AT&T Inc. will offload its DirecTV operations in a deal with private equity firm TPG that values the business at about $16 billion, a fraction of the $48 billion that the telecom giant paid for the satellite-TV company in 2015.

Under the deal, a joint venture with TPG will operate a new DirecTV entity—consisting of AT&T’s pay-TV units—according to a filing on Thursday. AT&T will get $7.6 billion in cash from the transaction, with the new DirecTV taking on $5.8 billion in committed debt financing. TPG is acquiring a 30% stake.

With the sale, AT&T is taking a big step toward becoming a smaller, modern communications and media company. AT&T also has to balance competing cash demands—for film and TV programming production, dividends of almost $15 billion a year and interest on nearly $154 billion in long-term debt.

Since acquiring DirecTV, AT&T has lost almost 9 million TV subscribers—or more than a third of the 25.4 million customers it had six years ago. To account for the lower value of its TV business, the company took a $15.5 billion impairment charge last quarter.

The deal provides cash to pay for AT&T’s 5G wireless expansion, including the billions of dollars worth of airwaves the company is expected to buy at a federal auction.

With a smaller stake in DirecTV, AT&T can pursue what it calls an inevitable combination with rival satellite-TV provider Dish Network Corp. at some point in the future. A proposed combination of the two satellite services was shot down by the Federal Communications Commission and the U.S. Justice Department in 2002.

—Bloomberg News