AT&T (T) is reportedly weighing a sale or spinoff of DirecTV, the satellite TV provider it acquired only four years ago for $49 billion, but one analyst doesn’t see a wide landscape of buyers should AT&T pull the trigger.
“Who is going to buy this?” asked CFRA Research telecommunications analyst Keith Snyder in an interview. “Everybody is moving away from traditional content delivery. How is AT&T going to unload an asset that’s in a declining landscape?”
The Wall Street Journal, which reported AT&T’s consideration of a DirecTV sale earlier Thursday, also reported that one of the potential options was a merger with Dish Network (DISH).
“There’s no way [a Dish-DirecTV merger] would get regulatory approval — it would create a monopoly in its purest form,” Snyder said. “Given how much pressure the government put on AT&T-Time Warner and Sprint (S)- T-Mobile (TMUS), there is no way this would pass muster.”
On Thursday, sources told Reuters that AT&T and Dish aren’t in talks for a DirecTV deal.
AT&T has been under pressure in recent weeks from activist investor Elliott Management. Earlier this month, Elliott Management disclosed a multi-billion dollar stake in AT&T and publicly issued a lengthy list of criticisms and suggestions for AT&T, including this push for asset sales:
“Any assets that do not have a clear, strategic rationale for being part of AT&T should be considered for divestment: DirecTV, the Mexican wireless operations, pieces of the wireline footprint, and other assets must all be evaluated as part of this review,” Elliott Management said in a press release.
Plus, should the aforementioned T-Mobile-Sprint deal proceed (it was greenlighted by the Department of Justice but now faces potential roadblocks from state attorneys general), one condition of the deal is for Dish to build out a wireless network.
“Let’s just say a DirecTV-Dish was approved — Dish is going to be biting more than they can chew if they build their wireless network and integrate DirecTV at the same time,” Snyder said.
AT&T’s diversification strategy
Meanwhile, a sale of DirecTV would be a blow to AT&T CEO Randall Stephenson’s strategy of diversifying the company's business, Snyder said.
“Randall really wants DirecTV in business — it’s the cornerstone of his diversification efforts,” Snyder said. “There’s a good argument to be made that there’s some cross pollination between wireless, DirecTV and WarnerMedia -- how much is very much up for debate.”
In a July 2015 press release announcing the completion of the DirecTV deal, Stephenson praised the transaction: “We’re now a fundamentally different company with a diversified set of capabilities and businesses that set us apart from the competition.”
For Snyder, who has a buy rating on AT&T, he hopes a deal proceeds at a reasonable price.
“Even if they get half the value [of DirecTV back], that’s roughly $24 billion - that’s a lot of money,” he said, adding that he thinks AT&T has no chance of selling DirecTV for the same or more than they paid for the company in 2015.
Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.
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