• by Karlene Lukovitz  @KLmarketdaily, October 10, 2019

Private equity firm Apollo Global Management and an outside banker have proposed a deal to AT&T in which the telecom would spin off its DirecTV business while maintaining control of it, according to a Fox Business Network report.

The proposal also “essentially” calls for rival satellite TV provider Dish Network Corporation to be folded into the new, AT&T-controlled company that would be created.

Apollo would provide the transaction financing and hold a minority equity stake, along with Dish, Fox Business Network’s sources said.

The deal would net AT&T “roughly half of the $49 billion it paid for DirecTV in 2015,” but Apollo and the bankers are arguing that the benefits would outweigh the losses, according to the report.

DirecTV, which is expected to lose about 1 million subscribers in the third quarter alone, due to growing competition from OTT alternatives, has become problematic for AT&T. Activist investor Elliott Management Corp. has recently been pushing for DirecTV’s sale as part of a broader strategic shift.

Dish, which lost 920,000 subscribers last year, is also likely to face increasing financial pressure going forward.

As a result, some analysts and industry experts have suggested that a DirecTV-Dish Network merger might not just be doable, but inevitable, as reported recently by MediaPost’s Wayne Friedman.

While AT&T has denied any intention of selling DirecTV, the Apollo proposal would actually be a spinoff, not a direct sale, one knowledgeable source pointed out to Fox Business Network. “Just because AT&T has said it doesn’t want to sell DirecTV, doesn’t mean they won’t spin it off,” this source said.

AT&T press contacts and Dish declined comment to Fox Business, but "would not dispute" that Apollo has made the pitch through an outside banker. Other sources inside AT&T confirmed that the pitch was made, adding that there are currently no active discussions with Apollo, but AT&T management "hasn’t totally closed the door on the deal or something similar." 

An AT&T spokesperson had no comment to MediaPost about any possible deal/changes with DirecTV.