AT&T's bets on 5G and Fiber expansion in its post-Hollywood future
Now that AT&T has shed WarnerMedia, the debt-ridden telco will return focus to its core business amid an industry-wide shakeup driven by 5G.
Why it matters: AT&T spent the past year and a half slimming down by offloading its media assets. But the race to 5G is driving tons of dealmaking in the telco space as everyone looks to bulk up.
- Purchases of DirecTV and Time Warner saddled AT&T with loads of debt — $152 billion as of the end of 2021. CEO John Stankey could have a hard time convincing shareholders of another purchase, even one that's more in line with its core business.
By the numbers: AT&T told investors last month it will spend $24 billion in each of the next two years to increase fiber-optic lines while cutting back on copper, a relic from AT&T's landline business.
- AT&T will double its fiber footprint to more than 30 million locations, which should add about 3.5 to 4 million subscriber locations each year.
- AT&T will also expand its 5G network coverage by adding 120 MHz of mid-band spectrum that's expected to cover more than 200 million people by the end of 2023.
- By 2025, AT&T plans to serve 75% of its network footprint with either 5G or fiber.
Yes, and: AT&T's stock price decreased 25% from the day it received clearance for the Time Warner deal.
The big picture: AT&T learned the very harsh lesson of what can happen when you don't stay in your lane.
- But AT&T is not alone in this. Verizon sold off AOL to Apollo Global Management last year for $5 billion, marking the end of its own ill-fated attempt in the media business.
- On the other side, T-Mobile is poised to be among the leaders in 5G in the U.S. One reason why? They didn't invest a ton of money in a media company; instead, they bought Sprint.
What they're saying: "The wireline third of the business is shrinking low, to mid-single digits, and in the wireless two-thirds, revenue per subscriber is shrinking at a time even as inflation is running at close to 7%. That means the only path to growth is to grow subscribers, but wireless is a saturated industry, and AT&T is competing against a company in T-Mobile that not only charges lower prices but also has a better network. It's not an easy hand to play," MoffettNathanson analyst Craig Moffett tells Axios.
The bottom line: Initially as CEO, Stankey spent his time breaking up his predecessor's kingdom. Now he has to build a new one.