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AT&T (T) Might Sell Stake in Hulu to Disney to Reduce Debt

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Per media speculations, AT&T Inc. (T - Free Report) is in discussions with its media rival The Walt Disney Company (DIS - Free Report) to sell its around 10% stake in Hulu — an American entertainment company that provides over-the-top streaming services — to the latter. Notably, the telecom behemoth aims to trim its massive debt burden after spending nearly $85 billion for acquiring WarnerMedia (erstwhile Time Warner) last year.

The buyout of Time Warner was a vital part of AT&T’s plan to diversify its revenue sources, while coping with a transforming media landscape that includes Netflix and Amazon. Yesterday, a federal appeals court ruled in favor of AT&T’s takeover of Time Warner stating that the merger won’t hurt consumers or competition in the pay-TV market.

As of Dec 31, 2018, the company had $5,204 million in cash and equivalents with $166,250 million of long-term debt. In November 2018, AT&T stated that it is focused on reducing its debt in 2019 through a number of initiatives, including a review of all of its non-core assets. As of September 2018, Disney, Comcast Corporation (CMCSA - Free Report) and Twenty-First Century Fox, Inc. (FOXA - Free Report) each possessed 30% stake in Hulu. Reportedly, the successful transaction would provide about $1 billion to AT&T, and give Disney up to 70% ownership in Hulu.

AT&T’s Key Focus

AT&T is poised to benefit from the healthy growth momentum in its wireless business, including the impending 5G boom. The company unveiled its 5G policy framework that hinges on three pillars — mobile 5G, fixed wireless and edge computing. In order to have a seamless transition among Wi-Fi, LTE and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network in early 2020. The company’s 5G service entails utilization of millimeter wave spectrum for deployment in dense pockets while in suburban and rural areas, it intends to deploy 5G on mid- and low-band spectrum holdings.

AT&T believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices. The telecom giant has already introduced mobile 5G networks in parts of 12 cities and is planning to add seven more cities in the first half of 2019. AT&T is also ramping up its FirstNet program and revamping lineup of video products, pricing and promotion initiatives. The company remains committed to managing its debt portfolio, and is well on track to achieve its target of 2.5x debt-to-EBITDA range by year-end 2019.

Driven by diligent execution of operational objectives, shares of AT&T have rallied 1.6% on an average against the industry’s decline of 2.1% over the past three months.




AT&T currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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