AT&T Chief Executive Officer John Stankey Updates Shareholders
AT&T Chief Executive Officer John Stankey
Offerings continue to resonate with consumers across strategic areas of focus. Significant investment in network quality continues to drive momentum in healthy wireless and fiber trends. AT&T’s ability to invest in attractive wireless device pricing to both new and existing customers further supports its acquisition and retention efforts by driving long-term value and reducing churn. Stankey said that AT&T’s network performance, combined with these offers, has increased migration to unlimited plans. Given this trend, he expects that by the end of 2020 the percentage of wireless customers on unlimited plans will increase by 10 points versus the end of 2019. In addition, he noted that the company expects fiber additions of 1 million or more this year on the back of strong broadband demand trends.
HBO Max is seeing improved traction. AT&T has 12.6 million HBO Max activations, up from 8.6 million as of September 30, and the number of hours of engagement per week has increased 36% in the past 30 days. Ultimately, Stankey believes the company’s relentless commitment to customer experience and willingness to invest in its strategic areas of focus should yield improved customer connections and drive positive long-term value creation for shareholders.
Strong cash generation and disciplined capital allocation continue to give AT&T the flexibility to invest in market-based priorities of fiber, 5G and HBO Max.
The company remains on track to generate $26 billion or more in free cash flow for full-year 2020 with a full-year dividend payout ratio percentage in the high 50s%.1 Stankey also said he anticipates the company in 2021 will generate free cash flow in the $26 billion range1 (exclusive of proceeds from potential asset divestitures) and gross capital investment in the $21 billion range.2 Stankey also said that he is committed to sustaining the dividend and investing AT&T’s capital effectively to manage down the company’s debt structure over time. The company will provide its 2021 financial outlook and capital allocation guidance when it reports its fourth-quarter 2020 results on Wednesday, January 27, 2021.
Business transformation efforts will remain a priority for AT&T. Stankey said that he is pleased with the company’s progress in managing costs and corporate structure and overhead and will continue these efforts. He said a focus on efficiency has resulted in lower distribution costs even as volumes continue to improve and that the COVID-19 pandemic has further accelerated a move to digital customer engagement that was already underway. Stankey also reiterated that AT&T continues to take a deliberate and thorough approach to monetizing non-core strategic assets.
1 Free cash flow dividend payout ratio is total dividends paid divided by free cash flow. Free cash flow is cash from operating activities minus capital expenditures. Due to high variability and difficulty in predicting items that impact cash from operating activities and capital expenditures, the company is not able to provide a reconciliation between projected free cash flow and the most comparable GAAP metric without unreasonable effort.
2 Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes expected FirstNet reimbursements.