Analyst Note| Michael Hodel, CFA |
AT&T has reached an agreement to restructure its U.S. television business, selling a stake in the operation to a private equity fund run by TPG. The deal isn’t large relative to the size of AT&T core wireless and media businesses. The firm disclosed that U.S. television services generated about $4 billion of EBITDA in 2020, equal to about 7% of the total for the year. It likely generated around 12% of free cash flow, a percentage we project to rapidly decline. But we suspect the firm is anxious to beginning putting the DirecTV mistake—and the investor attention it commands—in the rearview mirror. We are maintaining our $36 fair value estimate and we believe AT&T shares are attractive.