AT&T filed a registration statement for a potential U.S. initial public offering of shares in DirecTV Latin America business, which the telco said could bring in up to $100 million.
With an IPO for the holding company for its satellite businesses in South America and the Caribbean, dubbed Vrio Corp., AT&T is potentially setting up the unit for a sale; the DirecTV Latin America assets have been valued at upwards of $10 billion. AT&T is looking at the IPO and potential spinoff to pay down debt as it aims to close the acquisition of Time Warner, which analysts say will push the telco’s debt load to more than $180 billion.
As of the end of 2017, DirecTV Latin America had about 13.6 million subscribers in South America and the Caribbean — up 9.3% year-over-year, in contrast to the “cord cutter” trend that has beset the U.S. pay-TV market. AT&T cited relatively low penetration of broadband in South America and lower internet-access speeds as limiting Vrio’s exposure to competitive threats of over-the-top streaming video services.
AT&T would retain majority voting control of Vrio post-IPO. According to AT&T’s filing Wednesday for Vrio, the telco plans to request for a ruling from the IRS that would let AT&T pursue a tax-free spin-off of its remaining interest in our common stock following the IPO. It noted, however, that there’s no guarantee the IRS will grant such a ruling or even that AT&T will decide to proceed with a spinoff of Vrio.
For full-year 2017, DirecTV Latin America had revenue of $5.57 billion, up 10.9% from the year prior, and net income of $222 million (versus a net loss of $356 million for the 2016).
Vrio’s businesses operate in eight South American countries and three Caribbean countries: Brazil, under the Sky brand; and, under the DirecTV brand, in Barbados, Colombia, Curaçao, Ecuador, Trinidad and Tobago, Venezuela, Argentina, Chile, Peru, and Uruguay.
Goldman Sachs, J.P. Morgan Securities, Citigroup and Morgan Stanley will act as the joint book-running managers for the IPO.