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AT&T Posts Strong Wireless Results in Q3; Fiber Strategy Comes Into Focus

Analyst Note

| Michael Hodel, CFA |

AT&T demonstrated resilience during the third quarter, with improvements nearly across the board in its telecom businesses and at WarnerMedia. Most impressive, the firm added 645,000 net postpaid phone customers during the quarter, its best performance in several years and topping rival Verizon (283,000). Management also made the case for its aggressive iPhone 12 promotion, pointing to the long commitment (30 months) attached. The promotion will pressure cash flow during the fourth quarter, but not terribly: AT&T increased 2020 expectations on this front. The firm now expects to generate $26 billion of free cash flow for the year, up about $2 billion from its prior forecast, leaving the dividend payout in the high-50% range.

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Company Profile

Business Description

Wireless communication remains AT&T's largest business, contributing nearly 40% of revenue. As the second- largest U.S. wireless carrier, AT&T connects more than 100 million devices, including 63 million postpaid and 16 million prepaid phone customers. The consumer and entertainment segment (about 25% of revenue) includes the consumer fixed-line and DirecTV satellite television businesses, serving 20 million television and 14 million Internet access customers. WarnerMedia now contributes a bit less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. Fixed-line business communications (14%), Latin American satellite television (2%), and Mexican wireless services (1%) constitute the remainder of the firm.

Contact
208 S. Akard Street
Dallas, TX, 75202
T +1 210 821-4105
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2019
Stock Type High Yield
Employees 243,000

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