AT&T Is Taking An Absolute Bath On Its DirecTV Merger
from the synergies dept
So we’ve noted a few times how giant telecom providers, as companies that have spent the better part of the last century as government-pampered monopolies, are adorable when they try (then inevitably fail) to innovate or seriously compete in more normal markets. Verizon’s attempt to pivot from curmudgeonly old phone company to sexy new ad media darling, for example, has been a cavalcade of clumsy errors, missteps, and wasted money.
AT&T has seen similar issues. Under CEO Randall Stephenson, AT&T spent more than $175 billion on mergers with DirecTV and Time Warner, hoping this would secure its ability to dominate the pay TV space through brute force. But the exact opposite happened. Saddled with so much debt from the deal, AT&T passed on annoying price hikes to its consumers. It also embraced a branding strategy so damn confusing — with so many different product names — it even confused its own employees.
As a result, AT&T lost 3,190,000 pay TV subscribers last year alone and roughly 7 million since 2018. Not exactly the kind of “domination” the company envisioned. Despite a $42 billion tax break from the Trump administration for literally doing less than nothing (42,000 layoffs, in fact), AT&T’s now being forced to consider low ball offers for DirecTV after investors finally got tired of the company’s merger-mania. As such, a company that was acquired for $67 billion (including debt) in 2015, is likely to be sold for less than a third of that:
“The telecom giant last week invited a handful of suitors into the second round of an auction of the struggling satellite-TV broadcaster, even though first-round bids had valued DirecTV at well below $20 billion, The Post has learned.
Opening bids from a coterie of buyout firms came in at around 3.5 times DirecTV?s roughly $4.5 billion of Ebitda, implying a valuation at around $15.75 billion, according to a source close to the process.”
A lot of experts told AT&T it was silly to buy a satellite TV provider on the eve of the cord cutting revolution. As such it’s kind of surprising to see that AT&T insiders are surprised by any of this:
“It is very, very surprising they would sell DirecTV at such a low price ? that?s a serious destruction of value,? said a former AT&T executive who spoke on the condition of anonymity.
An AT&T spokesperson declined to comment.”
AT&T bought a company based on antiquated tech, integrated it into a confusing array of befuddling, discordant brands, then tried to make consumers pay off the debt in the form of relentless price hikes at the peak of a massive paradigm shift in television where price matters more than ever. Yeah, totally surprising how that didn’t work out.