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DirecTV Spinoff Expected to Close in Early August

DirecTV
(Image credit: DirecTV)

AT&T is expected to close the spinoff of pay TV services including DirecTV "in the next few weeks," company CFO Pascal Desroches told equity analysts during the wireless company's second quarter earnings call Thursday. 

AT&T struck a deal with private equity firm TPG back in February to spin off DirecTV, U-verse TV and AT&T TV, keeping a 70% equity stake. 

"I think we moved through the DirecTV process a little bit faster than what we had expected. It's not a complicated transaction," Desroches said. 

According to Desroches, the deal will mean that AT&T will close its fiscal 2021 calendar sans about five months of DirecTV revenue, a hit estimated to be around $9 billion. About $1 billion of EBITDA will come off the bottom line, as will about $1 billion in free cash flow.

AT&T will receive between $1.75 billion - $2 billion in cash from TPG, and much more cash in its subsequent spinoff of WarnerMedia with Discovery Inc., all of which will be used to pay down debt and relieve interest payments. 

"Once the WarnerMedia transaction closes, our net debt will go down significantly, and the interest savings for that are fairly meaningful. You can do the math," Desroches said. 

"Just think roughly $45 billion of cash coming in, and that's after our DirecTV cash that we expect to come in beginning of August. So overall, we expect a meaningful savings in interest," Desroches added. 

The FCC announced last week that it has signed off on the DirecTV spinoff. 

AT&T subsequently announced that it would sell around $6.2 billion in DirecTV debt to help finance the transaction. AT&T also announced the sale of its DirecTV Latin American operation.

Daniel Frankel

Daniel Frankel is a Los Angeles-based writer and editor who has covered the media and technology industries for more than two decades, working on staff for publications including E! Online, Electronic Media, Mediaweek, Variety and paidContent and GigaOm. He's dangerous, and he might get himself and someone else killed some day. But gosh darn it, he gets results.