million premium video subscribers.
Under AT&T’s ownership, the pay TV units suffered large subscriber losses and the new spinoff quickly moved to reassure consumers that they were committed to providing better services.
"This is a watershed moment for DirecTV as we return to a singular focus on providing a stellar video experience," said Bill Morrow, CEO, DirecTV. "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."
The company said that the newly branded DirecTV Stream will become the single brand for video streaming services previously launched by AT&T, excluding HBO Max.
The transition will happen later in August and the service will continue to be available with no term commitment or hidden fees.
DirecTV also stressed that as a part of the deal, AT&T satellite, streaming or IP video customers will automatically keep their video service, any bundled wireless, internet or HBO Max services, and associated discounts with no action needed.
Over the next few months DirecTV said it will also be updating its look across its video services.
As part of the spinoff, AT&T contributed its U.S. video business unit to the new entity in exchange for preferred units as well as a 70% 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% 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 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.
AT&T had racked up large debts in its foray into the media business with the acquisition of DirecTV and Time Warner and the telco is now refocusing its capital on investing in 5G.
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 company said.
