February 7, 2018 / 1:54 PM / in 13 days

AT&T files confidentially for IPO of DirecTV Latin America stake

(Reuters) - AT&T Inc (T.N), which owns satellite television service DirecTV, on Wednesday said it had filed confidentially for an initial public offering for its minority interest in DirecTV Latin America.

Shares of AT&T rose nearly 2 percent to $37.45 in morning trade.

The No. 2 U.S. wireless carrier has been reviewing its portfolio to find ways to help reduce its debt, which will increase to about $180 billion once its $85.4 billion acquisition of Time Warner Inc (TWX.N) closes.

The IPO, expected to come in the first half of 2018, is unlikely to affect AT&T’s debt profile meaningfully, New Street Research analyst Jonathan Chaplin said.

“It is a very very small step in the right direction ...It probably won’t move the needle very much,” Chaplin said.

Reuters, citing sources, reported last year that AT&T was evaluating a sale of its pay TV operations in Latin America. The assets could have been valued at more than $8 billion at the time. (reut.rs/2f5y6R4)

    “We expected that AT&T would sell it (DirecTV Latin America stake) rather than publicly list it, this could presumably mean they weren’t able to find a buyer,” MoffettNathanson analyst Craig Moffett said, raising concerns over the valuation of the assets.

    Cable service providers have been facing stiff challenges as the industry battles with cord-cutting, where people are moving toward on-demand video streaming services such as Netflix Inc (NFLX.O) and Amazon.com Inc’s (AMZN.O) Amazon Prime.

    The Latin America business, excluding Mexico, has been AT&T’s best candidate to divest, as the region is largely non-strategic and “didn’t fit very well with any of their other significant initiatives”, Moffett said.

    AT&T, which acquired DirecTV for $48.5 billion in 2015, reported about 13.6 million video connections for Latin America as of Dec. 31, 2017, an addition of 1.1 million from a year earlier.

    Reporting by Supantha Mukherjee and Muvija M in Bengaluru; Editing by Maju Samuel

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