AT&T has provided a comprehensive vision for its operations going forward, saying it will focus on deploying 5G and fibre, and expanding its HBO Max streaming service. CEO John Stankey said the company also wants to keep its dividend at current levels, using remaining cash to reduce debt. The company noted there will be enough to pay for its financial commitments this year. These will include USD 23 billion for C-band spectrum, a dividend to shareholders of nearly USD 15 billion, gross capex of about USD 21 billion and the debt repayments.
The company does not expect the (partial) sale of its US pay-TV business, set to complete in the second half, to impact the 2021 guidance it gave in January. The close will however ease pressure on results and initiatives after that, helped by market trends. Among the benefits will be:
- a higher wireless EBITDA, helped by profitable share gains, customer growth and the continued adoption of unlimited plans;
- an expansion to the company’s fibre footprint and penetration;
- improved margins at the business wireline unit as AT&T continues to simplify the portfolio;
- improvements also at WarnerMedia as HBO Max scales, advertising gradually improves and cost savings from recent organizational changes offset higher investment in the service;
- and a better performance at AT&T Latin America on customer growth and continued expense management.
New 5G spectrum to launch this year paid by cash and fresh debt, no buybacks
AT&T expects to start deploying 40 MHz of its 80 MHz of C-band spectrum by the end of this year, will millimeter wave spectrum playing a role in its broader network densification strategy. Capex for the deployment will run to USD 6-8 billion, with most of the amount getting spent in 2022-2024.
The expected costs have been calculated into the company’s 2021 capex guidance and leverage ratio target. The company expects to end this year with a net debt-to-adjusted EBITDA ratio of 3.0x, with an anticipated increase in net debt to USD 6 billion to fund the C-band spectrum. During 2024, the net debt-to-adjusted EBITDA ratio will go to 2.5x or lower, helped by cash flows after dividends and no share buy-backs.
To pay for the C-spectrum, AT&T will have access to cash totaling at least USD 30 billion, including cash on hand at the end of 2020 of USD 9.7 billion, unsecured, short term debt of USD 6.1 billion secured in January, and financing through a term loan credit agreement of USD 14.7 billion.
The company said it has 70 percent of its total low and mid-band spectrum in service; the remaining 30 percent will improve performance in the top 50 urban markets, which should boost customer growth.
Wireless service revenue growth for the full-year is still seen at around 2 percent, with a modest EBITDA increase.
HBO Max projections upped, ad-supported version to start in June
AT&T now expects 120-150 million worldwide HBO Max and HBO subscribers by the end of 2025, up from the 75-90 million projected in October 2019. Subscriber numbers should reach 67-70 million this year, worldwide, from 61 million at the end of last year. Finally, revenues from the Home Box Office business unit should more than double over the next five years.
AT&T plans to lift its investment in the service as HBO Max scales at a global level, with expectations for peak dilution in 2022 and break even in 2025. Subscriber and revenue growth in 2021 are expected to be partially driven by the initial international expansion of HBO Max and the launch of an advertising-supported version (AVoD) of HBO Max in June.
AT&T earlier confirmed the HBO Max will officially launch in 39 Latin American and Caribbean territories in June. The launch is art of a wider launch in 60 markets outside of the US this year, including 21 territories in Europe in the second half.
Fibre expansion plans
Regarding fibre rollouts, the company is looking to add 3 million more customer locations this year, across 90 metro areas. Broadband revenue growth is seen up by mid-single digits for this year, with better margins from its broadband business unit.
