AT&T Files for DIRECTV Latin America IPO: Debt to Decrease?

An image of a stock chart with money, a calculator and a pen lying on it.
Credit: Shutterstock photo

AT&TT has recently filed a registration statement with U.S. Securities and Exchange Commission for a potential initial public offering (IPO) of its DIRECTV Latin American business. The IPO has been offered in the Class A common stock of Vrio Corp., which is AT&T's holding company for its Latin American digital entertainment services unit, DIRECTV Latin America. AT&T would retain a majority stake in Vrio Corp. post the IPO.

Joint bookrunners for the IPO are Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC. The IPO will be carried out by means of a prospectus.

An IPO is an operational business strategy opted by a company to raise funds for investment or expansion or to pay off debt by letting its shares become publicly traded. IPO is also seen as an exit strategy for the company founders and early investors to profit from their early risk taking move in a new venture.

Per a Reuters report, AT&T had initially planned to sell its DIRECTV Latin American business to reduce debt levels, which are likely to increase post the completion of an $85.4 billion cash-and-stock deal with Time Warner TWX . Several analysts opine that the deal closure might raise the telco's debt load to more than $180 billion. However, AT&T's latest push for IPO hints at its failure to find a suitable buyer.

Notably, the company's DIRECTV Latin America performed well in fourth-quarter 2017. Total revenues from Latin America were $1.391 million, up 10.3% year over year. The improved top line reflects price rises, driven by macroeconomic conditions with mixed local currencies. Meanwhile, operating income was $135 million with continued free cash flow. For 2017, DIRECTV Latin America's revenues rose 10.9% to $5.57 billion on the back of increased subscriptions.

As of Dec 31, 2017, total subscribers were 13.629 million, up 9.4% from the year-ago quarter. In the reported quarter, the company gained net 139,000 subscribers against loss of 21,000 subscribers in the prior year. The company witnessed remarkable subscriber growth despite cord-cutting, which poses a severe threat to U.S. pay-TV business.

Given this backdrop, we expect investor focus to remain on the outcome of the filed IPO, which is anticipated to affect the telco's liquidity scenario.

AT&T Inc. Price

AT&T Inc. Price | AT&T Inc. Quote

Zacks Rank & OtherKey Picks

AT&T is a Zacks Rank #2 (Buy) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Investors interested in the broader Computer and Technology sector can also consider Verizon Communications VZ and United States Cellular USM . While Verizon carries a Zacks Rank of 2, United States Cellular sports a Zacks Rank #1.

The projected earnings growth rate (3-5 years) for Verizon and United States Cellular is 5.41% and 1%, respectively.

Don't Even Think About Buying Bitcoin Until You Read This

The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.

Zacks has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 4 crypto-related stocks now >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Time Warner Inc. (TWX): Free Stock Analysis Report

AT&T Inc. (T): Free Stock Analysis Report

Verizon Communications Inc. (VZ): Free Stock Analysis Report

United States Cellular Corporation (USM): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos


    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

    Learn More