Weapons of mass (value) destruction

This post is by Om Malik from On my Om

Telecom companies tend not to be particularly good at anything, including running their own businesses. They never seem to learn — only to spend incompetently on expansions into new markets involving content and media. I would go as far as to say that, when it comes to shareholder value, their repeated attempts at “diversification” are weapons of mass destruction. 

Three years ago, AT&T spent $85.4 billion (plus $23.3 billion in debt) to buy TimeWarner’s media business. AT&T dreamed of building out a streaming media platform to compete with Netflix, the current  (and likely future) big kahuna of the streaming revolution. That misadventure is coming to an end.

So is another ill-planned fling. In 2014, AT&T spent almost $67 billion (with $18.6 billion in debt) and bought DIRECTV. Earlier this year, AT&T hived off its three video businesses into a new company. This entity includes DIRECTV, AT&T’s fiber-to-the-home TV service called U-Verse, and something called AT&T TV. The new entity is unimaginatively called DIRECTV (New DIRECTV.) It’s hard to believe people got paid for this. 

The final pick is a not so-so ironic name choice

Here is the kicker: TPG, the private-equity giant, got 30 percent ownership of the new company and valued the company at $16.25 billion, a third of what AT&T paid in cash, and less than the debt it took on when it bought DIRECTV. TPG paid $1.8 (Read more...)