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AT&T will direct $8B in cash from DirecTV deal to debt reduction - CEO

- Discussing AT&T's (NYSE:T)deal to spin off DirecTV and its U.S. video
businesses on a call, CEO John Stankey says the transaction "aligns with
the future of our business" - allowing the company to monetize a portion
of
the assets while sharing in upside. (DirecTV has been generating cash
flow
to the tune of about $4B/year.)
- The deal improves AT&T's ability to focus on strategic growth
priorities - 5G wireless, fiber deployment, and HBO Max - while
maintaining
some future optionality.
- AT&T expects to apply about $8B in cash proceeds from the deal toward
debt reduction this year, executives say.
- But they don't expect a material impact to the 2021 financial guidance
the company offered in January. That includes a forecast of $26B in free
cash flow this year (considering that Q4 is a low-cash-flow quarter, the
timing of the close shouldn't offer much impact). And AT&T expects
ongoing
cash flow from the business going forward.
- It does change the financial profile of the business; after the close
(expected in the second half), AT&T will deconsolidate "New DirecTV" from
consolidated results.
- And while the deal isn't quite the DirecTV-Dish Network (NASDAQ:DISH)
merger that many speculated about earlier, Stankey says the company will
be
"diligent" about exploring second options for the business. (DISH is up
0.4% after hours.)
- AT&T stock is now up 0.5% after hours.*Source: AT&T deal presentation*





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