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AT&T now expects to have up to 150 million subscribers worldwide on HBO and HBO Max in 2025.
Gabby Jones / Bloomberg
AT&T management hosted an investor day on Friday morning, following rival events
Verizon Communications
and
T-Mobile USA
Wednesday and thursday. The highlight was the significant increase in the HBO Max subscriber target, with few other incremental news that would move the needle for a company the size of AT&T.
Shares of AT&T (ticker: T) rose 3.8% Friday morning to about $ 30.65 as the event unfolded. The company now expects to have between 120 and 150 million subscribers on HBO Max and HBO by 2025. Its previous forecast, given at the end of 2019, was 75 to 90 million subscribers that year. At the end of 2020, the services had a total of 61 million subscribers worldwide.
Lately, investors have been happy to appreciate the business in flux only by increasing subscribers, it seems.
Netflix
(NFLX) trades for a long time mainly based on that figure after each quarterly result, while recent ambitious streaming subscriptions aim at
ViacomCBS
(VIAC) and Discovery (DISCA) sent those stocks up.
Growth on HBO Max will be accelerated by a new level of sustained advertising – released in June – and an expanded international release, WarnerMedia CEO Jason Kilar said on Friday. He said the company will expand HBO Max to 60 markets in Latin America and Europe this year. By the end of 2021, AT&T expects to have between 67 and 70 million HBO Max and HBO subscribers worldwide, which would increase from 6 to 9 million this year.
AT&T still expects a few years of heavy investment for HBO Max. It sees peak losses in 2022, with service primarily equal in 2025. HBO’s revenue will be about $ 15 billion that year, Kilar said, up from $ 6.8 billion last year.
This is one of the three key investment areas that AT&T CEO John Stankey highlights to investors whenever he has the opportunity, along with laying the fiber optic cable and upgrading its 5G wireless network.
In his opening remarks on Friday, Stankey summarized the pitch for investors, focusing on increasing the number of subscribers in AT&T’s media and communications companies and a more streamlined company. “More customer relationships and a more efficient and effective company will result in shareholder profitability,” Stankey said.
AT&T Communications CEO Jeff McElfresh explained the transmission of the company’s fiber cables in 2021. It plans to expand its fiber footprint to an additional 3 million potential customers this year, a goal previously discussed by management before Friday.
Americans relied more than ever on their home internet connections during the Covid-19 pandemic, and broadband was a major growth area for the telecommunications industry. And people also want faster fiber connections to allow higher download and upload speeds than coaxial cable. McElfresh said Friday that when the company first brings fiber to a street or neighborhood, 70 percent of its subscribers are new to AT&T and see a 10 percent higher market share than local competitors.
The company expects single-digit broadband sales to grow in 2021 and rising profit margins. This makes sense: it is a high fixed cost business with a low marginal cost when adding a new customer. Profits should grow faster than sales as the business grows. Just look at
ComcastS
(CMCSA) or
Charter Communications
Broadband Results (CHTR) for 2020.
AT&T spends more than $ 27 billion on the C-Band spectrum, behind $ 53 billion in Verizon Communications (VZ) and ahead of T-Mobile’s $ 11 billion. Management said Friday that the company will invest another $ 6 billion to $ 8 billion to implement that new spectrum. AT&T has not adjusted its previously provided wireless guidance for 2021: management continues to expect a 2% increase in revenue from services, with a “modest” increase in wireless profit.
Overall, AT&T continues to expect sales to grow by about 1% in 2021, and earnings per share to remain steady starting in 2020. Unlike Verizon and T-Mobile this week, AT&T has offered no other long-term goals. long or guidelines apart from that HBO Max figures.
After his investments in 5G, fiber, HBO Max, Stankey said that AT&T’s priorities are to support the stock dividend at the current level, with a free cash flow after that payment that will pay the debt. This year, the company will increase its loans by $ 6 billion to finance its C-band waste. The decrease in DirecTV will bring in almost $ 8 billion in cash, but will also move some of Ebitda – earnings before interest, taxes , depreciation and amortization – from the profit and loss account, effectively increasing the leverage of AT&T.
AT&T chief financial officer Pascal Desroches said on Friday that he expects the company to close in 2021 with a net-debt-adjusted-Ebitda ratio of 3.0 times. He expects to reduce this by 2.5 times by the end of 2024. Meanwhile, more asset sales are on the table, while share buybacks are off, AT&T said on Friday.
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