It's time to sell DIRECTV.
That's the message to AT&T from Elliott Management Corporation. A hedge fund investment firm claiming control of $3.2 billion in AT&T stock.
Elliott explains DIRECTV has yet to prove it was a good purchase. For one thing, the purchase took place "at the absolute peak of the linear TV market."
In addition to suggesting AT&T overpaid to begin with, Elliott also states AT&T has done little to add value ever since then.
Elliott also pointed at the DIRECTV NOW streaming version as another reason to sell.
AT&T recently rebranded DIRECTV NOW to AT&T TV NOW.
Time to sell poor DIRECTV NOW
DIRECTV NOW has been "poorly executed." This was summed up as "technical mishaps," "usability issues" and "weak customer service," according to Elliott. The firm also highlighted the sustained subscriber decline as further evidence.
DIRECTV NOW has lost a significant number of subscribers over the last three quarters. However, the company explained this was intentional as it looks to 'clean up' the customer base.
Irrespective of the reason, Elliot notes this decline has occurred during an "otherwise-booming OTT market." This appears to be pointing to how the streaming market has seen massive growth over the last couple of years. In part, at the expense of traditional pay-TV.
WarnerMedia also questionable
Elliott did not stop there either. The firm also took aim at WarnerMedia by questioning the value of the Time Warner purchase.
Acknowledging the assets are still valuable, the firm stated "clear strategic benefits" should be visible "after $109 billion and three years."
The failed T-Mobile acquisition from 2011 was also used as another example of AT&T's "questionable" merger and acquisition strategy.
Too many eggs in AT&T's basket
What Elliott is saying is AT&T is juggling too much at the same time. This is in addition to heading in too many directions at the same time. The result being all areas of the AT&T business are now starting to suffer.
As a means to fix this the firm advises AT&T needs to move on from "acquisition mode" and focus on executing its strategy.
The first step being a full review of AT&T's portfolio. Following which, the company should look to get rid of any and all "distractions."
This should not just be limited to smaller businesses either. Instead, AT&T should look to sell any business that has no "clear, strategic rationale for being part of AT&T."
Again, DIRECTV was directly named as a prime candidate for review. A prime candidate to be sold if it's not in line with the company's grander goals.
AT&T did recently explain DIRECTV NOW is no longer one of its main focuses. Instead, its focus had turned to AT&T TV and the new WarnerMedia streaming service.