AT&T (T) announced on Monday that it would sell its 70% stake in its satellite television service, DirecTV, to TPG, a private equity firm, for $7.6 billion in cash. The telecom major expects to receive these cash payments from DirecTV and TPG through 2029.
Details of AT&T’s Sale of Its Stake in DirecTV
The transaction is expected to close in the second half of next year. As a part of this deal, AT&T will receive from TPG an initial payment of $2 billion, subject to certain deductions, during 2025, and will receive additional payments from TPG totaling $500 million in 2029.
AT&T Had Acquired a Stake in DirecTV in 2021
In 2021, AT&T entered into a joint-venture agreement with TPG, where the private equity firm contributed around $1.8 billion in cash in exchange for a 30% stake in DirecTV, valuing the business at around $16 billion at the time. As a part of the deal, AT&T agreed not to sell its stake in DirecTV for a three-year period, which expired on July 31.
However, this deal has not worked out for AT&T as it has faced declining subscribers from the DirecTV business, which has put pressure on its financials. In fact, in its most recent financial year, distributions from DirecTV amounted to $2.04 billion, down from $2.65 billion the previous year. This decline reflects the ongoing challenges AT&T has been dealing with in managing its stake in the satellite TV provider.
Is AT&T Stock a Buy?
Analysts remain cautiously optimistic about T stock, with a Moderate Buy consensus rating based on nine Buys and five Holds. Year-to-date, AT&T has increased by more than 30%, and the average AT&T price target of $21.85 implies a downside potential of 0.23% from current levels.
