AT&T Is Getting Closer to a Clean Slate. Here’s What Comes Next

Barron's2022-02-02

After a saga of misguided M&A, there’s still work to be done for AT&T. Patrick T. Fallon/AFP via Getty ImagesAT&T shed some light on its pending exit from the media business on Tuesday, elaborating on...

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Comments

Theo_4
2022-02-02
Theo_4
Oh
sheenayam
2022-02-02
sheenayam
It is always good to focus and expand on what you are good at. Way to go AT&T!!
wwwwwl
2022-02-02
wwwwwl
K
Feelix Teo
2022-02-02
Feelix Teo
mk
summerdreamz
2022-02-02
summerdreamz
Ok
HENRYCSC
2022-02-02
HENRYCSC
Good

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Here’s What Comes Next\n</h2>\n\n<h4 class=\"meta\">\n\n\n2022-02-02 08:36 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barrons.com/articles/att-media-spin-51643742609?mod=hp_LEAD_1><strong>Barron's</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>After a saga of misguided M&A, there’s still work to be done for AT&T. Patrick T. 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Competitive dynamics in both wired and wireless communications appear to be getting more intense, especially as industry subscriber growth slows following a pandemic-era boost. And AT&T requires tens of billions of dollars in capital expenditures to improve its 5G and fiber networks.AT&T plans to expand its 5G C-band network to 200 million people in the U.S. by the end of 2023, and wants to reach 30 million homes and businesses with its fiber network by the end of 2025.AT&T will have more financial firepower to throw at those goals. Management expects $20 billion of annual free cash flow from the post-WarnerMedia telecom company, with 40% of that, or $8 billion, going toward its dividend. That compares with a $15 billion annual dividend commitment prior to the spinoff. The new payout will be some $1.11 per share annually, or a 6.3% yield at current prices (adjusting for the roughly $6.70 a share in Warner Bros. Discovery stock that AT&T holders will receive). It matches the projections that AT&T gave when announcing the transaction in May 2021.AT&T management expects to spend around $24 billion on capital investments in 2022. And the company will get an estimated $43 billion via the WarnerMedia transaction to put toward paying down debt. Management expects to get net debt to adjusted earnings before interest, taxes, depreciation, and amortization—or Ebitda—down to 2.5 times by the end of 2023. That compares with about 3.2 times today.The result should be a leaner, meaner AT&T that’s better equipped to face its challenges, but investors will want to see proof after feeling burned by years of management decisions that look poor in hindsight. Next up is a virtual investor day on March 11 focused on the post-WarnerMedia telecom business, which could include new long-term targets and plans.The closing of the transaction itself should also bring some relief. Investors interested in Warner Bros. Discovery can shift to that stock, and those who want a yield-generating telecom stock can double down on AT&T. 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