AT&T outlines ‘new era’ with focus on 5G, broadband growth

Bloomberg

AT&T Inc, which is returning to its roots as a pure telecom company, showed investors how it plans to balance expanding broadband services while paying for network upgrades and a $8 billion dividend.
AT&T Chief Executive Officer John Stankey says the spinoff of WarnerMedia in the coming weeks will mark the “starting line of a new era” for the company as it shifts its focus to growing the 5G and fiber-broadband businesses, according to a statement ahead of AT&T’s annual investor day.
With the media business gone, AT&T expects to spend $24 billion on capital investments this year and sees cash flow of about $16 billion, down from $19.2 billion last year,
according to the statement.
The company had previously called for cash flow of $20 billion this year but has revised its accounting to remove $4 billion in financing it expects to receive from its equipment suppliers.
AT&T expects cash flow to increase to $20 billion in 2023 as broadband sales kick in and cost cuts continue. By 2024, capital spending will come down to $20 billion as bigger parts of the network build-outs are completed.
The company said revenue is expected to grow by low-single digits this year and next. The company says 2021 revenue would have been $118.2 billion excluding WarnerMedia.
AT&T sees profit excluding some items this year in the range of $2.42 to $2.46 a share, up from $2.41 last year if WarnerMedia were excluded. For 2023, adjusted earnings per share will be $2.50 to $2.60, according to the statement.
Most analysts haven’t provided estimates for standalone AT&T as they awaited the company’s outlook and a better sense of timing for WarnerMedia spinoff. AT&T reiterated that it expects the deal to close early in the second quarter.
AT&T’s forecast for incremental growth echoes comments made earlier this month by phone company peer Verizon Communications Inc US wireless carriers, which also include T-Mobile US, are under pressure to grow sales after a record year of mobile subscriber gains in 2021. Adding to that challenge, the three carriers have spent more than $100 billion on 5G technology and have yet to show much return for that investment.

Without the costs and distractions of a media business, AT&T says investors can expect the company to focus on delivering the best broadband services while paying an attractive dividend of “just over” $8 billion annually. While that’s down from about $15 billion before the spinoff, AT&T says it’s still among the highest for US companies.
Most of the large media acquisitions AT&T made over the past decade have now been unwound, either through asset sales or spinoffs. The company says it will continue to look for ways to cut expenses and expects to reach $6 billion in annual cost savings by the end of 2023.