What is AT&T?
AT&T (American Telephone and Telegraph) is a multinational telecommunications conglomerate headquartered in Dallas, Texas. Founded in 1877 by Alexander Graham Bell, it is now the world’s largest telecommunications company and the largest provider of mobile phone services in the U.S.AT&T operates several divisions:
- AT&T Communications – wireless services, internet services, video entertainment
- WarnerMedia – media and entertainment properties including HBO, CNN, Warner Bros.
- AT&T Latin America – wireless services in Mexico and video in Latin America and the Caribbean
In 2021, AT&T reported total revenues of $168.8 billion and had 230,000 employees. Its main competitors are Verizon and T-Mobile.
How is AT&T’s Financial Performance?
AT&T’s financial highlights for 2021:
- Revenues: $168.8 billion
- Operating Income: $26.7 billion
- Net Income: $19.9 billion
- Total Assets: $551.6 billion
- Total Equity: $178.9 billion
AT&T’s revenues have declined in recent years as the company has divested some businesses like DirecTV while investing heavily in 5G infrastructure and content for its streaming services. However, the company remains highly profitable with a strong balance sheet.
What are AT&T’s Main Business Segments?
AT&T operates across three main business segments:
1. AT&T Communications
This is AT&T’s largest division, providing wireless and wireline telecom services to consumers and businesses. It includes:
- Mobility (wireless) – 100.4 million U.S. wireless subscribers
- Business Wireline – voice, data, security, cloud solutions
- Consumer Wireline – broadband internet, legacy voice services
In 2021, the Communications segment generated revenues of $118.6 billion, 70% of AT&T’s total.
2. WarnerMedia
AT&T’s media and entertainment division includes properties such as HBO, HBO Max streaming, the Turner cable networks (CNN, TBS, TNT), and the Warner Bros. film and TV studio.In 2021, WarnerMedia had revenues of $35.6 billion, 21% of AT&T’s total. In April 2022, AT&T spun off WarnerMedia in a $43 billion deal with Discovery to form a new standalone company, Warner Bros. Discovery.
3. AT&T Latin America
Provides wireless services to 21.6 million subscribers in Mexico and video entertainment services across Latin America and the Caribbean. Generated $5.6 billion in revenues in 2021.
What is AT&T’s 5G Strategy?
Rolling out 5G networks is a top priority for AT&T. The company’s 5G strategy includes:
- Expanding its high-band 5G+ network in high-traffic areas like stadiums, airports, entertainment districts. 5G+ can deliver speeds over 1 Gbps.
- Deploying mid-band 5G spectrum to improve speeds and coverage. Expects to cover 200 million people with mid-band 5G by end of 2023.
- Using low-band 5G to provide nationwide coverage. AT&T’s low-band 5G now covers over 255 million people.
AT&T is investing $6-8 billion per year in its 5G network buildout. The company views 5G as critical to enabling next-gen applications like self-driving cars, smart cities, remote surgeries, and immersive AR/VR experiences.
How is AT&T Competing in the Streaming Wars?
The streaming video market has become intensely competitive, with players like Netflix, Disney+, and HBO Max (owned by AT&T) vying for subscribers. AT&T’s streaming strategy revolves around HBO Max, which launched in May 2020.
HBO Max builds on the prestige HBO brand with additional content from the WarnerMedia library and originals. It got off to a slower start than rivals but has been gaining traction.Key HBO Max stats:
- 76.8 million global subscribers as of Q1 2022
- Added 12.8 million subscribers in 2021
- $7.5 billion in revenue in 2021
- Plans to reach 120-150 million subscribers by 2025
To drive growth, AT&T invested heavily in HBO Max content, spending $18 billion on programming in 2021. Hit originals like Mare of Easttown, Hacks, and Succession have made the service a must-have for many.In a controversial move, Warner Bros. released all its 2021 films on HBO Max the same day as in theaters.
This helped attract subscribers but strained relationships with theaters and talent.Going forward, Warner Bros. Discovery will have to balance continuing investment in HBO Max with improving profitability as Wall Street increasingly scrutinizes the economics of streaming.
What Acquisitions and Divestitures Has AT&T Made?
AT&T has made several large acquisitions and divestitures in recent years as it has reshaped its portfolio:
Major acquisitions:
- 2014: DirecTV for $48.5 billion
- 2018: Time Warner for $85 billion
Major divestitures:
- 2021: Spun off DirecTV, AT&T TV and U-Verse into new company
- 2022: Spun off WarnerMedia in $43 billion deal with Discovery
The Time Warner and DirecTV deals gave AT&T major media assets but also saddled it with huge debt. Activist investors criticized AT&T for getting distracted from its core telecom business.
Under CEO John Stankey, AT&T has worked to undo some of those moves, spinning off DirecTV and WarnerMedia to refocus the company and pay down debt. The leaner AT&T will concentrate on its 5G and fiber broadband buildout.
What is AT&T’s Outlook?
AT&T faces both challenges and opportunities ahead. On one hand, its core wireless and broadband connectivity services are more important than ever in the digital economy. 5G opens up exciting new possibilities.
But AT&T also faces cutthroat competition, high capital spending requirements, and the continued decline of its legacy landline voice and DSL internet businesses. Revenue growth has been hard to come by.Spinning off DirecTV and WarnerMedia should help AT&T focus, reduce debt, and invest in key strategic areas.
But it also means giving up the recurring subscription revenues those divisions provided.Key things to watch with AT&T going forward:
- Pace of 5G adoption and AT&T’s ability to monetize 5G with consumers and businesses
- Competition and pricing pressure in wireless, especially as cable companies enter the market
- Execution on cost-cutting initiatives to improve margins
- Ability to replace lost revenues from divested businesses
- Continued paying down of debt to strengthen balance sheet
AT&T’s stock has underperformed the market in recent years as investors soured on its expensive acquisitions. But with the DirecTV and WarnerMedia deals done, the company has a chance to shift the narrative if it can deliver on its 5G promise and return to growth. The next few years will be critical to shaping AT&T’s long-term trajectory.
