AT&T CEO Provides Update to Shareholders
September 17 2019 - 5:16PM
Business Wire
Randall Stephenson, chairman and CEO of AT&T Inc.* (NYSE:T),
spoke today at the Goldman Sachs Communacopia Conference in New
York. While there, he discussed the company’s strategy, including
capital allocation, and progress against 2019 priorities.
AT&T Strategy
Stephenson discussed AT&T’s plan to take advantage of two
trends: continuous growth in time spent viewing premium content and
increases in demand for connectivity and bandwidth. He said the
company has the right assets to address these trends at a time when
a direct path to the consumer gives content companies a competitive
advantage.
Stephenson said that WarnerMedia’s large-scale content creation
capabilities matched with AT&T’s vast distribution network
across 170 million direct-to-consumer relationships, 5,500 retail
stores and 3.2 billion annual customer touches is a powerful
combination that positions AT&T to succeed.
Stephenson went on to say that the combination of WarnerMedia’s
massive ad inventory with the data provided by AT&T’s
large-scale networks offers a significant additional value
opportunity, which drove the creation of Xandr.
Capital Allocation and De-leveraging
Stephenson reiterated that AT&T remains confident in its
ability to reduce its net debt-to-adjusted EBITDA ratio to the 2.5x
range by the end of 2019. The company paid down $9 billion in net
debt in the first half of 2019 and has reduced net debt by $18
billion since it closed the Time Warner acquisition. Its progress
against this goal gave the company confidence to increase its
full-year free cash flow target to $28 billion, a $2 billion
increase.
To reach its de-leveraging goal, AT&T plans to use free cash
flow after dividends and to continue monetization initiatives,
including both asset sales and working capital initiatives, such as
collateral agreements. AT&T has already surpassed its
monetization goal of a net $6 billion to $8 billion in 2019, with a
cumulative total of $9 billion raised year to date — $4 billion
from asset sales and $5 billion from working capital and other
monetization initiatives. Additional potential asset monetization
activity could include the sales of company-owned cell towers in
the United States; tower receivables; real estate; and the
company's regional sports networks. In addition, European
broadcaster CME, of which AT&T owns 75%, has initiated a
strategic review that could include a sale of the company.
Stephenson said that given the company’s confidence in reaching
its target net debt-to-adjusted EBITDA ratio, investors should
expect that share buybacks will be added to the mix of its capital
allocation approach. AT&T is not providing guidance on the
amounts of share buybacks but says it is a logical move given that
the cash cost of debt is at historically low levels and
significantly below the cash cost of equity.
Strong Execution
As John Stephens, the company’s chief financial officer,
recently discussed, the company has executed against the priorities
it laid out in late 2018 and expects to continue to deliver in the
third quarter of 2019.
In the first half of the year, in addition to AT&T’s
de-leveraging progress, the company grew wireless service revenues;
grew Entertainment Group EBITDA ; remained on track to deliver $700
million in WarnerMedia run-rate synergies in 2019; and led the
industry in network performance, 5G deployment and fiber build. GWS
has recognized AT&T for having the nation’s best wireless
network for two years in a row, and Ookla has ranked AT&T’s
network as the fastest for two quarters in a row.
Stephenson said he expects continued progress in the third
quarter and beyond. The company expects wireless service revenue
growth to continue in the second half of 2019 and that it will
achieve its goal of full-year Entertainment Group EBITDA stability.
He said the company will also continue to focus on positioning
WarnerMedia to be more competitive in an industry being reshaped by
consolidation and technology. As WarnerMedia focuses on the launch
of HBO Max in spring 2020, AT&T expects to accelerate
investment and the development of new content. And AT&T plans
to continue to invest in its network. The company’s FirstNet build
was already 9 months ahead of schedule at the end of the second
quarter, and AT&T expects to reach 70% Band 14 coverage by the
end of the year. AT&T has 5G mmWave in parts of 21 cities today
and plans to be in parts of 29 cities by the end of 2019 with
nationwide 5G coverage using sub-6 GHz spectrum by the first half
of 2020.
AT&T has also been working to reduce costs. In addition to
its ongoing work to manage content costs, the company has been
focused on network virtualization. Stephenson said these efforts
have resulted in about 17 consecutive quarters of lower network
costs. The company expects 75% of its network functions to be
virtualized by the end of 2020.
AT&T announces third-quarter 2019 results on Wednesday,
October 23 followed by WarnerMedia Day in Los Angeles on October
29. The company’s second-quarter 2019 results are available
here.
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology. It
executes in the market under four operating units. WarnerMedia is a
leading media and entertainment company that creates and
distributes premium and popular content to global audiences through
its consumer brands including: HBO, Warner Bros., TNT, TBS, truTV,
CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim,
Turner Classic Movies and others. AT&T Communications provides
more than 100 million U.S. consumers with entertainment and
communications experiences across TV, mobile and broadband
services. Plus, it serves nearly 3 million business customers with
high-speed, highly secure connectivity and smart solutions.
AT&T Latin America provides pay-TV services across 11 countries
and territories in Latin America and the Caribbean, and is the
fastest growing wireless provider in Mexico, serving consumers and
businesses. Xandr provides marketers with innovative and relevant
advertising solutions for consumers around premium video content
and digital advertising through its AppNexus platform.
AT&T products and services are provided or offered by
subsidiaries and affiliates of AT&T Inc. under the AT&T
brand and not by AT&T Inc. Additional information is available
at about.att.com. © 2019 AT&T Intellectual Property. All rights
reserved. AT&T, the Globe logo and other marks are trademarks
and service marks of AT&T Intellectual Property and/or AT&T
affiliated companies. All other marks contained herein are the
property of their respective owners.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to
risks and uncertainties, and actual results might differ
materially. A discussion of factors that may affect future results
is contained in AT&T’s filings with the Securities and Exchange
Commission. AT&T disclaims any obligation to update and revise
statements contained in this news release based on new information
or otherwise.
This news release may contain certain non-GAAP financial
measures. Reconciliations between the non-GAAP financial measures
and the GAAP financial measures are available on the company’s
website at https://investors.att.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20190917006139/en/
Erin McGrath AT&T Inc. Phone: (214) 862-0651 Email:
erin.mcgrath@att.com
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