- AT&T (NYSE:T) has issued a strategy update to shareholders following CFO John Stephens' talk today at the BofA Merrill Lynch Media, Communications and Entertainment conference.
- The strategy is ongoing, Stephens says: to combine WarnerMedia content with massive direct-to-consumer distribution, and coordinate content, distribution and advertising into the spring launch of HBO Max.
- The company will continue delivering on 2019 operational priorities: Wireless service revenues were up 2.6% for the first half with expected Q/Q growth in the second half, and AT&T expects full-year stability in Entertainment Group EBITDA that rose almost 4% in the first half. WarnerMedia run-rate synergies are still expected to hit $700M by year-end.
- Some trends will hit Q3 revenues, he said: lower wireless equipment revenues amid low upgrade rates (but no margin impact); tough comparison to 2018 hits at Warner Bros that should see revenues $400M lower; and ongoing adverse forex impact in Latin America.
- Content cost management is going well as AT&T holds the line on retransmission talks; in Q3, the company expects an incremental 300,000-350,000 premium video losses. Fewer customers on promo pricing and a launch of AT&T TV should mark improving premium subscriber trends.
- And in the critical area of de-leveraging, Stephens says AT&T expects to meet its 2.5x net debt-to-adjusted EBITDA target by year-end, due to free cash flow and asset monetization. Investors should expect stock buybacks in the mix this year, he says.