CORRECTING and REPLACING John Stephens, AT&T Chief Financial Officer, Provides Update at Morgan Stanley Conference
15 November 2018 - 1:17PM
Business Wire
First bullet should read: Adjusted EPS at the high end of the
$3.50 range1 (instead of EPS at the high end of the $3.50 range).
Ninth bullet, insert fourth sentence: The company has found that
its market share increases the longer its fiber offerings have been
available – up to about 50% market share after 3 years. Insert
footnoote 1 at end of release body.
The corrected release reads:
JOHN STEPHENS, AT&T CHIEF FINANCIAL
OFFICER, PROVIDES UPDATE AT MORGAN STANLEY CONFERENCE
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:
- Adjusted EPS at the high end of the
$3.50 range1
- Free cash flow at the high end of the
$21 billion range
- 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:
- 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.
- 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.
- 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.
- 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.
- 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.
- 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. The company has found that
its market share increases the longer its fiber offerings have been
available – up to about 50% market share after 3 years. 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.
1Adjustments include a non-cash mark-to-market benefit plan
gain/loss, merger-related interest expense, merger integration and
amortization costs and other adjustments. We expect the
mark-to-market adjustment which is driven by interest rates and
investment returns that are not reasonably estimable at this time,
to be the largest of these items. Accordingly, we cannot provide a
reconciliation between forecasted adjusted diluted EPS and reported
diluted EPS without unreasonable effort.
*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.
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version on businesswire.com: https://www.businesswire.com/news/home/20181114005832/en/
Erin McGrathAT&T Inc.Phone: (214) 862-0651Email:
erin.mcgrath@att.com
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