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AT&T now expects to have up to 150 million subscribers worldwide on HBO and HBO Max by 2025.
Gabby Jones / Bloomberg
AT&T management organized an investor day on Friday morning, after events from rivals
Verizon Communications
and
T-Mobile US
on Wednesday and Thursday. The highlight was a significant increase in the HBO Max subscriber target, with little other incremental news that would move the needle to a company the size of AT&T.
AT&T (ticker: T) shares jumped 3.8% on Friday morning, to around $ 30.65, with the event in progress. The company now expects to have between 120 million and 150 million subscribers to HBO Max and HBO by 2025. Its previous forecast, made in late 2019, was 75 million to 90 million subscribers that year. At the end of 2020, the services totaled 61 million subscribers worldwide.
Investors lately have been enjoying valuing the streaming business just for the growth of subscribers, it seems.
Netflix
(NFLX) stocks have long been traded predominantly based on that number after each quarterly result, while the recent ambitious goals of streaming subscribers
ViacomCBS
(VIAC) and Discovery (DISCA) sent these actions through the roof.
HBO Max’s growth will be accelerated by a new level of advertising – launched in June – and international expansion, 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 million and 70 million HBO Max and HBO subscribers worldwide, which would represent growth of 6 million to 9 million this year.
AT&T still expects several years of heavy investments for HBO Max. It sees peak losses in 2022, with service reaching breakeven first in 2025. HBO’s revenue will be around $ 15 billion in that year. year, said Kilar, up from last year’s $ 6.8 billion.
This is one of the three main areas of investment that AT&T CEO John Stankey highlights to investors whenever he gets the chance, along with installing fiber optic cables and upgrading his wireless network to 5G.
In his opening speech on Friday, Stankey summed up the proposal to investors as a focus on increasing subscribers in AT&T’s media and communications business and in a more streamlined company. “More customer relationships and a more efficient and streamlined company will result in returns for shareholders,” said Stankey.
AT&T Communications CEO Jeff McElfresh explained the company’s fiber cable advancement in 2021. It plans to expand its fiber footprint to 3 million additional potential customers this year, a goal that had previously been discussed by management before Friday -market.
Americans depend more than ever on their domestic Internet connections during the Covid-19 pandemic, and broadband has been a major growth area for the telecommunications industry. And people also want faster connections, with fiber to allow faster download and upload speeds than coaxial cable. McElfresh said on Friday that when the company first 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 of one-digit broadband sales in 2021 and expansion of profit margins. This makes sense: it is a high fixed cost business, with low marginal cost to add a new customer. Profits are expected to increase faster than sales as the business grows. Just look at
Comcastin
(CMCSA) or
Charter communications
‘(CHTR) 2020 broadband results.
AT&T is spending more than $ 27 billion on the C band spectrum, behind $ 53 billion of Verizon Communications (VZ) and ahead of T-Mobile’s $ 11 billion. Management said on Friday that the company will invest $ 6 billion to $ 8 billion to deploy this new spectrum. AT&T did not adjust its wireless guidance previously provided for 2021: management continues to expect service revenue growth of around 2% with “modest” growth in wireless profit.
Overall, AT&T also continues to expect sales growth of around 1% in 2021 and earnings per share to remain stable starting in 2020. In contrast to Verizon and T-Mobile this week, AT&T did not offer no long-term goal or guidance beyond the HBO Max numbers.
After his investments in 5G fiber, HBO Max, Stankey said that AT&T’s priorities are to keep stock dividends at their current level, with free cash flow after that payment to pay off the debt. This year, the company will increase its loans by $ 6 billion to finance the C-band splurge. The spin-off of DirecTV will bring almost $ 8 billion in cash, but it will also remove part of Ebitda – earnings before interest, taxes, depreciation and amortization – of its income statement, increasing AT&T’s leverage.
AT&T CFO Pascal Desroches said on Friday that he expects the company to end 2021 with a 3.0-fold adjusted net debt / EBITDA ratio. He expects to drop to 2.5 times by the end of 2024. In the meantime, more asset sales are at stake, while stock repurchases are suspended, AT&T said on Friday.
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