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. 

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...)