AT&T appeases activist investor Elliott with three-year strategic plan
CEO Randall Stephenson says AT&T has ‘no sacred cows’ when it comes to reviewing its business portfolio
New York — AT&T on Monday unveiled a three-year strategic plan that included adding two new board members, selling off up to $10bn worth of noncore businesses in 2020 and paying off all its debt from the purchase of Time Warner, bowing to pressure from activist investor Elliott Management.
The second-largest US mobile carrier by subscribers has struggled with a stagnant stock price as it has spent hundreds of billions on a bet that owning media content, as well as all the ways that people can consume content through their phones, TV and internet, would pay off.
But its heavy debt load and declining revenue from segments like satellite provider DirecTV brought criticism from Elliott, which revealed a $3.2bn stake in AT&T in September.
Shares of AT&T were up 4.6% to $38.60 in morning trading.
AT&T announced the plan on the day it released third-quarter results that saw worsening results in several areas, including satellite provider DirecTV and WarnerMedia, which includes the Turner TV networks and premium channel HBO.
On the conference call with analysts, CEO Randall Stephenson said AT&T had “no sacred cows” when it came to reviewing the portfolio of businesses.
While DirecTV will be an important piece of AT&T’s strategy over the next three years, AT&T will consider multiple options including partnerships and other structures, Stephenson said.
AT&T also said that it expects Stephenson to remain CEO at least to the end of 2020.
In a letter to shareholders supporting the plan, Elliott Management said AT&T would evaluate all potential CEO candidates and separate the role of chair and CEO.
“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott said in a statement.
A source familiar with the matter said on Monday that Elliott is supportive of the board member AT&T is expected to nominate in 2019 at the next board meeting.
To reduce its debt pile of $153.5bn at the end of the third quarter, AT&T has been on a selling spree. Over the weekend, it sold Central European Media Enterprises (CME) to investment group PPF, in a cash deal valued at about $2.1bn.
The company expects generate $14bn through asset sales and other initiatives by the end of this year. It reduced its net debt by $12.7bn so far in 2019.
The news on Monday presented an “awkward conundrum” as AT&T announced financial guidance through 2022 that was ahead of Wall Street consensus, but its quarterly results fell short of expectations in every segment, said Jonathan Chaplin, an analyst with New Street Research, in a note.
AT&T lost 1.2-million premium TV customers, which includes DirecTV, as well as 195,000 streaming video customers, as AT&T has sought to roll off subscribers who had signed up with price promotions.
Revenue from WarnerMedia was down 4.4% from the previous year to $7.8bn as it made less money from the Warner Bros.
Total operating revenue in the third quarter ended September 30 fell to $44.59bn from $45.74bn, a year earlier, missing analyst expectations of $45bn, according to IBES data from Refinitiv..
Excluding items, AT&T earned 94c a share, above analysts’ estimates of 93c.
The carrier added 101,000 net new phone subscribers who pay a monthly bill during the third quarter. Wall Street estimated the carrier would gain 61,000 net new customer additions, according to a note from Cowen analysts.