AT&T (NYSE:T)
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John Stephens, AT&T chief financial officer, spoke today at the Morgan
Stanley European Technology, Media & Telecommunications conference in
Barcelona. Stephens reiterated the company’s guidance for 2018. For the
full year, AT&T* (NYSE: T) expects to deliver:
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EPS at the high end of the $3.50 range
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Free cash flow at the high end of the $21 billion range
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Capital investment in the $22 billion range, net of FirstNet
reimbursements and vendor financing.
As AT&T looks to 2019 and beyond, it is focused on several areas:
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Driving solid results in a competitive wireless environment. AT&T’s
U.S. wireless service revenues grew on a comparable basis in both the
second and third quarters of 2018, and the company expects growth —
also on a comparable basis — for full-year 2018. This revenue growth
is supporting strong wireless EBITDA margins. The company added 1.1
million branded smartphones in the third quarter of 2018 and nearly
half-a-million prepaid phone net adds. The company previously said
that many of its new prepaid subscribers have lifetime values
comparable to its postpaid subscriber base, and these additions helped
drive prepaid revenues up nearly 7% year over year.
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Integration of WarnerMedia and the creation of a modern media
company. In its first full quarter as part of AT&T, WarnerMedia
had strong results and was accretive by $0.05 to AT&T’s earnings per
share in 3Q18. The company continues to expect a $2.5 billion run rate
in synergies by the end of 2021. The addition of WarnerMedia has given
AT&T high-quality, premium content to better compete. The company
expects this combination to drive a virtuous cycle in which the
combination of premium content with direct-to-consumer relationships
will drive additional customer engagement and data to drive better
advertising and monetization models. And Xandr, the company’s
advertising and analytics business, will use data, a large inventory
of advertising and an ad tech platform to make premium video
advertising more relevant and valuable. All of this is combined with
first-class networks designed to deliver content in new and innovative
ways.
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Maintaining its capital allocation strategy and deleveraging. AT&T
remains focused on investing in growth while returning value to
shareholders via its dividend and strengthening its balance sheet. The
company expects to reach leverage ratios in the 2.9x range by the end
of 2018, trending to the 2.5x range by year-end 2019 and to historical
levels by the end of 2022. The company expects to support its
deleveraging plans by growing free cash flows, which are expected to
be at a run rate of $25 billion exiting 2018; improving EBITDA through
merger synergies and improved operational performance; and monetizing
non-core assets, such as real estate. Stephens also said that AT&T has
an opportunity to reduce capital intensity as its Mexico LTE build and
its U.S. fiber build wind down. At the same time, AT&T is prudently
managing its near-term maturities and refinancing risks and expects to
end 2018 with $48 billion in debt maturing through 2022, an average of
$12 billion annually, down from $76 billion at the close of the Time
Warner transaction.
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Building the FirstNet network. AT&T is ahead of schedule on its
FirstNet build, and its network has performed well during recent
storms, such as Hurricanes Florence and Michael. This strong
performance has allowed the company to support its customers,
including first responders, as well as customers of other carriers
that experienced outages. More than 3,600 agencies representing more
than 250,000 subscribers have signed on to FirstNet, and the company
expects flow share gains going forward. AT&T expects its FirstNet
build to improve network quality, speeds and capabilities, and to
increase the company’s retail footprint across the nation. As it
deploys spectrum and builds new sites, the company expects its
spectrum capacity at the end of 2019 will be 50% higher than in 2016,
excluding millimeter wave. And AT&T expects $1.3 billion in FirstNet
reimbursements in the fourth quarter of 2018.
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Deploying its 5G network. AT&T expects to be the first U.S.
company to introduce standards-based mobile 5G service in parts of 12
cities by the end of 2018 and plans to expand to parts of 19 cities in
early 2019. The company expects its 5G investment will not increase
capital intensity and does not expect 5G to generate material revenues
in 2019. Even as it prepares for standards-based 5G, AT&T is deploying
new technologies that are increasing speeds and capabilities on its
LTE network. It expects to have rolled out these faster speeds in more
than 400 cities by the end of 2018 and plans to expand to more than
100 additional cities in early 2019.
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Improving EBITDA margins in its Entertainment Group business unit. The
company expects improved revenue trends as it moves to market-based
pricing for DIRECTV NOW and a significant subset of its video base
rolls off 2-year price locks in 2019. While the move to market pricing
may increase churn and subscriber losses, the company expects that it
will contribute to improved margins. The company also expects growth
in broadband revenues as it completes its U.S. fiber build and more
subscribers choose its higher-ARPU fiber product. At the same time,
AT&T it will continue to focus on managing costs in its Entertainment
Group unit.
Stephens addressed the U.S. Department of Justice appeal of the U.S.
District Court decision that allowed AT&T and Time Warner to complete
their merger earlier this year. He said that AT&T’s legal team is
working on the appeal, allowing management to focus on running the
business. Oral arguments have been scheduled for December 6, and the
company continues to expect resolution in the first quarter of 2019.
AT&T will hold a meeting with analysts on November 29. The event will be
broadcast live via the internet, and additional details will be
announced prior to the meeting.
*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.
© 2018 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181114005832/en/
Erin McGrathAT&T Inc.Phone: (214) 862-0651Email: erin.mcgrath@att.com