AT&T to sell Puerto Rico, U.S. Virgin Islands units to Liberty Latin America
AT&T announced that it plans to sell its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America. The transaction includes network assets, including spectrum; real estate and leases; customers, including 1.1M wireless subscribers; and contracts. At close, approximately 1,300 current AT&T employees will move to Liberty Latin America. To ensure a smooth transition for its customers, AT&T will provide certain transition support functions to Liberty Latin America following close of the transaction. Under terms of the agreement, AT&T will retain FirstNet responsibilities and relationships as well as DIRECTV and certain global business customer relationships. The sale does not affect AT&T's FirstNet commitment. AT&T retains its dedicated FirstNet network core and service capabilities. Among other services, post-close Liberty Latin America will support AT&T's FirstNet build in Puerto Rico and the U.S. Virgin Islands, expanding LTE coverage and capacity to best meet the needs of first responders in the region. Eligible first responders subscribing to AT&T's FirstNet services in Puerto Rico and the U.S. Virgin Islands will still have access to the benefits and capabilities of the FirstNet network platform, including priority and preemption. Under the terms of the agreement, AT&T will receive $1.95B in cash at close, subject to customary closing adjustments. The transaction is subject to review by the FCC and the Department of Justice. The two companies expect the deal to close within 6 to 9 months. To reach its de-leveraging goal, AT&T plans to use free cash flow after dividends and to continue monetization initiatives. AT&T has already surpassed its monetization goal of a net $6B-8B in 2019, with a cumulative total of $10B raised year to date - from both asset monetizations and working capital initiatives. With this deal, the total of completed or announced monetization efforts this year is more than $11B. Given the company's confidence in reaching a net debt-to-adjusted EBITDA ratio in the 2.5x range this year, shareholders should expect that share buybacks will be in the mix in the fourth quarter, along with continued de-levering.