AT&T Sale of DirecTV would be impeded


Two wrongdoings do not correct

AT & T

T 2.05%

The telecommunications giant could consider the mother's wisdom in deciding whether to release the purchase of DirecTV 2015. Perhaps the business of satellite programming was not great in 2015, and AT&T could narrowly look better now that activists Elliott Management are going around the body.

However, the separation of DirecTV would require cash flows to pay dividend and service debt, let alone invest in its business. The options for good dealings are limited and must be a barrier to making sense.

DirecTV is struggling because AT&T purchased the business for $ 49 billion in 2015. Satellite video links fell by 2.6% in 2017 and a further 6% in 2018. DirecTV Now did not change the streaming offer above the department. Operating income in the AT&T entertainment section, with U-Verse broadband houses and voice heritage businesses and other details decreasing, fell by over 7% last year.

DirecTV carving could be a short-term boost for AT&T's share price, which has greatly contributed to the Verizon competitor in the past three and five years. Elliott, who came after AT&T last week, wants to focus and rationalize it. Digging on WarnerMedia's acquisition of Time Warner could now be easier without getting a dying business. DirecTV also has a willing director. Co-founder and chairman of DISH

Charlie Ergen

he noted the value of the conference combination this week, according to reports.

But even Mr Ergen acknowledged that there could be a regulatory barrier. In addition, DirecTV gives something needed from AT&T: cash. It may be decreasing, but it is a mature business. Total entertainment in the entertainment section should generate almost $ 10 billion in interest before tax, depreciation and amortization this year – around 17% of the company's income, according to Baird Equity Research. Ebitda by Baird DirecTV pegs is near $ 8 billion – a large part of that.

To maintain its dividend yield at around 6%, the AT&T must pay out at least $ 15 billion a year, or more than half its expected cash flows, while meeting a debt burden. approaching $ 200 billion. If the value of DirecTV had increased in the meantime, it would be worth trying those cash flows in the future. Under the circumstances, AT&T should not be repeated.

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