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AT&T President and COO John Stankey Updates Shareholders

John Stankey, president and chief operating officer of AT&T Inc.* (NYSE: T) and CEO, Warner Media LLC, spoke today at the Morgan Stanley Technology, Media and Telecom Conference where he provided an update to shareholders.

Benzinga · 03/04/2020 10:21

John Stankey, president and chief operating officer of AT&T Inc.* (NYSE: T) and CEO, Warner Media LLC, spoke today at the Morgan Stanley Technology, Media and Telecom Conference where he provided an update to shareholders.

5G and wireless trends. As of the end of February, AT&T's 5G network covers more than 80 million people and the company plans to have nationwide 5G coverage by the end of the second quarter of 2020.

Stankey also said that, based on expected 5G growth and HBO Max opportunities, mobility will continue to be the biggest driver of revenue growth and profitability. AT&T also expects FirstNet to contribute to wireless revenue growth, with FirstNet subscriber additions ramping as push-to-talk capabilities and new devices drive growth. The company expects wireless service revenues to grow by more than 2% in 2020.

HBO Max. Stankey said the company is still on track for a May launch of HBO Max. He said more than 10 million HBO subscribers on AT&T distribution platforms will be offered immediate access to HBO Max at launch.

Cost transformation initiatives.Stankey said AT&T has identified 10 categories of cost initiatives over the short-, mid- and long-term targeting double-digit billions of dollars in gross savings over the next three years.

Additional Accelerated Share Repurchase. AT&T also today announced it has entered into a definitive agreement with Morgan Stanley & Co. LLC to retire $4 billion of its common stock beginning in the second quarter through an accelerated share repurchase (ASR) agreement. This follows a similar $4 billion transaction under which the company is retiring shares in the current quarter. Repurchases under the new ASR agreement will begin in April.

AT&T has said it intends to use 50% to 70% of free cash flow after dividends to retire about 70% of the shares it issued to fund the acquisition of Time Warner — now WarnerMedia — by the end of 2022. Year to date in 2020, AT&T has raised $4 billion via the issuance of preferred shares. The company has continued to add preferred equity to its capital structure while at the same time reducing its outstanding shares of common stock under its share retirement program.

The two ASRs, combined with open market repurchases, are expected to bring total common shares retired in 2020 to more than 250 million through April, depending on market conditions. The company will provide an update on its share retirement program when it releases first quarter results on April 22, 2020.

AT&T ended 2019 with a net debt-to-adjusted EBITDA ratio of about 2.5x. The company previously indicated that the timing of funding for share retirements may temporarily impact this ratio in 2020. But the company's guidance for net debt-to-adjusted EBITDA in the 2.0 to 2.25x range by the end of 2022 is unchanged.

The company remains confident in achieving its 2020 and long-term guidance.