One key question some might have had about the spin out of DirecTV assets was the impact on AT&T cash flow. That was the reason DirecTV was purchased in the first place, and cash flow generation matters mightily to AT&T.
For most observers, the acquisition of DirecTV was about strategy, and that is correct, up to a point. For some of us, the deal also was the fastest way AT&T could make an acquisition that was immediately a boost to free cash flow.
AT&T said as part of its second quarter 2021 results that the company expected lower revenues by $9 billion; cash flow (EBITDA) lower by $1 billion and free cash flow lower by about $1 billion. AT&T also received about $7 billion in cash as part of the transaction.
The now separated asset still means AT&T gets a 70 percent share of DirecTV cash flow and revenue, plus equity value upside. That answers the question.
Assuming the primary use of free cash is payouts to the owners, rather than heavy reinvestment in the business, AT&T continues to receive the great bulk of cash flow value.
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