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AT&T Looks to Cut Debt With Puerto Rico, Virgin Islands Sale

John J. Edwards III
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AT&T Looks to Cut Debt With Puerto Rico, Virgin Islands Sale

(Bloomberg) -- AT&T Inc. agreed to sell its operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America Ltd. for $1.95 billion in cash, taking a step toward reducing debt amassed in one of 2018’s biggest merger deals.

The Dallas-based telecom and media giant has been trying to strengthen its balance sheet since taking over Time Warner Inc. last year for $85 billion. “This transaction is a result of our ongoing strategic review of our balance sheet and assets to identify opportunities for monetization,” John Stephens, AT&T’s chief financial officer, said in a statement.

AT&T was exploring the possible sale of the Puerto Rican operations over the summer, though it then expected to reap as much as $3 billion from the transaction, a person familiar with the matter told Bloomberg News.

“Reports that we originally sought $3 billion for these assets are not accurate,” an AT&T spokeswoman said Wednesday. “That was never our expectation and that valuation wouldn’t have reflected the value of the assets or the market for such assets.”

AT&T is under pressure from activist shareholder Elliott Management Corp., which last month started urging divestments of some assets and other management changes. The company had already sold its stake in the Hulu streaming service and its New York offices in the debt-reduction effort, reaping a total of $3.6 billion.

What Bloomberg Intelligence Says

“The sale of AT&T’s operations in Puerto Rico and the U.S. Virgin Islands will further relieve pressure on the company to delever and allow for the allocation of more free cash flow to share buybacks in 4Q.”

John Butler, telecom analyst.

Click here to read the research.

In all, including Wednesday’s deal and cash-flow-management steps, AT&T said it has raised a net $11 billion this year, exceeding its goal of $6 billion to $8 billion. The company reports its third-quarter earnings Oct. 23 and has an investor day scheduled for Oct. 29 to offer an update on its WarnerMedia entertainment and media strategy.

For Liberty Latin America, part of U.S. cable pioneer John Malone’s global empire, the deal furthers regional expansion ambitions. The AT&T assets in the sale include cellular, landline and internet businesses. Denver-based Liberty operates in more than 20 countries around Latin America and the Caribbean.

AT&T said it plans stock buybacks in the fourth quarter, along with more debt cuts. The company’s shares were modestly higher in New York trading Wednesday, having gained 31% this year through Tuesday. Liberty Latin America’s class-A shares rose as much as 6.1% Wednesday.

The Wall Street Journal reported on the coming sale earlier Wednesday.

(Updates with AT&T statement on valuation in fourth paragraph.)

--With assistance from Scott Moritz.

To contact the reporter on this story: John J. Edwards III in Boston at jedwardsiii1@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, John J. Edwards III, Timothy Annett

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