AT&T CEO Calls Activist Investor's Letter a "Mixed Bag"

Randall Stephenson - Economic Club Lunch- Getty-H 2019
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Randall Stephenson on Tuesday told the Goldman Sachs Communacopia Conference some ideas from Elliott Management make "a lot of sense," but that the company doesn't plan any major acquisitions.

AT&T CEO Randall Stephenson on Tuesday told an investor conference that a letter received from activist investor Elliot Management has some useful ideas for the phone giant, but is overall "a mixed bag."

"There are some things in the letter that we've looked at and say it makes a lot of sense. And we need to push further and talk about that," Stephenson told the Goldman Sachs Communacopia Conference in New York City during a session that was webcast. "There are some other areas you look at, and it's not as clear in terms of how it would make sense for us. But these are smart guys, right, and they put a lot of ideas into the paper that we need to sit down and engage with them on."

Investment firm Elliott Management Corp. recently said funds that it manages have acquired $3.2 billion of AT&T stock and called for changes at the telecom and entertainment giant, arguing that its acquisition strategy in particular has hurt the company's shares and performance.

Stephenson said the letter from Elliot Management has been discussed at the board level. "And at the end of the day, we're going to evaluate it and talk to them and see what makes sense for all of our shareholders," he said.

The upcoming HBO Max streaming service was also among the topics discussed during the Goldman session, not least as it has been preceded by the telecom giant naming WarnerMedia CEO John Stankey to take on the additional roles of president and COO of AT&T, effective Oct. 1, reporting to Stephenson.

"He's done a really nice job of breaking down silos and getting the business reoriented towards HBO Max digital distribution," Stephenson said of promoting Stankey. He added AT&T with WarnerMedia faced a "hard play" to take a legacy media business and "pivot into a digital distribution model."

The AT&T boss said he and his board took time to consider who may help lead AT&T as it combines with WarnerMedia and Stankey quickly rose to the top of a list they drew up.

Stephenson also addressed expectations that Stankey's recent promotion positions him to succeed Stephenson atop AT&T: "I've been asked a thousand times: Is he the heir apparent? Personally, the board hasn't informed me I'm retiring yet. So I take offense at talk of an heir apparent. But I will say if Stankey is successful, he's in a pretty good position, if he executes this play."

WarnerMedia plans to launch the HBO Max streaming service next year, after previewing it Oct. 29, with library content and scripted originals, as well as content from the media giant's cable networks portfolio, including HBO, TNT and TBS. 

"This is going to be different. This is not Netflix. This is not Disney. This is not Hulu. This is different, standing up a digital platform and driving fast penetration through customer relationships that you own in this distribution business," Stephenson said of AT&T's 170 million customer relationships.

The direct-to-consumer platform will join Netflix, Amazon, Apple, Disney and NBCUniversal in the streaming wars. It is widely expected to have a higher monthly price point, especially compared to the $4.99 a month that Apple TV+ and the $6.99 that Disney+ will charge when they launch.

Stephenson also addressed the nearly 300,000 subscriber losses sustained during recent carriage disputes with CBS and Nexstar: "We made some hard choices. We had a couple of folks drop this year — CBS and Nexstar dropped us because we couldn't come to terms of what the pricing mechanism might look like. Those were a painful few weeks ... but it was the right thing to do."

On the mergers and acquisitions front, the exec said AT&T will take a pause during another expected round of industry consolidation after swallowing Time Warner to create WarnerMedia. "It's hard to predict what the industry structure will look like — there are a lot of areas where it would make sense for industry consolidation to occur," he argued.

Added Stephenson, "We don't intend to participate in any of that, as you might guess. There are areas where it might make sense, but the uncertainty in terms of how it's going to be treated by regulators makes it really hard to predict where the industry goes."