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AT&T pressed to unload DirecTV when problems mount, Dish might be the best option



As issues pile up at AT&T Inc.'s DirecTV subsidiary, Wall Street bankers begin to pile up the telecom giant with offers to sell satellite television operator Charlie Warden's washing network as one potential suitor, Fox Business Network teach.

Floating banking ideas are coming at an uncertain time for the country's largest satellite TV company, providing services to some 22.9 million subscribers. Despite its large reach, DirecTV is hemorrhaging customers – losing 2.5 million subscribers in the last year alone. The company is targeting activist investor Elliot Management, which ripped off a $ 3.2 billion stake in AT&T and called on management to land DirecTV.

Problem Mounting

Meanwhile, AT&T has filed a lawsuit in federal court for allegedly falsifying its streaming service subscribers, DirecTV Now ̵

1; in an attempt to make the brand look as if it was winning customers organically. And perhaps more ominous: Fox's business network has learned that DirecTV may be at the center of a boycott developed by outside advisers to President Trump, who was critical of news coverage of AT&T's CNN affiliate. Trump has called on his supporters to boycott AT&T services in the past to pressure CNN to change the coverage of the White House, and outside advisers have told the president that DirecTV may be the most vulnerable of AT&T departments to boycott customers, according to people with knowledge of the matter.

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But Wall Street investment bankers tell AT&T that there is a simple solution that would involve selling DirecTV or a merger, people familiar with the matter say. Among the push deals is one where DirecTV merges with Dish Network, spinning companies into a single unit or merger that can be funded with equity from private companies, as Dish – with 12 million subscribers – is a significantly smaller company from DirecTV, add these people.

It is not clear how seriously Randall Stephenson, CEO of AT&T, has taken such overtures.

AT&T spokesman declined comment, as did Dish spokesman. But media analysts believe the two companies would be stronger together, as they would share the huge cost of their satellite infrastructure.

Such a combination can help merged companies reduce costs, scale up and compete with content and technology giants and

"There needs to be an appetite between the two companies to merge," says Peter Adderton, a veteran telecommunications contractor and founder of prepaid wireless service Boost Mobile. "The biggest worry I would think about Dish and Direct TV is its huge infrastructure costs have both companies, obviously there are new competitors in the video space: Youtube, Disney, Amazon and others who do not have these legacy infrastructure costs."

Ticker [19659012] Security Last Last [19659014] Change % Chg
T AT&T INC. 37.16 -0.15 -0.40%
DISH [19659017] DISH NETWORK CORPORATION 35.30 35.30 35.30 -0,78 [19659020] -2.16%

Shares of the dish, which were down four percent today, gained two percent in the report of FOX Business for possible AT&T shares closed at $ 37.16.

Big Believers Distribution

Stephenson, CEO of AT&T, did not address Elliot Management's call to sell DirecTV, however, in a letter dated September 9 to AT&T, he recommended spending cuts and other sales to strengthen his balance sheet after acquiring $ 85 billion in Time Warner, which ended in June 2018 and is being challenged by the Federal Justice Department's antitrust unit.

But Wall Street was a little skeptical of the telecommunications hippo. The company has a mountain of debt and cultural differences between AT&T – a diversified telecommunications company – and Time Warner's core news and entertainment business. Shares have been essentially traded flat since the announcement of the deal in the fall of 2016.

Still, Stephenson defends the strategic meaning of the deal and the role of DirecTV in the company. Speaking at a Goldman Sachs Communacopia conference Tuesday, Stephenson said AT&T "received an incredible premium for selling this small ad inventory on DirecTV." Stephenson also noted that DirecTV plays a key role in AT&T content distribution: "We always were great believers in the spread and power of it. ”

The purchase of DirecTV is worth $ 67 billion, and AT&T took on its debt when it closed the deal in July 2015. But DirecTV has lost 2.5 million subscribers over 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.

Therefore, bankers say that if Stevenson had to land him now, he would have lucky to recover half of the purchase price

And DirecTV's potential sale price could fall even further if Trump's boycott efforts prove even slightly successful. In June, President Trump proposed a boycott of AT&T on Twitter over CNN coverage of the White House, and recently advisers suggested to the president that in order to exert maximum pressure on the company, he should target the DirecTV boycott.

A White House spokesman declined to comment and it is unclear whether the president will focus a possible boycott on the company.

Potential Pitfalls

A potentially devastating blow could occur if the NFL chooses not to renew the so-called. Sunday Ticket Contract with DirecTV – a package that allows viewers to watch offline games with their DirecTV subscription. If some data is not updated, DirecTV loses 10% of its subscriber base, according to some estimates.

If DirecTV does not take the contract, they will have to file a $ 1.5 billion annual rights bill, which is the second largest amount the NFL charges each network. The only channel to pay more is ABC, which has exclusive rights to Monday night football for about $ 2 billion a year.

And there is no guarantee that Dish or any other suitor will seek to buy an asset that is clearly diminishing. by value. While some bankers hope the Dish merger will resolve DirecTV's problems, Dish may not be able to merge as it is already involved in the acquisition of Sprint Corp's spectrum and prepaid wireless businesses. as part of the DOJ's approval of the T-Mobile-Sprint merger.

Dish is looking for a partner to help build and fund their ongoing T-Mobile and Sprint deal to create a fourth major wireless carrier, based on comments Ergen made today at the same event at Goldman Sachs Stephenson in .


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