(Forbes) On February 7, 2018, AT&T (NYSE: T, $36.60, Market Capitalization:$224.7 billion), a global provider of communications and digital entertainment services, announced that it is exploring an initial public offering option to sell its stake in DirecTV Latin America business in first half of 2018.
The company has confidentially filed a registration statement with U.S. regulators and the company maintains that no assurance can be provided whether an IPO will be completed or not. According to Wall Street Journal article dated 2/7, AT&T’s plans to separate most of its Latin American operations in an IPO which could raise billions of dollars for US carrier’s core business. AT&T was evaluating a sale of its DirecTV operations in Latin America; and planning an IPO could presumably mean they weren’t able to find a buyer at a desired valuation. The unit includes millions of television subscribers in the Caribbean and in South America that AT&T inherited when the company acquired DirecTV in 2015. This also includes a 93% stake in Sky Brazil, a satellite provider. The division had 13.6 million connections that generated approximately revenue of $5.5 billion in FY17. The Carve-out entity which excludes AT&T’s Mexican cell phone and satellite-TV operations could fetch approximately $10 billion in an IPO.
When AT&T first announced the acquisition of DirecTV, the management team was most optimistic about Brazil. However currency and commodities meltdown along with the billing issues proved to be major hurdles for the Brazilian business that was already struggling to reliably grow its subscriber base. Over time, AT&T’s Latin America focus market shifted from Brazil to Mexico and Latin America markets (excluding Mexico) are no longer a part of AT&T’s long-term game plan. AT&T’s chief executive, Randall Stephenson’s stated strategy is that the company monetizes assets that are not a strategically fit and hence the company was looking to sell its Latin American unit (excluding Mexico) since the last few months. Brazil’s antitrust officials’ conditional approval of the AT&T – Time Warner deal only if the merged entity kept Sky Brazil separate from the operations of Time Warner (which owns cable channels like CNN and TNT), further necessitated the separation of the Latin American business. The IPO would enable AT&T to raise capital to reduce its debt, which is likely to increase to about $180 billion once its acquisition of Time Warner closes. Listing the unit independently could be a first step towards separating the business or it can also be used as a vehicle to acquire or merge with others. Potential merger partners in Latin America include Telefonica SA and Liberty Latin America Ltd (which recently split-off as an independent publicly listed company from Liberty Global plc).
(Photo: Accura Media Group)
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