AT&T Is Taking An Absolute Bath On Its DirecTV Merger

from the synergies dept

So we've noted a few times how giant telecom providers, as companies that have spent the better part of the last century as government-pampered monopolies, are adorable when they try (then inevitably fail) to innovate or seriously compete in more normal markets. Verizon's attempt to pivot from curmudgeonly old phone company to sexy new ad media darling, for example, has been a cavalcade of clumsy errors, missteps, and wasted money.

AT&T has seen similar issues. Under CEO Randall Stephenson, AT&T spent more than $175 billion on mergers with DirecTV and Time Warner, hoping this would secure its ability to dominate the pay TV space through brute force. But the exact opposite happened. Saddled with so much debt from the deal, AT&T passed on annoying price hikes to its consumers. It also embraced a branding strategy so damn confusing -- with so many different product names -- it even confused its own employees.

As a result, AT&T lost 3,190,000 pay TV subscribers last year alone and roughly 7 million since 2018. Not exactly the kind of "domination" the company envisioned. Despite a $42 billion tax break from the Trump administration for literally doing less than nothing (42,000 layoffs, in fact), AT&T's now being forced to consider low ball offers for DirecTV after investors finally got tired of the company's merger-mania. As such, a company that was acquired for $67 billion (including debt) in 2015, is likely to be sold for less than a third of that:

"The telecom giant last week invited a handful of suitors into the second round of an auction of the struggling satellite-TV broadcaster, even though first-round bids had valued DirecTV at well below $20 billion, The Post has learned.

Opening bids from a coterie of buyout firms came in at around 3.5 times DirecTV’s roughly $4.5 billion of Ebitda, implying a valuation at around $15.75 billion, according to a source close to the process."

A lot of experts told AT&T it was silly to buy a satellite TV provider on the eve of the cord cutting revolution. As such it's kind of surprising to see that AT&T insiders are surprised by any of this:

"It is very, very surprising they would sell DirecTV at such a low price — that’s a serious destruction of value,” said a former AT&T executive who spoke on the condition of anonymity.

An AT&T spokesperson declined to comment."

AT&T bought a company based on antiquated tech, integrated it into a confusing array of befuddling, discordant brands, then tried to make consumers pay off the debt in the form of relentless price hikes at the peak of a massive paradigm shift in television where price matters more than ever. Yeah, totally surprising how that didn't work out.

Hide this

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: cord cutting, randall stephenson, satellite tv, tv
Companies: at&t, directv


Reader Comments

Subscribe: RSS

View by: Thread


  1. identicon
    Anonymous Coward, 8 Oct 2020 @ 4:26pm

    Numbers are a bit off

    While the broad point of AT&T taking a bath here is accurate, it's misleading to talk about a purchase price including debt while then talking about a sale price excluding debt. It's unlikely much of that debt has moved off DirectTVs balance sheet. It would be more reasonable to quote the initial purchase price of $49B noting it came with a significant debt load.


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Follow Techdirt
Insider Shop - Show Your Support!

Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads
.

This site, like most other sites on the web, uses cookies. For more information, see our privacy policy. Got it
Close

Email This

This feature is only available to registered users. Register or sign in to use it.