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Report: Under Investor Pressure, AT&T Considers Spin Off of DirecTV or Merger with Dish Network

Jason Gurwin

Last week, Elliot Management, a $3.2 billion shareholder of AT&T stock, released a letter addressed to AT&T’s board calling out the company’s performance — especially around their DirecTV business. Elliot Management wants AT&T to rid itself of DIRECTV — and it seems like the executive team is listening.

In a report in the WSJ, AT&T is considering spinning the company off into a separate public company or attempting to merge with satellite competitor Dish Network. The latter won’t be easy though, as it’s already face scrutiny in the past. The company tried to merge with Dish Network back in 2001, but were blocked through an antitrust dispute.

It’s been a rough path since AT&T acquired DirecTV for $49 billion in 2015 — as the pay-TV service has seen massive losses. The service peaked in 2016 with 21 million subscribers, but with continuing losses which saw 778,000 premium TV subscribers churn last quarter — the service is left with just 17.9 million subscribers. And it’s not expected to get better, as they’ve already hinted that they will lose over 1 million subscribers in the third quarter.

AT&T had hoped that their vMVPD DIRECTV NOW, which has since been renamed AT&T TV NOW could fill the gap — but the service has also seen declines. Last quarter, they lost a whopping 168,000 DIRECTV NOW subscribers, following two consecutive quarters which saw 350,000 drop in paid subscribers. With the continuing losses, DIRECTV NOW has 1.34 million subscribers total, down from their peak of 1.85 million last September.

DirecTV has tried to optimize for profitable customers by dropping promotions and engaging in aggressive negotiations with content partners. AT&T had carriage disputes that led to blackouts of both CBS and Nexstar locals.

The pay-TV business has become less interesting for AT&T as an overall business as the company has shifted focus to 5G for both wireless and in-home broadband — and their upcoming HBO MAX service. So by letting go of DirecTV the company will no longer have to focus on what is and will continue to be a declining business.