HideTechdirt is off for the long weekend! Looking for something to read instead? Check out our new Working Futures anthology »
HideTechdirt is off for the long weekend! Looking for something to read instead? Check out our new Working Futures anthology »

AT&T Ponders Dumping DirecTV After Investor Backlash, But It's Not Likely To Help

from the yeah-that's-not-gonna-work dept

As we just got done noting, investors have finally started to grumble about AT&T's obsession with merger mania (aka "growth for growth's sake"). AT&T, you'll recall, spent more than $150 billion to acquire Time Warner and DirecTV in a bid to dominate the streaming video and online advertising space. But the deals saddled AT&T with so much debt, it forced the company to raise rates despite rising competition, driving many of these customers to the exits. Oh, and AT&T's being sued by other investors for allegedly lying about it. It has also largely bungled its TV branding in general.

In what appears to be an intentional leak designed to suggest that AT&T is taking these concerns seriously, a report emerged this week in the Wall Street Journal (non paywalled alternative read here), suggesting that AT&T may now try to offload DirecTV after paying $67 billion for the company back in 2015:

"The telecom giant has considered various options, including a spinoff of DirecTV into a separate public company and a combination of DirecTV's assets with Dish Network, its satellite-TV rival," the Journal report said, citing "people familiar with the matter." It's still early in the process, so AT&T could end up sticking with DirecTV. "AT&T may ultimately decide to keep DirecTV in the fold. Despite the satellite service's struggles, as consumers drop their TV connections, it still contributes a sizable volume of cash flow and customer accounts to its parent," the Journal reported."

AT&T's decision to spend billions of dollars on a satellite TV company on the eve of the cord cutting revolution was always seen as a shaky bet. Especially given AT&T's decision to freeze most serious investment in the company's fixed-line broadband business. That said, the money DirecTV is currently making is helping to pay off the company's enormous debt load (AT&T's currently in the running for the most heavily-indebted company public letter wasn't kind to AT&T. Notably, the investors took issue with AT&T's belief that you dominate a space by throwing billions of dollars at mergers, something Wall Street usually is keen on thanks to short term gains:

"We firmly believe that AT&T’s M&A strategy has not only contributed directly to its profound share price underperformance, but has also caused distractions that have contributed to the Company’s recent operational underperformance."

That's a polite way of saying AT&T can't just buy its way to domination. But Elliot's suggestion to offload DirecTV won't help much.

The debt from a decade of merger mania would remain, and while the announcement of a sale might boost the markets slightly (allowing Elliot to exit semi-gracefully), it wouldn't fix what's broken at AT&T. Telcos like AT&T and Verizon still suck at wandering outside of their core competencies (building and running networks, lobbying to crush competitors), the result of being government-pampered monopolies for the better part of a generation. As we've seen with Verizon's Go90, AOL, and Yahoo face plants, these companies simply aren't good at adaptation and competition because it's an alien construct.

AT&T executives desperately want AT&T to be Google and Facebook, and have eyed both companies' ad revenues jealously for the better part of the last two decades, thinking that money is somehow owed to them because they own the underlying network (that's really what the net neutrality fight was about). They seem to believe growth for growth's sake and lobbying are the path to domination, but while that worked well in the broadband space, it's not going to work quite as well in helping them gain stature in other markets.

Especially given that as lumbering monopolies fused to the nation's intelligence agencies, neither AT&T nor Verizon has the ability to actually innovate in the space, which is why AT&T's current TV branding efforts look a lot like road kill. AT&T will remain saddled with millions of aging copper and phone lines it is (like most US telcos) too cheap to upgrade despite billions in tax cuts and regulatory favors. Mindless merger mania won't fix the DNA-level problems that plague Ma Bell, and neither will selling off a core component of the company's bumbling, but ongoing, attempt to dominate the video advertising space.

Filed Under: competition, consolidation, cord cutting, divestitutre, mergers, satellite tv, streaming, tv
Companies: at&t, directv


Reader Comments

Subscribe: RSS

View by: Time | Thread


  • identicon
    Del Varner, 20 Sep 2019 @ 6:58am

    Will they ban private usage?

    Will the State of California ban the use of facial recog by private parties?

    reply to this | link to this | view in chronology ]

  • icon
    James Burkhardt (profile), 20 Sep 2019 @ 7:51am

    That said, the money DirecTV is currently making is helping to pay off the company's enormous debt load (AT&T's currently in the running for the most heavily-indebted company public letter wasn't kind to AT&T.

    Feels like something got cut out of the middle of this.

    reply to this | link to this | view in chronology ]

  • identicon
    Not an Investor, 20 Sep 2019 @ 8:17am

    Oh, and AT&T's being sued by other investors for allegedly lying about it.

    I have never understood the concept of a company being sued by its investors or shareholders. If the company wins, they still spend money on lawyers, lowering shareholder value. If they win, they also have to pay the investors, out of company funds, when ultimately belongs to the investors. Win or lose, the lawyers win and the investors are no better off.

    reply to this | link to this | view in chronology ]

    • icon
      Nathan F (profile), 20 Sep 2019 @ 8:49am

      Re:

      I gather it isn't so much a suite to get money as a suite to get the company exec's to do or stop doing something business wise.

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 20 Sep 2019 @ 9:20am

        Re: Re:

        I thought that stock holders meetings could be called by enough stock holders, and that they could replace the board. A law suite only makes sense if it is a minority of stock holders trying to force the board to do something.

        reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Sep 2019 @ 9:38am

    "AT&T, you'll recall, spent more than $150 billion to acquire Time Warner and DirecTV in a bid to dominate the streaming video and online advertising space. But the deals saddled AT&T with so much debt, it forced the company to raise rates despite rising competition, driving many of these customers to the exits."

    T. Boone Pickens (rip) oil man and corporate raider would purchase companies like this and scrap them making money off the garage sale. His stock purchases used to scare the C-Suite folks into stock buy backs and poison pills.

    reply to this | link to this | view in chronology ]

  • icon
    ECA (profile), 20 Sep 2019 @ 11:13am

    Would really like...

    To see these folks paper work, with everything that they are doing and paying out..
    Pay 150 billion and not know :
    HOW it works
    How to make it work
    How to get customers to Buy it..
    How to Improve it..
    How to do much of anything WITH IT..

    In the old days, most companies would create a Subsidiary to help the company and see if they could make things better.. now it seems that Other companies are doing the CORPS job... And those running the Corp are the only employees.. Those Heads of the corp get tons of money just to pay other companies to do THEIR JOB.. The same thing happened to HUGHES sat system, getting bought out.

    To many chiefs and no Indians, to many chefs, and no one to prep.. To much Sauce and no pasta..
    All the smart persons got fired or Quit, and now the Boss's/bill collectors that have no IDEA of how this works...are trying to run the business.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 20 Sep 2019 @ 12:05pm

    Food for thought. That 67 Billion dollars could have purchased over 3 million miles of 144 strand single mode outdoor telephone pole fiber cable. That is without a bulk discount. We have approximately 2,678,000 miles of paved roads in the US. Not including labor and hardware costs. Fiber is is really nice in that upgrades to it would be minimal. The fiber probably would last 50-100 years with regular maintenance.

    reply to this | link to this | view in chronology ]

    • identicon
      Rocky, 20 Sep 2019 @ 12:24pm

      Re:

      Not to mention that you can upgrade the equipment on each end of the fiber to increase capacity regularly when new transmission tech becomes available for very little cost in the long run.

      reply to this | link to this | view in chronology ]

  • identicon
    Mr Bill, 20 Sep 2019 @ 1:28pm

    The worst kind of M&A company...

    There may be some good M&A companies out there, but I haven't seen one yet. These companies all seem to think that by purchasing the latest hot new thing, that the revenues from that hot new thing will become theirs.
    In reality the acquiring company rarely has a clue about how their new purchase operated, how the customer relationships worked, how the product/project management worked, and so on. As they don't understand how their new purchase functioned, they end up killing it by aligning the new purchase with their old and busted corporate culture which is usually some variant of "the current quarter is the only one that matters". As a result they end up spending hundreds of millions or multiple billions on something they divest themselves of within a decade at a significant loss.

    reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 21 Sep 2019 @ 8:59am

    Sucks to be you, out_of_the_blue!

    reply to this | link to this | view in chronology ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Close

Add A Reply

Have a Techdirt Account? Sign in now. Want one? Register here



Subscribe to the Techdirt Daily newsletter




Comment Options:

  • Use markdown. Use plain text.
  • Remember name/email/url (set a cookie)

Follow Techdirt
Techdirt Gear
Shop Now: Techdirt Logo Gear
Advertisement
Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Advertisement
Report this ad  |  Hide Techdirt ads
Recent Stories
Advertisement
Report this ad  |  Hide Techdirt ads

Close

Email This

This feature is only available to registered users. Register or sign in to use it.