AT&T announced a three-year capital allocation plan aimed at addressing concerns of activist investor Elliott Management, under which the company said it will continue to sell of pieces of the business to get its balance sheet in shape.
Through 2022, the company pledged to make “no major acquisitions” and laid out a plan which it expects to drive “significant growth” in margins and earnings while allowing the company to invest in growth areas and continue to pay down debt. In 2020, the company said it expect to sell $5 billion to $10 billion of “non-strategic assets” to help pay down debt.
Meanwhile, for the third quarter of 2019, AT&T’s pay-TV business continued to be in free-fall. WarnerMedia revenue in the third quarter dropped 4.4% on a tough comparison with Warner Bros.’s stronger theatrical slate in the year-earlier period.
The telco said it expects chairman and CEO Randall Stephenson to remain chief executive through at least 2020. In addition, the company said it add a new director at its next board meeting, followed by another director in 2020.
“The objectives we have outlined today have been central to our plans for many months, even before we closed our acquisition of Time Warner,” Stephenson said in a statement. “But, as you would expect, our thinking has also benefited from our engagement with our owners, including Elliott Management. I’ve found our engagement with Elliott to be constructive and helpful, and I look forward to continuing those conversations.”
Last month, Elliott Management urged AT&T to refocus on its core business, criticizing its massive deals for Time Warner and DirecTV as inhibiting its financial performance.
Overall, AT&T’s consolidated revenue for the third quarter was $44.6 billion, below analyst consensus estimates of $45 billion. Q3 adjusted earnings per share of 94 cents.
During the third quarter of 2019, AT&T dropped a net 1.2 million premium TV video subscribers, including at DirecTV, while its over-the-top AT&T TV Now service dropped 195,000. As of the end of the period, AT&T had 21.6 million total video customers, which included 1.1 million AT&T TV Now subscribers — down 3.6 million from 25.2 million a year earlier.
WarnerMedia Q3 2019 operating revenue was $7.8 billion, down 4.4%, dragged down by a 10.4% declined at Warner Bros. with the company citing “a more favorable mix of box office releases in the prior comparable period” as well as lower television licensing. HBO revenue was up 10.6% to $1.8 billion.
WarnerMedia has set an HBO Max media day on Tuesday, Oct. 29, to announce new details of the forthcoming subscription streaming service set to debut next spring.
For 2020, AT&T projects consolidated revenue to grow between 1%-2% and adjusted earnings per share to be $3.60 to $3.70 per share including its investment in HBO Max.