The sale is likely to be a prelude for more such divestures which are aimed at reducing its debt.
As per sources familiar with the matter at hand, AT&T Inc is exploring options of its Digital Life home security business, which includes sales, as it looks for ways to lower its debt after its $85.4 billion planned acquisition of Time Warner Inc.
The divestiture marks a reversal in AT&T strategy especially since it entered the U.S. home security market in 2013 with the introduction of its Digital Life services which offers customers a range of cameras and sensors to help them monitor their home and pets on their smartphone.
In 2016, the Digital Life service accounted for a tiny fraction of AT&T’s $163.8 billion revenues. However with 400,000 – 500,000 customers the divesture is likely to fetch close a $1 billion, said sources.
Although the proceeds from this sale would hardly make a splash on AT&T’s debt, which has accumulated to $143.7 billion, as on June 30, it could however be a prelude to more divestitures, said sources.
“AT&T will carry an incredible debt load (after the Time Warner deal closes), which is a risky proposition for a company with declining revenues,” said Craig Moffett, a research analyst at MoffettNathanson. “They will almost certainly have to find assets to sell to appease the bond rating agencies.”
AT&T acquisition of Time Warner is currently being reviewed by the U.S. Department of Justice. The deal is expected to close by the year end.