Does AT&T Even Need DirecTV?

With AT&T Inc. shifting its focus to the newly acquired Time Warner businesses, its struggling DirecTV division is looking less essential. Should DirecTV’s headaches persist, it may even get to the point where AT&T is better off without it.

AT&T bought Time Warner (now called WarnerMedia) for $102 billion last year. Before that, it acquired DirecTV for $63 billion in 2015.1These back-to-back megadeals have left AT&T with a net debt balance of $175 billion, making it the world’s largest borrower, aside from financial institutions. As DirecTV loses hundreds of thousands of satellite-service customers and suffers declining Ebitda, there’s some concern among shareholders and bondholders that AT&T could be overburdening itself. This raises questions about AT&T’s ability to keep increasing its dividend and making important investments in fiber and its new 5G wireless network, all while maintaining an investment-grade debt rating.