AT&T Chief Executive Randall Stephenson told attendees at an investor conference today that activist investor Elliott Management Corporation has some ideas that “make a lot of sense,” and that AT&T needs to “push further” on those ideas. Other ideas described in a letter from Elliott to AT&T “are not quite as clear in terms of how that would make sense for us,” Stephenson said.
Elliott Letter to AT&T
Elliott Management Corporation, which manages investment funds that have AT&T holdings, sent a letter to the company Monday advising AT&T to make strategic changes. Several of Stephenson’s comments seemed aimed at addressing a chief concern expressed in the AT&T Elliott letter – that AT&T overpaid when it purchased Time Warner and should instead have made internal investments.
According to Stephenson, consumers are spending more and more of their time watching premium content – a trend that also is driving demand for more bandwidth, and which the company believes will continue. Against this background, it makes sense to vertically integrate a “premium media and entertainment” business with “the best large-scale distribution business,” Stephenson said.
“A company that can put together premium media content creation and production with networks will have a significant strategic advantage,” he continued.
Noting that all the growth in the content creation business is happening digitally, Stephenson said a content creation company that has a “direct path to a large set of consumers” will have a “unique competitive advantage and that’s the play we’re running here.”
AT&T Vertical Integration Plans
He cited some numbers to illustrate the strength of AT&T’s network and distribution business. The company, he said:
- Has 170 million customer relationships via its pay-TV, broadband and mobility businesses
- Has 5,500 retail stores
- Touches consumers 3.2 billion times every year
Stephenson also noted that, even though DISH Network dropped HBO because of content costs, HBO grew 3% in the second quarter of 2019 – an accomplishment he attributed to strong HBO sales through AT&T’s distribution network. (HBO is one of numerous assets AT&T acquired through the Time Warner deal.)
AT&T’s vertical integration strategy will face a major test when the company launches HBO Max — a new OTT SVOD service that will compete with Disney+, Apple TV+, Netflix, and others. Stephenson did not offer details about the offering, other than noting that it is scheduled to launch October 29. Originally the offering was not expected until the spring of 2020.
Stephenson made his comments at the Goldman Sachs Communacopia Conference, which was also webcast.
