AT&T CEO Randall Stephenson on Tuesday deflected criticism that the company is too big and paid too much for its media businesses.
Stephenson, speaking at the Goldman Sachs Communacopia conference for media and telecom companies in New York, said it still “makes sense” for the company to own both a big wireless network and content. Activist shareholder firm Elliott Management last week pushed AT&T to sell many of its non-core assets, including DirecTV.
AT&T bought DirecTV in 2015 for $49 billion and CNN owner Time Warner (now known as WarnerMedia) last year for $85 billion.
“We believe people are going to spend more and more of their day watching premium content and we expect people will also demand more bandwidth,” Stephenson said.
Ellliott disclosed that it has taken a $3.2 billion stake in AT&T (T). In a letter to AT&T (T)’s board, Elliott took issue with the company’s streaming strategy, saying that “there is still confusion over strategy and a growing sense that AT&T (T) doesn’t have a plan” — particularly with regards to the HBO cable network and the company’s upcoming HBO Max streaming service that is set to launch in October.
But Stephenson said he was excited about HBO Max, arguing that it’s not Disney, Netflix or Hulu and that it will take advantage of all the HBO and Warner Bros. content that the company already owns as well as new deals it will sign with top creators.
WarnerMedia announced a deal with J.J. Abrams on Monday, for example. HBO Max also said Tuesday that it will be the exclusive streaming home for “The Big Bang Theory.
Stephenson said that AT&T’s board is reviewing the Elliott letter. Even though he disagreed with the call to sell a big chunk of assets, he did say that Elliott is right that AT&T has to pay down its big debt load. And he noted that the company has made that a priority.
Stephenson added that the company is probably done making any more deals for the foreseeable future, even as its wireless rivals T-Mobile (TMUS) and Sprint (S) are set to merge and Verizon (VZ) has made some content deals of its own, most notably of Yahoo and AOL.
“There are a lot of areas where it would make sense for industry consolidation to occur. We don’t intend to participate in any of that,” Stephenson said.
Elliott criticized Stephenson’s management decisions, including elevating WarnerMedia CEO John Stankey to chief operating officer. The promotion makes Stankey the heir apparent to Stephenson, a potential plan that Elliott bashed. But Stephenson on Tuesday praised Stankey effusively. Stephenson also noted that he’s not going anywhere himself: “The board hasn’t informed me I’m retiring yet.”
AT&T chief financial officer John Stephens also defended the company’s acquisition strategy at another conference last week.
Stephens said at the Bank of America Merrill Lynch Communications & Entertainment Conference that even Elliott conceded that “the collection of assets we have accumulated were pointed out to be something that could create significant value” and added that AT&T is “excited about” those assets.
Despite concerns about debt and DirecTV, shares of AT&T are up more than 30% in 2019. That’s in part because of healthy quarterly results thanks to the contributions from WarnerMedia’s HBO cable TV unit and the Warner Bros. film studio as well as the core wireless business. That helped offset continued weakness at DirecTV.
AT&T has also benefited from the fact that it pays a dividend that yields more than 5%. Dividend-paying stocks have done well this year due to a flight to safety, as investors looking for high yields have found better options among stocks than low-yielding government bonds. The stock also got a boost after Elliott announced its stake.
