AT&T sells its Puerto Rico and U.S. Virgin Islands operations for $1.95B

AT&T said today it plans to sell its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America. The $1.95 billion cash sale includes spectrum and real estate, along with 1.1 million wireless subscribers.

The two companies expect the deal to close within six to nine months, at which time about 1,300 current AT&T employees will move to Liberty Latin America. AT&T will provide some transition support to Liberty Latin America to try and ensure a smooth handover.

The deal does not include AT&T’s FirstNet commitment in Puerto Rico and the U.S. Virgin Islands. Liberty Latin America will support AT&T's FirstNet build in the islands, expanding LTE coverage and capacity to meet the needs of first responders in the region.

Today’s deal with Liberty Latin America also does not include AT&T’s DirecTV business in the region.

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AT&T executives have been telling investors the company would sell off assets to pay down its debt. In March, AT&T CFO John Stephens said paying down debt was a top priority in 2019. “We feel very good about our ability to generate $6 billion to $8 billion of asset sales… I think everyone knows we are actively on the market with a collection of real estate.”

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Today, AT&T said it has already raised $10 billion this year to pay off its debt. And the sale to Liberty Latin America will take that to more than $11 billion raised. "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 of 2019, along with continued de-levering," said the company in today’s announcement.

In a recent letter to AT&T's board of directors, activist investor Elliott Management said, "AT&T should continue to aggressively repay debt in order to improve its overall financial positioning. Through this combination of debt repayment and meaningful EBITDA growth, AT&T will de-lever to below 2.0x by 2022."

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Liberty Latin America is already an entrenched pay-TV and broadband provider in the region. "The combination of AT&T's leading mobile and wired businesses with Liberty Puerto Rico's leading high-speed broadband and TV business will create a strong and competitive integrated communications player," said Balan Nair, president and CEO, Liberty Latin America, in a statement.