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AT&T Inc. is taking a fresh look at its DirecTV business, according to people familiar with the matter, exploring a deal for a service wounded by cord-cutting.
The telecom and media giant and its advisers at Goldman Sachs Group Inc. have been in talks with private-equity suitors about the satellite TV unit, some of the people said. Potential bidders include Apollo Global Management Inc., which had expressed interest last year, and Platinum Equity, these people said.
The process is at an early stage, and it’s not clear what form any deal would take—or if there will be one at all. It is possible some of the suitors will team up or submit joint proposals. Other investors that were approached have decided not to pursue bids, some of the people said.
AT&T T, +0.46% executives have previously explored parting with DirecTV assets, including a potential spinoff or combining assets with rival Dish Network Corp., but obstacles, including antitrust concerns, have gotten in the way.
A private-equity buyer could avoid those regulatory concerns. AT&T is looking to sell just over 50% of the asset, which would allow the telecom giant to take a fast-shrinking business off its books while still enjoying the benefits of a still-large distribution network, some of the people said.
Any deal for the satellite TV service would be sizable but likely a far cry from the $49 billion AT&T paid for it in 2015. The pay-TV unit has lost millions of subscribers in recent years as viewers switch to on-demand entertainment services like Netflix Inc. A deal could value the business below $20 billion, some of the people said.
If a deal is reached, it would start to streamline a company that used a series of acquisitions in the last decade to shift from a phone-service provider into a media conglomerate. It also left the enlarged AT&T with a large debt load.
The purchase of DirecTV made AT&T the biggest U.S. pay-TV provider, a title it later ceded to Comcast Corp. as satellite customers canceled. In 2018, a roughly $80 billion takeover of Time Warner added HBO, the Warner Bros. film studio and cable channels like CNN to AT&T’s portfolio.
Cellphone service and wired broadband remain AT&T’s biggest profit engines and account for more than half of the company’s over $180 billion of annual revenue. Those telecom units have played a key role in stabilizing overall earnings this year as the coronavirus pandemic drained revenue in its satellite arm and in its WarnerMedia division.
AT&T shares have missed out on the stock market’s recent rally. The shares are down more than 20% year-to-date, compared with a roughly 8% advance in the S&P 500 index.
Shedding a majority of the shrinking pay-TV business could offer a cash boost, while also triggering a costly write-down for AT&T. Cord-cutting has caused the most damage at AT&T, which lost 7 million U.S. video connections over the past two years. AT&T doesn’t break out revenue or profits for DirecTV.
Executives say the customer-loss trend is exacerbated by the pandemic. Many bars, hotels and airlines that use satellite feeds are operating at diminished capacity—if at all—sapping more of the unit’s revenue.
AT&T also has joined the streaming fray by launching HBO Max in May. About 4.1 million people had activated the new service by the end of June. Earlier this month, WarnerMedia’s new boss ousted several executives, including the head of HBO Max.
