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AT&T Explore Parting Ways With DirecTV Unit



AT&T
             Inc.


T -1.08%

is exploring parting with its DirecTV satellite unit, people familiar with the matter said, and move that would mark sharp course correction in strategy for Chief Executive Randall Stephenson , who billed his $ 49 billion bet on the satellite provider as a key to the phone giant's future.

The telecom giant has considered a variety of options, including a spinoff of DirecTV into a separate public company and a combination of DirecTV's assets with Dish Network Corp., its satellite-TV rival, the people said.

AT&T may finally decide to keep DirecTV in the fold. Despite the satellite service's struggles, as consumers drop their TV connections, it still contributes a sizable amount of cash flow and customer accounts to its parent.

AT&T acquired DirecTV in 201

5 for $ 49 billion. The company's shrinking satellite business is under a microscope after activist investor Elliott Management Corp. revealed a $ 3.2 billion stake in AT&T last week and released a report pushing for strategic change. Elliott has told investors that AT&T should unload DirecTV, The Wall Street Journal has previously reported.

There could be regulatory hurdles to any deal with Dish, which has about 12 million subscribers. When Dish's Predecessor EchoStar Communications Corp. and DirecTV's former owner Hughes Electronics Corp. tried to merge in 2001, regulators finally blocked it on antitrust grounds, worried that many rural americans would be left with only a single option to get their television service. More recently, Dish Chairman Charlie Ergen held talks to combine with DirecTV in 2014, but lost out to AT&T.

On the idea of ​​merging two satellite providers, AT&T finance chief John Stephens said, “From a regulatory perspective, it has not been successful and I do not know that there is any change in that regulatory perspective.” He added , speaking last week at an investor conference, "I understand industrial logic, but it's quite frankly it's tried and has been rejected."

Write to Shalini Ramachandran at shalini.ramachandran@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com

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