Friday morning from the AT&T Pebble Beach National Pro-Am, CNBC Squawk Box co-anchors Joe Kernen and Becky Quick interviewed AT&T CEO and Chairman, Randall Stephenson.
In this far ranging early morning interview, Randall discussed the current and future outlook of the large cap communications and entertainment company he leads. Effectively, he stated that he was very bullish on the projected economic output in 2020 for the company.
He stressed that the top priority for the AT&T was to pay down the massive debt incurred from its acquisition of Time Warner. He commented that the goal was to bring down debt to a ratio of 2.5X debt-to-EBITDA and this past year, they successfully paid off $30 billion in debt. Additionally, Randall shared that AT&T realized a 45% total shareholder return in calendar year 2019.
Media Business
Overall, he commented that AT&T’s media business, renamed Warner Entertainment, is doing well. In the short term, they expect to roll-out HBO Max in May 2020 which will feature Warner Bros. extensive inventory of content, including the TV series “Friends” and “The Big Bang Theory”. and content from Turner’s networks.
Currently, premium HBO streaming has approximately 30 million subscribers. Those subscribers will automatically convert to HBO Max once the it comes on-line. He expects that HBO Max will grow to 50 million subscribers.
Financials
Activist shareholder, Elliot Management, bought a large stake in AT&T back in September 2019 and criticized the management and board leadership, and the direction of the company. Elliot Management in a letter wrote that AT&T’s stock could potentially surge to above $60 a share by 2021 if the company “increased strategic focus, improved operational efficiency” and “enhanced leadership and oversight.”
Furthermore, Elliot Management questioned the company’s succession plan of tagging Warner Media’s CEO and AT&T COO, John Stankey, as CEO Randall Stephenson’s heir apparent. They expressed concerns with Stankey’s decision making. his lack of experience operating and communications and entertainment company, and his ability to manage the conglomerate.
Bottom line is AT&T’s financial future appears highly dependent on the success of HBO Max growing paid subscriptions, management paying down the high level of corporate debt on its balance sheet, and developing a coherent strategy that can effectively discover and employ the synergies of AT&T’s diverse assets and enterprises.