Shares in Viacom Inc. lost ground for the week ended March 22 amid the looming possibility of a network blackout on AT&T Inc.-owned DIRECTV. Elsewhere, NII Holdings Inc.'s stock plummeted after the company announced a sale that would result in its dissolution.
Viacom and AT&T's DIRECTV have until midnight March 22 to strike a deal that would prevent Viacom's suite of 23 networks — including Nickelodeon/Nick At Nite (US), MTV (US), Comedy Central (US) and BET (US) — from going dark on DIRECTV's primary satellite service, AT&T's telco TV offering U-Verse and on the streaming service AT&T Watch.
Both sides have blasted each other's tactics and motives in the disagreement. Viacom representatives suggested that AT&T was abusing its market power in the wake of its acquisitions of DIRECTV in 2015 and Time Warner in 2018. AT&T representatives countered that many Viacom networks were no longer popular with its subscriber base.
A carriage disruption — which would come on the heels of a quarter during which AT&T sustained subscriber losses and Viacom is focused on shoring up its affiliate footing — would not be beneficial to either side, analysts said.
BTIG Research analyst Rich Greenfield recalled that a 2012 multiweek blackout of Viacom's networks on DIRECTV resulted in competitors picking off a number of the distributor's subscribers. In a March 20 note to clients, Greenfield wrote that it is difficult to see how a carriage disruption would serve either Viacom or AT&T's DIRECTV. He said that while Nickelodeon has lost overall ratings in recent years, its lead in the kids category has widened, and the service remains a key part of video bundles. Greenfield said losing MTV, Comedy Central and BET would create real headwinds for AT&T/DIRECTV.
While AT&T would reduce programming costs without the Viacom portfolio, "the acceleration in subscriber losses that it would cause appear nonsensical if they are trying to maximize free cash flow from DIRECTV to fund dividends at AT&T," Greenfield wrote.
Similarly, Patrice Cucinello, director at Fitch Ratings, wrote in a March 20 note that Viacom's ability to renegotiate its carriage agreement with AT&T's DIRECTV "is critical to the health of its affiliate revenues and cable networks business."
Cucinello noted that Viacom's strategy of concentrating on flagship brands has reinvigorated ratings and viewership at MTV, Comedy Central and BET, but Nickelodeon and Paramount Network (US) continue to struggle, making a deal all the more important.
Viacom shares lost 11.00% for the week and were trading at $24.91 as of midday March 22. Meanwhile, AT&T shares were trading up 1.27% at $31.06 apiece.
Wireless services provider NII Holdings this week struck a deal to sell its 70% stake in Nextel Brazil to América Móvil SAB de CV, a Mexico-based telecommunications firm, through the sale of one of NII's Luxembourg-based subsidiaries. Nextel Brazil represents NII's "sole remaining operating asset," meaning that upon completion of the sale, NII intends to "dissolve and wind up NII after the closing of the transaction," the company said in a statement.
Under the agreement, which has been unanimously approved by NII's board, América Móvil will buy all the equity interests in Nextel Brazil for $905 million, less net debt and subject to certain adjustments at closing. NII will receive 70% of the final net proceeds after deducting a $2 million preferred share return due to AI Brazil.
As of midday March 22, NII Holdings shares were trading at $2.00, down 37.30% for the week.
Nexstar Media Group Inc. and Tribune Media Co. shares dipped slightly after Nexstar this week agreed to sell 19 television stations for $1.32 billion in cash, clearing the path for its purchase of Tribune.
TEGNA Inc. will buy 11 stations in eight markets for $740 million, while E.W. Scripps Co. will acquire eight stations in seven markets for $580 million. Nexstar is also in talks to sell two other stations in Indianapolis, the company said March 20. The sale of the 19 TV stations is part of Nexstar's efforts to comply with the U.S. Federal Communications Commission's local and national television ownership rules and to obtain regulatory approval for its proposed Tribune deal.
Nexstar plans to use the net proceeds from the divestitures to fund the Tribune acquisition and to reduce debt.
Analysts are largely positive on the deal's prospects, with RBC Capital Markets analyst Leo Kulp saying in a recent report that the agreement could be "very financially attractive" for Nexstar and will likely give the company "greater negotiating scale with its partners."
Nexstar shares were trading at $105.01 around midday March 22, down 1.48%. Tribune shares were trading at $46.09, down 0.07%.