Telecommunications giant AT&T, a prominent player in the Diversified Telecommunication Services industry according to InvestingPro Tips, is reportedly considering various strategies for its 70% stake in DirecTV. The company's contemplations range from dividend recapitalization to onboarding a new investor, or potentially a complete divestment from the venture. The discussions are still in the early stages and have not reached a concrete decision.
This move comes as AT&T shifts its focus towards expanding its broadband network. The company is contemplating selling its remaining stake in DirecTV before an impending deadline. This has sparked renewed talks about a potential merger between DirecTV and Dish Network (NASDAQ:DISH).
AT&T's interest in divesting from DirecTV can be traced back to the losses it incurred following its acquisition of the satellite service provider in 2015. To mitigate these losses, AT&T partnered with TPG Capital last year to convert DirecTV into an independent video company while maintaining majority ownership.
The joint venture between AT&T and TPG valued DirecTV at approximately $16 billion in 2021. DirecTV has been grappling with the challenge of retaining subscribers in the face of rising competition from streaming services, as highlighted by Leichtman Research Group. This aligns with InvestingPro's data that shows a -0.27% revenue growth for AT&T in Q2 of 2023.
The decrease in DirecTV's subscriber base led to a significant reduction in payments to AT&T, going down from $2.7 billion to $1.9 billion. Despite this setback, news of AT&T's potential strategies for its DirecTV stake led to a 1.2% rise in the company's shares. According to InvestingPro data, AT&T's market cap is currently at 104.67B USD and its share price at the previous close was 14.78 USD.
AT&T is legally permitted to sell its stake after July 31, 2024. Whether the company will choose to withdraw completely from the venture or pursue another course of action remains to be seen. It's worth noting that AT&T pays a significant dividend to shareholders, as pointed out by InvestingPro Tips, and has maintained dividend payments for 40 consecutive years, which might be a factor in their future decisions.
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