AT&T is one of America's two dominant telecoms giants, the #1 by revenues, but still stuck in second place by retail mobile customers. In its current form, AT&T re-combines several of the previously separate businesses which were formed from the break-up of the old Bell telephone system in the early 1980s. The key development was the acquisition in 2005 of what was left of the "old" AT&T by regional operator SBC, and the subsequent purchase of the SBC's wireless partner BellSouth. The merged group adopted the storied AT&T name, as well as an updated version of its old corporate logo. It was a welcome reinvention of a once-mighty brand which had up until that point suffered a dramatic decline in its fortunes. Mirroring the fixed line business, SBC and Bell South's wireless service Cingular in turn reinvented itself as a new version of the old AT&T Wireless company which it had swallowed a year earlier. In 2011, in an attempt to leapfrog main rival Verizon, AT&T also announced plans to acquire smaller competitor T-Mobile USA for $39bn. However, the Justice Department and FCC issued legal challenges to that deal on competition grounds, forcing the group to abandon its plan at the end of the year. AT&T did, however, manage to acquire much smaller Leap Wireless. In 2014, the group set about boosting its fledgling TV service with the acquisition of satellite broadcaster DirecTV for $49bn. That deal was finally completed a year later. Just over a year after that, AT&T was back on the acquisition trail, with agreement to acquire media giant Time Warner for $85bn. The US government launched an ill-conceived lawsuit to block the deal, but the judge found in the companies' favour and the merger went ahead as planned in summer 2018. The resulting group is a mammoth force in both communications and content, primarily in the US, but also in Latin America, and globally via its Warner division. Revenues in 2020 were $171.8bn (down 5%), but a mammoth $16bn write-off against struggling DirecTV resulted in a net loss of $5.2bn (after a profit of almost $15.0bn the year before). There are now three main divisions. AT&T Communications houses the traditional telecoms and wireless operations, as well as DirecTV and streaming channels; it accounts for as much as 80% of revenues. By the end of 2020, it served almost 183m wireless connections in the US, including resellers and connected devices. Only around 95m were under the main AT&T wireless banner; another 81m were for connected devices such as automobile systems, monitoring and home security devices and the like. The group's DirecTV and U-verse broadcast services reached 17.2m subscribers (down sharply for the second consecutive year), and there were 14.1m broadband connections (more or less unchanged). WarnerMedia (the former Time Warner) contains the content creation and cable channel business, while a third division delivers wireless and streaming services across Latin America under the AT&T, Vrio, Sky Brasil and Sky Mexico banners. A fourth unit, Xander, is the group's digital advertising platform. Randall Stephenson, CEO of AT&T since 2007, passed over that role in 2020 to John Stankey.
Capsule checked 19th March 2021
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Adbrands Daily Update 26th Feb 2021: In a development that has seemed increasingly likely over the past two years, AT&T announced plans to spin off US satellite broadcaster DirecTV as a separate entity. It's not as radical a separation as some might have envisaged: AT&T will retain a 70% stake in the new company, which will continue to carry the DirecTV name. Private equity firm TPG is acquiring the other 30% in a deal which values the business at $16.25bn. Bill Morrow, current head of US video services, becomes CEO of the new entity. AT&T retains full ownership of its HBO Max streaming service as well as pay-TV operations in Latin America, operating as Vrio and Sky Mexico.
Adbrands Daily Update 28th Jan 2021: People are demanding more home entertainment than ever before in the pandemic, but all the growth is in streaming services, and traditional pay-TV is bleeding red ink. AT&T took a massive $15.5bn write-off against struggling satellite broadcaster DirecTV, resulting in a whopping for the final quarter of 2020 and a $5.2bn deficit for the year as a whole. That failed to offset solid growth in AT&T's own streaming service HBO Max, where subscriptions topped 41m at year's end. Despite subscriber growth in the mobile division, pandemic-related factors including the lack of international roaming revenues and weakness in the WarnerMedia content business caused a 5% slippage in group revenues to $172bn.
Adbrands Daily Update 27th Apr 2020: AT&T CEO Randall Stephenson announced plans to pass on that role to longtime deputy John Stankey at the end of June. Stephenson became CEO in 2007, just after the acquisition of Bell South and the buyout of Cingular, and he led the push into media with the acquisitions of DirecTV and Time Warner. He will remain chairman for the rest of 2020 before departing the group altogether in Jan 2021.
Adbrands Daily Update 29th Oct 2019: Talks with local regulators in different states to resolve opposition to its merger with Sprint drag on, but in all other respects T-Mobile USA is thriving. In 3Q it added more postpaid wireless subscribers than both its two biggest rivals combined. Postpaid are generally considered to be mobile companies' most valuable customers. Net adds were 754,000 subscribers, compared to 444,000 at Verizon and a lacklustre 101,000 at AT&T. Total customers at T-Mobile at the end of Sept were 84.2m, though prepaid still represented a significant proportion. Total postpaids were 45.7m. AT&T had 162.3m, including 75.2m postpaids. However its results were overshadowed by a worrying decline in pay-TV and broadband customers. Verizon had 93.8m mobile customers, and remains the postpaid champion with 89.1m contract subscribers. Sprint has yet to report 3Q figures, but at the end of 2Q had 54.6m total customers of whom 32.2m were postpaid. If the T-Mobile/Sprint goes through without further significant losses in postpaid customers, the combined total of around 77.9m monthly subscribers would put that business ahead of AT&T.
Adbrands Daily Update 19th Sep 2019: In a surprise turnaround, AT&T is considering a disposal of its DirecTV satellite business, according to the WSJ. That follows comparatively weak performance by that unit over the past couple of years as a result of intense competition from alternative providers, as well as increasingly vocal calls for restructuring from activist investor Elliott Management. Options under consideration include spin-off as a separate company or even a merger of DirecTV with rival Dish Network, though the latter route would come under intense scrutiny from regulators. AT&T may also decide to keep its satelliet business, which is a steady contributor to cash flow.
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