AT&T has sold a minority stake in its video business units to private equity company TPG Capital.
AT&T has been trying to sell its DirecTV, U-Verse and AT&T TV businesses since it acquired it around six years ago.
AT&T acquired DirecTV in 2015 for $49 billion around the same time, on-demand online streaming became a trend. According to sources with knowledge of the matter, the sale of the stake in the three units to TPG was $16 billion.
Analysts said that AT&T's purchase of DirecTV was "nonsensical."
"With our acquisition of DirecTV, we invested approximately $60 billion in the U.S. video business. It's fair to say that some aspects of the transaction have not played out as we had planned," AT&T said in a statement.
AT&T and TPG will establish a new company called New DirecTV. AT&T will own 70% of the new company, while TPG will own the rest.
AT&T said the merger should create "future value creation opportunities" that will further cash flows for the company. AT&T said that despite DirecTV not meeting its expectations the business still generated cash flows of more than $4 billion per year.
Analysts said the sale of the business is expected to significantly reduce the strain on AT&T's balance sheet. The proceeds can be used to pay debt - mostly incurred after it purchased Time Warner in 2018. AT&T paid an estimated $85 billion for the acquisition, which placed popular brands such as TNT, CNN, Warner Bros and HBO under its banner.
Senior analysts at Rosenblatt Securities said the sale is just part of AT&T's plan to focus more on its nascent streaming services such as its HBO Max streaming service.