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.