Pascal Desroches, senior
executive vice president and chief financial officer of AT&T
Inc.* (NYSE:T) spoke today at the Oppenheimer Technology, Internet
& Communications Conference, where he provided an update to
shareholders.
Desroches indicated that AT&T has good momentum as the
company continues to successfully execute in its market focus areas
of 5G, fiber and HBO Max. At the same time, AT&T continues to
invest in its network and the creation of compelling content. For
full-year 2021, AT&T expects gross capital investment1 to be in
the $22 billion range, capital expenditures in the $17 billion
range and cash content spend of approximately $19 billion.
In wireless, Desroches said he expects strong demand for mobile
services and AT&T’s consistent go-to-market strategy will
enable the company to sustain profitable postpaid subscriber growth
in the second half of 2021. The wireless landscape remains highly
competitive as operators look to capitalize on healthy industry
demand. Desroches noted that AT&T expects this competitive
intensity to continue at current levels and factored this
expectation into its reiterated guidance for full-year 2021 service
revenue growth of 3%, up from 2% previously, and low single-digit
mobility EBITDA growth.
AT&T has also been simplifying its portfolio to focus on its
connectivity-based businesses. The company recently completed its
DIRECTV transaction with TPG Capital and is moving forward with its
plans to spin or split off WarnerMedia and combine it with
Discovery to form a new entertainment company, Warner Bros.
Discovery.
Desroches said this strategy is about unlocking the value of
AT&T’s assets and matching the video and entertainment
businesses with the right capital structure and partners. This will
help AT&T focus on growth in wireless and fiber while also
giving shareholders future optionality with WarnerMedia and
allowing the company to benefit from potential upside with DIRECTV.
Following completion of the WarnerMedia/Discovery transaction,
which Desroches continues to expect in mid-2022, AT&T expects
to significantly reduce debt and to increase investment in 5G and
fiber.
Desroches reiterated the benefits of AT&T’s wireless network
strength and performance. AT&T currently covers 250 million
people in the U.S. with 5G using sub-6 MHz spectrum across nearly
500 markets. The company plans to begin C-Band deployment by the
end of 2021 and expects to cover approximately 200M POPs with
C-Band by the end of 2023.
In discussing the company’s expectations for the second half of
2021, Desroches noted that in most cases AT&T has long-term
supply agreements that provide for priority access and committed
pricing for materials and equipment. He also noted, like many other
companies, AT&T is now seeing some disruption in its supply
chain, including for fiber and related components. Given these
impacts over the next few months, Desroches indicated that the
company is seeing a slower-than-anticipated ramp within its fiber
ecosystem and the fiber locations buildout for 2021 is now expected
to be in the 2.5 million range. Management does not expect any
impact to its financial guidance as a result of this shift. In
addition, in working closely with the broader fiber ecosystem to
address this near-term dislocation, AT&T has better line of
sight in its ability to ramp its fiber deployment activities in the
coming quarters and is confident it will achieve the company’s
target of 30 million customer locations passed by the end of
2025.
AT&T also continues to experience healthy demand for HBO Max
in both domestic and international markets and therefore reiterated
its recently raised global HBO Max and HBO 2021 subscriber guidance
of 70 million to 73 million.2 During the third quarter, HBO will
cease to be offered as a subscription on Amazon Channels. This was
a strategic decision made by WarnerMedia. It is anticipated that
there will be an impact on HBO Max / HBO domestic subscribers in
the third quarter, but this has already been considered into the
company’s global subscriber guidance for the full year.
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology.
Consumers and businesses have more than 225 million monthly
subscriptions to our services. AT&T Communications provides
more than 100 million U.S. consumers with entertainment and
communications experiences across mobile and broadband. Plus, it
serves high-speed, highly secure connectivity and smart solutions
to nearly 3 million business customers. 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, HBO Max, Warner Bros., TNT, TBS,
truTV, CNN, DC Entertainment, New Line, Cartoon Network, Adult Swim
and Turner Classic Movies. Xandr, now part of WarnerMedia, provides
marketers with innovative and relevant advertising solutions for
consumers around premium video content and digital advertising
through its platform. AT&T Latin America provides pay-TV
services across 10 countries and territories in Latin America and
the Caribbean and wireless services to consumers and businesses in
Mexico.
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. © 2021 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.
1Gross capital investment includes capital expenditures and cash
payments for vendor financing and excludes FirstNet reimbursements.
In 2021, vendor financing payments are expected to be in the $4
billion range and FirstNet reimbursements are expected to be about
$1 billion. 2Global HBO Max and HBO subscribers consist of domestic
and international HBO Max and HBO subscribers, and exclude free
trials, basic and Cinemax subscribers.
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.
Cautionary Statement Concerning Forward-Looking
Statements
Information set forth in this communication, including financial
estimates and statements as to the expected timing, completion and
effects of the proposed transaction between AT&T, Magallanes,
Inc. (“Spinco”), and Discovery, Inc. (“Discovery”) constitute
forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These estimates and statements are subject to risks and
uncertainties, and actual results might differ materially. Such
estimates and statements include, but are not limited to,
statements about the benefits of the transaction, including future
financial and operating results, the combined Spinco and Discovery
company’s plans, objectives, expectations and intentions, and other
statements that are not historical facts. Such statements are based
upon the current beliefs and expectations of the management of
AT&T and Discovery and are subject to significant risks and
uncertainties outside of our control. Among the risks and
uncertainties that could cause actual results to differ from those
described in the forward-looking statements are the following: the
occurrence of any event, change or other circumstances that could
give rise to the termination of the proposed transaction; the risk
that Discovery stockholders may not approve the transaction
proposals; the risk that the necessary regulatory approvals may not
be obtained or may be obtained subject to conditions that are not
anticipated; risks that any of the other closing conditions to the
proposed transaction may not be satisfied in a timely manner; risks
that the anticipated tax treatment of the proposed transaction is
not obtained; risks related to potential litigation brought in
connection with the proposed transaction; uncertainties as to the
timing of the consummation of the proposed transaction; risks and
costs related to the implementation of the separation of Spinco,
including timing anticipated to complete the separation, any
changes to the configuration of the businesses included in the
separation if implemented; the risk that the integration of
Discovery and Spinco being more difficult, time consuming or costly
than expected; risks related to financial community and rating
agency perceptions of each of AT&T and Discovery and its
business, operations, financial condition and the industry in which
it operates; risks related to disruption of management time from
ongoing business operations due to the proposed merger; failure to
realize the benefits expected from the proposed merger; effects of
the announcement, pendency or completion of the proposed merger on
the ability of AT&T, Spinco or Discovery to retain customers
and retain and hire key personnel and maintain relationships with
their suppliers, and on their operating results and businesses
generally; and risks related to the potential impact of general
economic, political and market factors on the companies or the
proposed transaction. The effects of the COVID-19 pandemic may give
rise to risks that are currently unknown or amplify the risks
associated with the foregoing factors.
These risks, as well as other risks associated with the proposed
transaction, will be more fully discussed in the proxy
statement/prospectus that will be included in the registration
statements that will be filed with the SEC in connection with the
proposed transaction. Discussions of additional risks and
uncertainties are contained in AT&T’s and Discovery’s filings
with the Securities and Exchange Commission. Neither AT&T nor
Discovery is under any obligation, and each expressly disclaims any
obligation, to update, alter, or otherwise revise any
forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information,
future events, or otherwise. Persons reading this announcement are
cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in
respect of the proposed transaction between AT&T, Spinco, and
Discovery. In connection with the proposed transaction, AT&T,
Spinco and Discovery intend to file relevant materials with the
Securities and Exchange Commission (“SEC”), including a
registration statement on Form S-4 by Discovery that will contain a
prospectus of Discovery and Spinco that also constitutes a proxy
statement of Discovery, and a registration statement by Spinco.
This communication is not a substitute for the registration
statements, proxy statement/prospectus or any other document which
AT&T, Spinco or Discovery may file with the SEC. STOCKHOLDERS
OF AT&T AND DISCOVERY ARE URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENT AND PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders will be able to obtain copies of the proxy
statement/prospectus (when available) as well as other filings
containing information about AT&T, Spinco and Discovery,
without charge, at the SEC’s website, http://www.sec.gov. Copies of
documents filed with the SEC by AT&T or Spinco will be made
available free of charge on AT&T’s investor relations website
at https://investors.att.com. Copies of documents filed with the
SEC by Discovery will be made available free of charge on
Discovery’s investor relations website at
https://ir.corporate.discovery.com/investor-relations.
No Offer or Solicitation
This communication is for informational purposes only and is not
intended to and does not constitute an offer to sell, or the
solicitation of an offer to subscribe for or buy, or a solicitation
of any vote or approval in any jurisdiction, nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in
which such offer, sale or solicitation would be unlawful, prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended, and otherwise in accordance
with applicable law.
Participants in Solicitation
AT&T and its directors and executive officers, and Discovery
and its directors and executive officers, may be deemed to be
participants in the solicitation of proxies from the holders of
Discovery capital stock and/or the offering of Discovery securities
in respect of the proposed transaction. Information about the
directors and executive officers of AT&T is set forth in the
proxy statement for AT&T’s 2021 Annual Meeting of Stockholders,
which was filed with the SEC on March 11, 2021. Information about
the directors and executive officers of Discovery is set forth in
the proxy statement for Discovery’s 2021 Annual Meeting of
Stockholders, which was filed with the SEC on April 30, 2021.
Investors may obtain additional information regarding the interest
of such participants by reading the proxy statement/prospectus
regarding the proposed transaction when it becomes available.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210810005998/en/
For more information, contact: Fletcher Cook AT&T
Inc. Phone: (214) 912-8541 Email: fletcher.cook@att.com
Daphne Avila AT&T Inc. Phone: (972) 266-3866 Email: daphne.avila@att.com
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