5G and Beyond

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.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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