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AT&T expects that in 2025 there will be up to 150 million subscribers worldwide on HBO and HBO Max.
Gabby Jones / Bloomberg
AT&T management hosted an investor day on Friday morning following competitors
Verizon Communications
and
T-Mobile USA
on Wednesday and Thursday. The highlight was a significantly increased HBO Max subscriber target, with little other incremental news that would move the needle for an AT & T-sized company.
The AT&T share (ticker: T) rose 3.8% to about $ 30.65 on Friday morning as the event progressed. The company now expects to have between 120 million and 150 million subscribers on HBO Max and HBO by 2025. The previous forecast, given at the end of 2019, was 75 million to 90 million subscribers in that year. At the end of 2020, the services had a total of 61 million subscribers worldwide.
Investors have recently been keen to appreciate the value of streaming businesses on their subscriber growth.
Netflix
(NFLX) shares have long traded predominantly on the basis of the figure after each quarterly result, while recent ambitious streaming subscriber targets of
ViacomCBS
(VIAC) and Discovery (DISCA) soared the shares.
Growth at HBO Max will accelerate through a new level of ad-supported advertising – starting in June – and expanded international engagement, WarnerMedia CEO Jason Kilar said on Friday. He said the company HBO Max will expand to 60 markets in Latin America and Europe this year. By the end of 2021, AT&T expects to have between 67 million and 70 million HBO Max and HBO subscribers worldwide, which will grow from 6 to 9 million this year.
AT&T still expects a few years of big spending on HBO Max. These are the biggest losses in 2022, with the service only to be equal in 2025. HBO revenue will be about $ 15 billion that year, $ 6.8 billion said last year.
It is one of three key investment areas that AT&T CEO John Stankey highlights to investors every time he gets the chance, along with the construction of optical cable and the upgrade of his wireless network to 5G.
In his opening speech on Friday, Stankey summed up the pitch for investors as focusing on growing subscribers in AT & T’s media and communications businesses and a more streamlined company. “More customer relationships and a more efficient and streamlined company will lead to shareholder returns,” Stankey said.
AT&T Communications CEO Jeff McElfresh explained the push for fiber cables in 2021. He plans to expand his fiber footprint this year to 3 million potential customers, a goal discussed by management before Friday.
During the Covid-19 pandemic, Americans were more dependent than ever on their Internet connections, and broadband was a major growth area for the telecommunications industry. And people also want faster connections to fiber to enable faster download and upload speeds than coaxial cable. McElfresh said Friday that when the company brings its fiber to a street or neighborhood, 70% of the subscribers it adds are new to AT&T, and it sees a 10% higher market share than local competitors.
The company expects growth in mid-single-digit broadband sales in 2021 and profit margins to expand. It makes sense: it’s a high fixed cost business, with a low marginal cost to add a new customer. Profits should increase faster than sales as the business grows. Just look
Comcastsay
(CMCSA) or
Charter communication
‘(CHTR) broadband results from 2020.
AT&T spends more than $ 27 billion on C-Band Spectrum, behind Verizon Communications (VZ) $ 53 billion and ahead of T-Mobile’s $ 11 billion. Management said Friday that the company will invest another $ 6 to $ 8 billion to harness the new spectrum. AT&T has not adjusted its previously given wireless guidelines for 2021: management still expects revenue growth of around 2% with a ‘modest’ wireless profit growth.
Overall, AT&T also expects sales growth of around 1% in 2021, and that earnings per share will remain stable from 2020 onwards. Unlike Verizon and T-Mobile this week, AT&T does not offer HBO Max figures other than longer-term targets or guidance.
Following its investment in 5G fiber, HBO Max, Stankey said AT & T’s priorities are to maintain the stock’s dividend at its current level, with the free cash flow after the payment paying debt. This year, the company will increase its loans by $ 6 billion to finance its C-Band scrap. The spin-off of DirecTV will bring in nearly $ 8 billion in cash, but also move some of Ebitda’s earnings before interest, taxes, depreciation and amortization – off its revenue statement, which in effect increases AT & T’s leverage.
AT & T’s future chief financial officer Pascal Desroches said on Friday that he expects the company to end 2021 with a 3.0-fold net debt-to-adjusted ratio. He expects it to drop to 2.5 times by 2024. Meanwhile, more asset sales are on the table, while share buybacks are not available, AT&T said on Friday.
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