By Sheila Dang and Neha Malara
(Reuters) – AT&T Inc
The second-largest U.S. carrier by subscribers has struggled with a stagnant stock price as it has spent hundreds of billions on a bet that owning media content, as well as all the ways that people can consume content through their phones, TV and internet, would pay off.
But its heavy debt load and declining revenue from segments like satellite provider DirecTV brought criticism from Elliott, which revealed a $3.2-billion stake in AT&T in September.
Shares of AT&T were up 4.6% to $38.60 in morning trading.
AT&T announced the plan on the day it released third quarter results that saw worsening results in several areas, including satellite provider DirecTV and WarnerMedia, which includes the Turner TV networks and premium channel HBO.
On the conference call with analysts, Chief Executive Randall Stephenson said AT&T had “no sacred cows” when it came to reviewing the portfolio of businesses.
While DirecTV will be an important piece of AT&T’s strategy over the next three years, AT&T will consider multiple options including partnerships and other structures, Stephenson said.
AT&T also said that it expects Stephenson to remain CEO through at least 2020.
In a letter to shareholders supporting the plan, Elliott Management said AT&T would evaluate all potential CEO candidates and separate the role of Chairman and CEO.
“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott said in a statement.
A source familiar with the matter said Monday that Elliott is supportive of the board member AT&T is expected to nominate this year at the next board meeting.
To reduce its debt pile of $153.5 billion at the end of the third quarter, AT&T has been on a selling spree. Over the weekend, it sold Central European Media Enterprises Ltd (CME)
The company expects generate $14 billion through asset sales and other initiatives by the end of this year. It reduced its net debt by $12.7 billion so far this year.
The news on Monday presented an “awkward conundrum” as AT&T announced financial guidance through 2022 that was ahead of Wall Street consensus, but its quarterly results fell short of expectations in every segment, said Jonathan Chaplin, an analyst with New Street Research, in a note.
AT&T lost 1.2 million premium TV customers, which includes DirecTV, as well as 195,000 streaming video customers, as AT&T has sought to roll off subscribers who had signed up with price promotions.
Revenue from WarnerMedia was down 4.4% from the previous year to $7.8 billion as it made less money from the Warner Bros. movie studio.
Total operating revenue in the third quarter ended Sept. 30 fell to $44.59 billion from $45.74 billion, a year earlier, missing analyst expectations of $45 billion, according to IBES data from Refinitiv..
Excluding items, AT&T earned 94 cents per share, above analysts’ estimates of 93 cents.
The carrier added 101,000 net new phone subscribers who pay a monthly bill during the third quarter. Wall Street estimated the carrier would gain 61,000 net new customer additions, according to a note from Cowen analysts.
(Reporting by Sheila Dang in New York, Ayanti Bera and Neha Malara in Bengaluru, additional reporting by Kenneth Li; Editing by Saumyadeb Chakrabarty, Kirsten Donovan and Nick Zieminski)