Pascal Desroches, senior
executive vice president and chief financial officer of AT&T
Inc.* (NYSE:T), spoke today at the Bank of America Media,
Communications & Entertainment Conference, where he provided an
update to shareholders.
Desroches said that AT&T continues to successfully execute
in its market focus areas of 5G, fiber and HBO Max. While
acknowledging the wireless industry continues to benefit from a
healthy-demand backdrop, AT&T remains steadfast in its
commitment to growing its postpaid phone base profitably. Desroches
said AT&T’s strength in wireless has been supported by the
company’s outstanding network quality, which has improved
measurably over the last several years. AT&T has the Nation’s
Best 5G Network1 and, for the fourth straight year, America’s Best
Wireless Network2 overall. In addition, as most recently indicated
by AT&T’s second-quarter 2021 results, its revamped
go-to-market strategy has enabled the company to both reduce churn
and improve industry flow share, yielding materially better
postpaid phone subscriber net adds versus those experienced over
the last several years.
With respect to its fiber initiatives, Desroches indicated that
the company remains confident in its ability to achieve its
adjusted end-of-year incremental customer locations passed target
in the 2.5 million range. As previously noted, AT&T has
experienced some disruption in its supply chain. However, at this
juncture the company believes the issue has been addressed and
remains comfortable in its ability to achieve its long-term
guidance for 30 million locations by the end of 2025.
AT&T also continues to experience healthy demand for HBO Max
in both domestic and international markets. The company recently
announced its plans to expand into six European countries next
month with plans to launch in at least 14 additional territories in
Europe in 2022. As previously indicated, AT&T expects most of
the subscriber growth in the second half of the year to come from
outside the United States due to the strategic decision to cease
offering HBO Max as a subscription on Amazon Channels. The company
anticipates this decision will likely impact total HBO Max / HBO
domestic subscribers and net additions in the third quarter.
However, Desroches reiterated that AT&T’s guidance for 70
million to 73 million global HBO Max and HBO subscribers by the end
of 2021 factors in the impact of this decision.3
AT&T continues to anticipate that its pending
WarnerMedia-Discovery transaction will close by mid-2022. After
close of that transaction and on a pro-forma basis, AT&T
expects annual revenues to grow at a low single digits CAGR4 from
2022 to 2024 with annual adjusted EBITDA5 and adjusted EPS6 growing
at a CAGR in the mid-single digit range. After close and subject to
AT&T Board approval, the company anticipates annual dividends
paid of $8 billion to $9 billion, reflecting a payout ratio of 40%
to 43% on projected free cash flow of $20 billion plus in
2023.7
1 AT&T awarded Best 5G Network by GWS
OneScore 2021. GWS conducts paid drive tests for AT&T and uses
the data in its OneScore analysis. AT&T 5G requires compatible
plan and device. 5G not available everywhere. Go to
att.com/5Gforyou for details.
2 AT&T awarded Best Network by GWS
OneScore 2021. GWS conducts paid drive tests for AT&T and uses
the data in its OneScore analysis. AT&T 5G requires compatible
plan and device. 5G not available everywhere. Go to
att.com/5Gforyou for details.
3 Global HBO Max and HBO subscribers
consist of domestic and international HBO Max and HBO subscribers,
and exclude free trials, basic and Cinemax subscribers.
4 Compound annual growth rate.
5 EBITDA is operating income before
depreciation and amortization.
6 AT&T expects adjustments to
2021-2024 reported diluted EPS to include merger-related
amortization ($4.3 billion for 2021 and approximately $1 billion
per quarter in 2022 until closing of the WarnerMedia transaction),
adjusted equity income, non-cash mark-to-market benefit plan
gains/losses, and other items. The company expects the
mark-to-market adjustments, which are driven by interest rates and
investment returns that are not reasonably estimable at this time,
to be a significant item. AT&T’s 2021 EPS depends on future
levels of revenues and expenses and performance of our equity
investment in DIRECTV which are not reasonably estimable at this
time. Accordingly, we cannot provide a reconciliation between these
projected non-GAAP metrics and the reported GAAP metrics without
unreasonable effort.
7 Free cash flow is a non-GAAP financial
measure that is frequently used by investors and credit rating
agencies to provide relevant and useful information. Free cash flow
is cash from operating activities minus capital expenditures, and
AT&T will include cash distributions received from DIRECTV,
including those reported as investing activities, as part of Free
Cash Flow. Due to high variability and difficulty in predicting
items that impact cash from operating activities and capital
expenditures, the company is not able to provide a reconciliation
between projected free cash flow and the most comparable GAAP
metric without unreasonable effort.
*About AT&T
AT&T Inc. (NYSE:T) is a diversified, global leader in
telecommunications, media and entertainment, and technology.
AT&T Communications provides more than 100 million U.S.
consumers with entertainment and communications experiences across
mobile and broadband. Plus, it serves high-speed, highly secure
connectivity and smart solutions to nearly 3 million business
customers. WarnerMedia is a leading media and entertainment company
that creates and distributes premium and popular content to global
audiences through its consumer brands, including: HBO, HBO Max,
Warner Bros., TNT, TBS, truTV, CNN, DC Entertainment, New Line,
Cartoon Network, Adult Swim and Turner Classic Movies. Xandr, now
part of WarnerMedia, provides marketers with innovative and
relevant advertising solutions for consumers around premium video
content and digital advertising through its platform. AT&T
Latin America provides pay-TV services across 10 countries and
territories in Latin America and the Caribbean and wireless
services to consumers and businesses in Mexico.
AT&T products and services are provided or offered by
subsidiaries and affiliates of AT&T Inc. under the AT&T
brand and not by AT&T Inc. Additional information is available
at about.att.com. © 2021 AT&T Intellectual Property. All rights
reserved. AT&T, the Globe logo and other marks are trademarks
and service marks of AT&T Intellectual Property and/or AT&T
affiliated companies. All other marks contained herein are the
property of their respective owners.
Cautionary Language Concerning Forward-Looking
Statements
Information set forth in this news release contains financial
estimates and other forward-looking statements that are subject to
risks and uncertainties, and actual results might differ
materially. A discussion of factors that may affect future results
is contained in AT&T’s filings with the Securities and Exchange
Commission. AT&T disclaims any obligation to update and revise
statements contained in this news release based on new information
or otherwise.
This news release may contain certain non-GAAP financial
measures. Reconciliations between the non-GAAP financial measures
and the GAAP financial measures are available on the company’s
website at https://investors.att.com.
Cautionary Statement Concerning Forward-Looking
Statements
Information set forth in this communication, including financial
estimates and statements as to the expected timing, completion and
effects of the proposed transaction between AT&T, Magallanes,
Inc. (“Spinco”), and Discovery, Inc. (“Discovery”) constitute
forward-looking statements within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
These estimates and statements are subject to risks and
uncertainties, and actual results might differ materially. Such
estimates and statements include, but are not limited to,
statements about the benefits of the transaction, including future
financial and operating results, the combined Spinco and Discovery
company’s plans, objectives, expectations and intentions, and other
statements that are not historical facts. Such statements are based
upon the current beliefs and expectations of the management of
AT&T and Discovery and are subject to significant risks and
uncertainties outside of our control. Among the risks and
uncertainties that could cause actual results to differ from those
described in the forward-looking statements are the following: the
occurrence of any event, change or other circumstances that could
give rise to the termination of the proposed transaction; the risk
that Discovery stockholders may not approve the transaction
proposals; the risk that the necessary regulatory approvals may not
be obtained or may be obtained subject to conditions that are not
anticipated; risks that any of the other closing conditions to the
proposed transaction may not be satisfied in a timely manner; risks
that the anticipated tax treatment of the proposed transaction is
not obtained; risks related to potential litigation brought in
connection with the proposed transaction; uncertainties as to the
timing of the consummation of the proposed transaction; risks and
costs related to the implementation of the separation of Spinco,
including timing anticipated to complete the separation, any
changes to the configuration of the businesses included in the
separation if implemented; the risk that the integration of
Discovery and Spinco being more difficult, time consuming or costly
than expected; risks related to financial community and rating
agency perceptions of each of AT&T and Discovery and its
business, operations, financial condition and the industry in which
it operates; risks related to disruption of management time from
ongoing business operations due to the proposed merger; failure to
realize the benefits expected from the proposed merger; effects of
the announcement, pendency or completion of the proposed merger on
the ability of AT&T, Spinco or Discovery to retain customers
and retain and hire key personnel and maintain relationships with
their suppliers, and on their operating results and businesses
generally; and risks related to the potential impact of general
economic, political and market factors on the companies or the
proposed transaction. The effects of the COVID-19 pandemic may give
rise to risks that are currently unknown or amplify the risks
associated with the foregoing factors.
These risks, as well as other risks associated with the proposed
transaction, will be more fully discussed in the proxy
statement/prospectus that will be included in the registration
statements that will be filed with the SEC in connection with the
proposed transaction. Discussions of additional risks and
uncertainties are contained in AT&T’s and Discovery’s filings
with the Securities and Exchange Commission. Neither AT&T nor
Discovery is under any obligation, and each expressly disclaims any
obligation, to update, alter, or otherwise revise any
forward-looking statements, whether written or oral, that may be
made from time to time, whether as a result of new information,
future events, or otherwise. Persons reading this announcement are
cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in
respect of the proposed transaction between AT&T, Spinco, and
Discovery. In connection with the proposed transaction, AT&T,
Spinco and Discovery intend to file relevant materials with the
Securities and Exchange Commission (“SEC”), including a
registration statement on Form S-4 by Discovery that will contain a
prospectus of Discovery and Spinco that also constitutes a proxy
statement of Discovery, and a registration statement by Spinco.
This communication is not a substitute for the registration
statements, proxy statement/prospectus or any other document which
AT&T, Spinco or Discovery may file with the SEC. STOCKHOLDERS
OF AT&T AND DISCOVERY ARE URGED TO READ ALL RELEVANT DOCUMENTS
FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENT AND PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security
holders will be able to obtain copies of the proxy
statement/prospectus (when available) as well as other filings
containing information about AT&T, Spinco and Discovery,
without charge, at the SEC’s website, http://www.sec.gov. Copies of
documents filed with the SEC by AT&T or Spinco will be made
available free of charge on AT&T’s investor relations website
at https://investors.att.com. Copies of documents filed with the
SEC by Discovery will be made available free of charge on
Discovery’s investor relations website at
https://ir.corporate.discovery.com/investor-relations.
No Offer or Solicitation
This communication is for informational purposes only and is not
intended to and does not constitute an offer to sell, or the
solicitation of an offer to subscribe for or buy, or a solicitation
of any vote or approval in any jurisdiction, nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in
which such offer, sale or solicitation would be unlawful, prior to
registration or qualification under the securities laws of any such
jurisdiction. No offer of securities shall be made except by means
of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended, and otherwise in accordance
with applicable law.
Participants in Solicitation
AT&T and its directors and executive officers, and Discovery
and its directors and executive officers, may be deemed to be
participants in the solicitation of proxies from the holders of
Discovery capital stock and/or the offering of Discovery securities
in respect of the proposed transaction. Information about the
directors and executive officers of AT&T is set forth in the
proxy statement for AT&T’s 2021 Annual Meeting of Stockholders,
which was filed with the SEC on March 11, 2021. Information about
the directors and executive officers of Discovery is set forth in
the proxy statement for Discovery’s 2021 Annual Meeting of
Stockholders, which was filed with the SEC on April 30, 2021.
Investors may obtain additional information regarding the interest
of such participants by reading the proxy statement/prospectus
regarding the proposed transaction when it becomes available.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210914006218/en/
Fletcher Cook AT&T Inc. Phone: (214) 912-8541 Email:
fletcher.cook@att.com
Daphne Avila AT&T Inc. Phone: (972) 266-3866 Email: daphne.avila@att.com
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