John Stephens, AT&T Chief Financial Officer, Speaks at Citi Conference
January 10 2019 - 7:32PM
Business Wire
John Stephens, AT&T chief financial officer, spoke yesterday
at the 2019 Global TMT West Conference in Las Vegas. Stephens
addressed the company’s priorities for 2019:
- Growing free cash flow and paying
down debt. AT&T (NYSE:T) expects gross capital investment
in the $23 billion range with free cash flow1 in the $26 billion
range with approximately $12 billion remaining after dividends. The
company intends to use the $12 billion — as well as $6 billion to
$8 billion it expects to raise from asset monetization — to reduce
debt. The company plans to lower its net-debt-to-adjusted EBITDA
ratio to the 2.5x range by the end of 2019 and to continue
deleveraging through 2022. The vast majority of AT&T’s debt is
fixed rate, protecting the company against interest rate
increases.
AT&T has increased its quarterly dividend
for 35 consecutive years. While dividend policy is determined by
the company’s board of directors, AT&T’s leadership plans to
give the board the flexibility to continue its current policy of
annual increases. The company expects its 2019 dividend payout
ratio will be in the high 50% range.2
- Delivering solid wireless results
with growth in service revenues and EBITDA. Stephens said
AT&T expects wireless service revenue growth to continue in
2019. AT&T is also focused on the transition to 5G technologies
and is seeing speeds substantially faster than traditional LTE and
with ultra-low latency. This will enable a wide range of use cases
— from IoT to manufacturing, gaming to augmented and virtual
reality.
AT&T expects 5G will eventually represent
a significant revenue stream for the company but does not expect it
to be a significant revenue stream in 2019. The company expects 5G
investment to be managed within current capital intensity
levels.
- Stabilizing Entertainment Group
EBITDA. Stephens said AT&T remains confident in its ability
to keep EBITDA levels in its Entertainment Group stable in 2019 as
the company focuses on cost controls, profitability and retaining
customers with offers that meet their needs. EBITDA support will
come from improving video ARPU as promotional pricing expires for
about 2 million linear video subscribers and as annual price
increases help offset content cost increases.
The company will also focus on enhancing
profitability in its over-the-top offerings. At the end of the
second quarter last year, about 500,000 DIRECTV NOW subscribers
were on $10 per month promotional pricing plans; By yearend 2018,
virtually no subscribers remained on this plan. The company expects
this and the expansion of its cloud DVR offer for DIRECTV NOW will
support ARPU growth in 2019.
AT&T also expects growth in broadband
revenues in 2019 driven by customer additions and ARPU increases as
it expands its fiber network, which offers higher speeds and high
reliability. By mid-2019, AT&T expects to cover 14 million
customer locations, a nearly 30% increase from the end of 2018.
- Integrating WarnerMedia and
sustaining growth at Home Box Office, Turner and Warner Bros.
WarnerMedia’s reputation for creative excellence, along with its
global scale; portfolio of iconic brands and franchises; and deep
intellectual property, including the Warner Bros. library of
content, positions AT&T well for success.
With the addition of WarnerMedia, AT&T
has become a modern media company with a combination of customer
data insights and premium content that sets up a virtuous cycle.
AT&T can deliver premium content that drives consumer
engagement, which generates data to drive better advertising and
monetization models. In turn, this generates returns to invest in
better content, which attracts even more viewers. And Xandr,
AT&T’s advertising and analytics unit, gives the company
further opportunities to monetize engagement.
- Accelerating advertising growth at
Xandr. Xandr lets AT&T combine data with advertising
technology to make addressable TV advertising more effective and
valuable for advertisers. Over time, AT&T expects to apply
data-powered targeting to significantly improve the yield on linear
advertising inventory.
As announced earlier this week, Xandr is
working with WarnerMedia’s Turner unit to improve the relevancy of
advertising, fueled by data and content connections. The two
organizations bring together a unique set of assets — valuable
consumer data and insights, advanced advertising capabilities and
engaged, passionate fanbases. This will let them better serve
marketers and deliver better experiences to consumers. AT&T
expects to realize $1 billion in revenue-related synergies,
including its advertising operations, by yearend 2021.
AT&T announces fourth-quarter and full-year 2018 results on
Wednesday, January 30. Results will be available before 7 a.m. ET,
and the company will host a call to discuss results at 8:30 a.m. ET
the same day. The earnings release, Investor Briefing and related
materials, as well as a live webcast of the call, will be available
at AT&T Investor Relations.
1 Free cash flow is cash from operating activities minus capital
expenditures. Gross capital investment excludes expected FirstNet
reimbursement in the $1 billion range; includes potential vendor
financing.2 Free cash flow dividend payout ratio is dividends
divided by free cash flow.
*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’s
HBO, Turner and Warner Bros. divisions are world leaders in
creating premium content, operate one of the world’s largest TV and
film studios, and own a world-class library of entertainment.
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 more than 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/20190110005801/en/
Megan KettererAT&T Inc.Phone: (972) 467-6537Email:
megan.ketterer@att.com
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