Ahead of an investor call Thursday afternoon, AT&T and TPG announced a definitive agreement to establish a new company named New DIRECTV that will run AT&T’s video business which includes DIRECTV, AT&T TV and U-verse video services.
The news comes just after reports of the two companies nearing a deal earlier this week, with sources estimating the value of the businesses to be around $15 billion. News of the “significant minority stake” has been circulating since November when AT&T was looking at multiple investors.
We now know that the deal will give AT&T 70% equity in the business and TPG will own 30%. The transaction values the new company at $16.25 billion.
“This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fiber and HBO Max. And it supports our deliberate capital allocation commitment to invest in growth areas, sustain the dividend at current levels, focus on debt reduction and restructure or monetize non-core assets,” said AT&T CEO John Stankey.
“As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability. TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”
How Will This Affect AT&T Video Customers?
“Once the transaction is completed, existing AT&T video subscribers will become New DIRECTV customers and will be able to keep their video service and any bundled wireless or broadband services, as well as HBO Max, plus any associated discounts,” the announcement says.
Current deals, including NFL Sunday Ticket on DIRECTV, will be rolled into New DIRECTV. Customers will continue to have access to the same services, content, and customer service. Account information, online access, and billing will also remain the same.
AT&T notes that its video business had around 17.2 million subscribers at the end of 2020. Combined, the services brought in $28 billion in revenue.