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AT&T Unwinds Its Media Strategy; Discovery Deal Highlights Media Value

Analyst Note

| Michael Hodel, CFA |

CEO John Stankey has wasted no time putting his mark on AT&T and we like the direction he’s headed. AT&T announced plans to spin off WarnerMedia and immediately merge the firm with Discovery to create a new media company. AT&T shareholders will own 71% of the new entity, which will assume $43 billion of AT&T’s debt load. The deal essentially completes the unwinding of former CEO Randall Stephenson’s strategic vision, which we’ve long considered ill-conceived, as reflected in our Poor capital allocation rating.

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Company Profile

Business Description

Wireless is AT&T's largest business, contributing about 40% of revenue. The firm is the third- largest U.S. wireless carrier, connecting 64 million postpaid and 17 million prepaid phone customers. WarnerMedia contributes a bit less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. Fixed-line business communications services, provided to a wide range of entities, provide about 15% of revenue. The consumer broadband segment (about 7% of revenue) primarily provides broadband service to 15 million households. The firm recently sold a stake in its traditional television business, which serves 17 million customers and generates about 17% of sales. This business will be removed from AT&T's financials going forward.

Contact
208 S. Akard Street
Dallas, TX, 75202
T +1 210 821-4105
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 230,000

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