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AT&T abandons plans for Vrio IPO in blow to efforts to cut debt

[SAN FRNACISCO] AT&T Inc canceled an already-downsized initial public offering of South American pay-television unit Vrio Corp, a setback for the telecommunications giant's efforts to cut debt.

The company said on Wednesday that it decided to withdraw plans for an IPO of Vrio due to market conditions. Earlier in the day, AT&T cut the number of shares being offered by nearly half, to 15 million. It had also reduced the targeted price range to US$16 to US$17 per share, from US$19 to US$22 apiece.

Proceeds from the IPO would have gone to AT&T, which had planned to use a portion of the funds to reduce debt, according to the filing. The move would have helped pay down the money it's borrowing for the planned US$85.4 billion Time Warner acquisition - and perhaps paved the way for other deals. The assets had been valued at as much as US$10 billion.

Shares of AT&T fell 0.5 per cent to US$35.04 as of 9:38 am in New York. They have declined more than 9 per cent this year.

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Vrio, a holding company for AT&T's stake in DirecTV's pay-TV business in South America, was acquired as part of AT&T's US$48.5 billion purchase of DirecTV in 2015. It encompasses operations in the Caribbean and South America, including a 93 percent stake in Sky Brasil. The satellite TV service has grown to 13.6 million subscribers and booked 8.5 per cent revenue growth to US$5.6 billion last year, according to a regulatory filing.

Goldman Sachs AT&T was initially seeking to raise as much as US$653 million from the share sale. The offering was being led by Goldman Sachs Group Inc, JPMorgan Chase & Co, Citigroup Inc and Morgan Stanley.

While AT&T has a growing mobile-phone business in Mexico, it has been lukewarm about the other Latin American assets. Executives have talked about using the various TV operations in the region as a way to extend the reach of some of its future Time Warner Inc programming. Conditions in Venezuela and Brazil have presented challenges, however.

An initial public offering Wednesday by GrafTech International Ltd, the steel mill equipment maker owned by Brookfield Asset Management Inc, also fell short of earlier expectations. The listing raised US$525 million after pricing below a marketed range, according to data compiled by Bloomberg.