AT&T continues to transform itself alongside a changing world, thanks to its CEO Randall Stephenson.
By Oso Oseguera and Anthony Moran
On an episode of Recode Media with Peter Kafka in February, AT&T chairman and CEO Randall Stephenson addressed a number of issues ranging from to why 5G internet will one day replace home broadband to AT&T’s $85 billion 2018 acquisition of Time Warner.
“My objective from day one was to run this acquisition differently than we’ve run any other,” Stephenson told Kafka on the latter topic, which raised eyebrows worldwide.
“In a typical acquisition, we come in, we have processes, we have everything from travel/entertainment expenditure guidelines to cultural aspects. We literally just forklift that onto the target and boom, start running execution, and off we go. Bam!… This one, we said, ‘That’s not the play we’re going to run here.’”
Stephenson is taking a more cautious approach with good reason. The past years have been tough for telecom companies. Their revenue and cash flows have dropped by an average of 6% annually since 2010 as consumption of mobile data boomed.
Companies responded by investing heavily in their wireless networks, even as subscriber growth slowed. As a result, the average ratio of capital spending to revenues has remained stubbornly high, at around 15%, for the major players in the industry. AT&T Inc. is made up of 98 individual companies. Its consolidated revenues for 2018 totaled $170.8 billion, versus $160.5 billion for 2017, up 6.4%, primarily due to the Time Warner acquisition.
Its phone business is still its largest operation by far, but is declining, and the future looks uncertain. Recent acquisitions to reinforce AT&T’s transition from a phone business to a media company have also included buying DirecTV in 2015 for $67 billion, yet when taken together these moves have made AT&T the most heavily indebted nonfinancial company in America. It currently owes over $200 billion.
As a result, unlike those other acquisitions that were more closely aligned with AT&T’s telecommunications history, Randall Stephenson has said Time Warner will be run more independently. “You don’t want this one polluted by a lot of the stuff going over here,” he told Peter Kafka. “Those are very independent and necessary cultures. This one over here is a talent-based culture.”
“Our 5G evolution plans and improved spectrum position are paving the way for the next generation of super-fast mobile and fixed networks,” Stephenson added on AT&T’s future plans.
Notwithstanding Stephenson’s self-belief, however, some analysts—notably, long-time AT&T critic Craig Moffet—believe the company may be in danger of overreach. “AT&T’s ambition in acquiring Time Warner goes far beyond transforming a storied American company,” Moffet stated. “Its goal is nothing less than a complete reinvention of the media ecosystem.