AT&T, TPG Capital in DIRECTV Deal

AT&T Inc. and TPG Capital are establishing a new standalone company that will own and operate DIRECTV, AT&T TV and U-verse video services.

The new company is valued at $16.25 billion and will be 70 percent owned by AT&T and 30 percent by TPG. At closing, Bill Morrow, CEO of AT&T’s U.S. video unit, will serve as CEO of the new company.

“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,” said AT&T CEO John Stankey. “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. 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.”

“Video remains a core service for tens of millions of households,” added David Trujillo, partner at TPG. “Since its launch in 1994, DIRECTV has continually evolved its product, content and service to provide customers an industry-leading video offering. As video consumption habits evolve, the new DIRECTV will continue investing in its offering to provide value to its customers, including through next-generation streaming pay-TV services. TPG looks forward to partnering with AT&T and new DIRECTV leadership to bring the right focus, attention and execution in support of new DIRECTV’s position as a competitive video provider for the benefit of its customers and employees.”

“We look forward to working with AT&T, Bill and the entire talented team at the new DIRECTV to create a seamless customer experience through the separation of the company,” added John Flynn, principal at TPG. “We are particularly excited by the opportunity to grow new DIRECTV’s streaming video service, leveraging the company’s leading pay-TV platform, talented labor force and large subscriber base to transition it into a leading next-generation video provider with best-in-class content and customer experience.”

Upon closing, DIRECTV will have a deal with AT&T to continue to offer bundled pay-TV services for AT&T’s wireless and internet customers. In addition, DIRECTV video subscribers will have continued access to HBO Max.