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AT&T’s DIRECTV May Be Up For Sale if an Investor Has His Way

Yesterday the investment group Elliott Management announced it now owns $3.2 billion of AT&T stock and that it’s pushing for AT&T to sell off DIRECT. According to this long letter, AT&T purchased DIRECTV at its peak and its streaming version DIRECTV NOW (now called AT&T TV Now) has been “poorly executed.” Because of this, Elliott Management is pushing for AT&T to sell off DIRECTV.

Here is the part in the letter from Elliott Management that talks about AT&T:

Beyond the wireless issues detailed above, AT&T has suffered from product issues in other business units that have hampered its ability to remain competitive:

DirecTV Over-the-Top (OTT) Issues: AT&T’s OTT offering, DirecTV NOW (renamed AT&T TV Now), has been poorly executed with delays, technical mishaps, weak customer service and usability issues. Despite describing DirecTV NOW as a replacement for DirecTV, the natural-substitution narrative has not played out. While unsustainably low prices and aggressive promotion did initially help the product scale, the benefits turned out to be very short term in nature. As AT&T raised prices to normalized levels, results rapidly deteriorated. After just two years of existence amidst an otherwise-booming OTT market, DirecTV NOW’s subscriber count is now declining.

The letter went on to say that AT&T should consider selling off DIRECTV as well as many other parts of AT&T.

But the news from Elliott Management was not all bad. According to the letter, “Elliott believes that through readily achievable initiatives — increased strategic focus, improved operational efficiency, a formal capital allocation framework, and enhanced leadership and oversight — AT&T can achieve $60+ per share of value by the end of 2021.”

Elliott Management also said that the recent string of mergers has directly contributed to AT&T’s stock underperforming and AT&T’s “operational underperformance.” These concerns are not limited to DIRECTV but also AT&T’s recent purchase of Time Warner.

One of the biggest concerns raised about AT&T’s purchase of Time Warner is the fact that most of the leadership team has left. Back when AT&T bought in, they listed Time Warner’s leadership team as one of the reasons for purchasing. Now with that team gone, many are worried about the future of what is now WarnerMedia.

AT&T responded to these concerns with the following statement:

Our management team and Board of Directors maintain a regular and open dialogue with shareholders and will review Elliott Management’s perspectives in the context of the company’s business strategy. We look forward to engaging with Elliott. Indeed, many of the actions outlined are ones we are already executing today.

AT&T’s Board and management team firmly believe that the focused and successful execution of our strategy is the best path forward to create value for shareholders. This strategy is driven by the unique portfolio of valuable businesses we’ve assembled across communications networks and media and entertainment, and as Elliott points out, is the foundation for significant value creation. We believe growing and investing in these businesses is the best path forward for our company and our shareholders.

For now, AT&T seems to have no plan to sell off any part of the company. But AT&T could face growing pressure if it does not meet the expectations of its investors.

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