AT&T Mulls Sale Of DirecTV Stake – Report

AT&T is in talks with private-equity firms, including Apollo Management, to sell a significant minority stake in its pay-TV businesses, including DirecTV, CNBC reported.

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According to the report, AT&T Now and U-Verse pay-TV businesses are also on the shelf. Final bids are due in early December. As part of a potential deal, AT&T (T) would shift legacy assets off the wireless carrier’s balance sheet, CNBC said.

Although valuations haven’t yet been determined, a deal may value DirecTV at less than $15 billion including debt, according to the report. AT&T bought DirecTV in 2015 for $67 billion including debt. Under the terms of the proposed transaction, AT&T would retain majority economic ownership of the businesses, and would maintain ownership of U-verse infrastructure, including plants and fiber.

The buyer would control the pay-TV distribution operations and consolidate the business on its books. The deal could include 30% to 49% of the combined pay-TV distribution businesses, according to the report.

The deal talks come as AT&T has been under pressure from investors, including activist hedge fund Elliott Management, to sell assets after buying DirecTV and then spending more than $100 billion on Time Warner.

Shares in AT&T have plunged 30% year-to-date, and the stock has a cautious Hold analyst consensus. That’s with 5 Hold ratings, 3 Sell ratings and 6 Buy ratings. Meanwhile, the average analyst price target of $31.55 indicates 15% upside potential lies ahead.

Tigress Financial analyst Ivan Feinseth recently reiterated a Buy rating on the stock, saying that AT&T’s strong gains in wireless subscribers, together with the ongoing 5G network rollout and dividend commitment, continue to make it a compelling opportunity.

“While the current COVID-19 pandemic economic outlook creates ongoing uncertainty, AT&T’s wireless and wireline services helped overcome weaknesses in other business lines as consumer and business connectivity remains key in helping to manage a remote and distributed workforce,” Feinseth wrote in a note to investors. “AT&T is also a defensive play in any market selloff: we believe further upside exists from current levels and continue to recommend purchase, viewing the recent pullback as a buying opportunity.” (See T stock analysis on TipRanks)