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AT&T CFO Pascal Desroches Updates Shareholders

Pascal Desroches, senior executive vice president and chief financial officer of AT&T Inc.* (NYSE:T) spoke today at the Oppenheimer Technology, Internet & Communications Conference, where he provided an update to shareholders.

Desroches indicated that AT&T has good momentum as the company continues to successfully execute in its market focus areas of 5G, fiber and HBO Max. At the same time, AT&T continues to invest in its network and the creation of compelling content. For full-year 2021, AT&T expects gross capital investment1 to be in the $22 billion range, capital expenditures in the $17 billion range and cash content spend of approximately $19 billion.

In wireless, Desroches said he expects strong demand for mobile services and AT&T’s consistent go-to-market strategy will enable the company to sustain profitable postpaid subscriber growth in the second half of 2021. The wireless landscape remains highly competitive as operators look to capitalize on healthy industry demand. Desroches noted that AT&T expects this competitive intensity to continue at current levels and factored this expectation into its reiterated guidance for full-year 2021 service revenue growth of 3%, up from 2% previously, and low single-digit mobility EBITDA growth.

AT&T has also been simplifying its portfolio to focus on its connectivity-based businesses. The company recently completed its DIRECTV transaction with TPG Capital and is moving forward with its plans to spin or split off WarnerMedia and combine it with Discovery to form a new entertainment company, Warner Bros. Discovery.

Desroches said this strategy is about unlocking the value of AT&T’s assets and matching the video and entertainment businesses with the right capital structure and partners. This will help AT&T focus on growth in wireless and fiber while also giving shareholders future optionality with WarnerMedia and allowing the company to benefit from potential upside with DIRECTV. Following completion of the WarnerMedia/Discovery transaction, which Desroches continues to expect in mid-2022, AT&T expects to significantly reduce debt and to increase investment in 5G and fiber.

Desroches reiterated the benefits of AT&T’s wireless network strength and performance.  AT&T currently covers 250 million people in the U.S. with 5G using sub-6 MHz spectrum across nearly 500 markets. The company plans to begin C-Band deployment by the end of 2021 and expects to cover approximately 200M POPs with C-Band by the end of 2023.  

In discussing the company’s expectations for the second half of 2021, Desroches noted that in most cases AT&T has long-term supply agreements that provide for priority access and committed pricing for materials and equipment. He also noted, like many other companies, AT&T is now seeing some disruption in its supply chain, including for fiber and related components. Given these impacts over the next few months, Desroches indicated that the company is seeing a slower-than-anticipated ramp within its fiber ecosystem and the fiber locations buildout for 2021 is now expected to be in the 2.5 million range. Management does not expect any impact to its financial guidance as a result of this shift. In addition, in working closely with the broader fiber ecosystem to address this near-term dislocation, AT&T has better line of sight in its ability to ramp its fiber deployment activities in the coming quarters and is confident it will achieve the company’s target of 30 million customer locations passed by the end of 2025.

AT&T also continues to experience healthy demand for HBO Max in both domestic and international markets and therefore reiterated its recently raised global HBO Max and HBO 2021 subscriber guidance of 70 million to 73 million.2 During the third quarter, HBO will cease to be offered as a subscription on Amazon Channels. This was a strategic decision made by WarnerMedia. It is anticipated that there will be an impact on HBO Max / HBO domestic subscribers in the third quarter, but this has already been considered into the company’s global subscriber guidance for the full year.   

1 Gross capital investment includes capital expenditures and cash payments for vendor financing and excludes FirstNet reimbursements. In 2021, vendor financing payments are expected to be in the $4 billion range and FirstNet reimbursements are expected to be about $1 billion.

2 Global HBO Max and HBO subscribers consist of domestic and international HBO Max and HBO subscribers, and exclude free trials, basic and Cinemax subscribers.