AT&T's CFO talks C-band, capex, debt and dividends
AT&T is spending around $27.8 billion on C-band spectrum for 5G. And that expense, according to the company's outgoing CFO, is something AT&T can handle "pretty easily."
"We certainly feel very good about the ability to do that," AT&T's John Stephens said Monday at the Deutsche Bank Media, Internet & Telecom Conference.
That's noteworthy considering S&P Global Ratings recently lowered its outlook on AT&T to negative from stable. The stock-ratings firm noted the change "reflects the increase in leverage from the purchase of spectrum licenses in the C-band auction as well as heightened risk that financial results could remain weak in 2021."
AT&T's message to investors, though, is not to worry.
"We are committed to the dividend," said Stephens, who recently announced his imminent retirement from AT&T after 28 years with the company. "With $26 billion of free cash flow after capex, there's plenty of money to pay out the dividend in a very reasonable payout ratio."
Stephens' departure from AT&T comes amid a substantial amount of financial gymnastics at the company. AT&T is in the midst of paying down a record-setting $190 billion in debt incurred through its purchases of DirecTV and Time Warner. As part of that effort, AT&T is cutting $6 billion in costs through 2023. The company also reached a deal to sell $7.8 billion worth of DirecTV to private equity firm TPG Capital.
That's why AT&T's C-band expense raised alarms. After all, the auction far exceeded even the most aggressive forecasts, and AT&T's spending during the event is almost as much as some analysts had expected the entire wireless industry to spend.
Nonetheless, Stephens isn't concerned.
AT&T's C-band purchase "leaves us in a very healthy competitive position." He said the company scored a total of 80MHz in the auction, including 40MHz that is scheduled to be released by the end of this year. He said that will give AT&T an "extremely competitive" position in the industry, "if not leading."
However, Stephens didn't spend much time discussing how exactly AT&T might recoup its massive C-band investment into 5G spectrum. Instead, the company is widely expected to go into those details on Friday during its analyst day.
Instead, Stephens touted AT&T's decision to restart its fiber network buildout. Indeed, he said in a release that AT&T would raise its fiber buildout goal to 3 million customer locations in 2021, up from a prior plan of 2 million. And the company expects to do that via its $18 billion in anticipated capital expenses during 2021 – a figure that's lower than what most analysts had expected.
- C-band auction maps and charts: Who won what, where and how much
- 5G in the US will get a lot clearer by March 31 – here's why
- AT&T, TPG to spin DirecTV into a separate company
— Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano
Like what we have to say? Click here to sign up to our daily newsletter
One of America's most loved telecoms get-togethers, The BIG 5G Event, will be returning to Austin in 2023 to host 1,500+ telecom, cloud and technology professionals — and we want you to be a part of it!
For three days, you can meet and network with leaders from every part of the North American 5G ecosystem and hear from over 150 speakers on the hottest industry topics. To apply for your complimentary pass to the event, visit this link.