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AT&T Inc's (NYSE: T) outgoing Senior Executive Vice President and Chief Financial Officer John Stephens, in his update to the shareholders, spoke about the momentum in postpaid wireless plans. AT&T was able to reduce churn in the third quarter of 2020 and drive adoption of higher-tier unlimited plans that include HBO Max.
Stephens said that the combination of its network and user demand for entertainment would yield positive long-term value creation across AT&T's customer base. HBO Max's availability on Amazon.com Inc.'s (NASDAQ: AMZN) Fire TV and the simultaneous release of "Wonder Woman 1984" on HBO Max and in theaters will add to HBO Max's attractiveness to new customers.
AT&T expects a 2020 full-year free cash flow of more than $26 billion. Dwelling deeper into capital allocation, Stephens said that AT&T's dividend payout ratio for full-year 2020 would be in the high 50s%.
AT&T has refinanced more than $60 billion of debt at historically low rates and has $30 billion debt due through 2025. The combination of higher free cash flow and lower-priced debt gives it the financial strength to invest in high-growth areas of fiber, 5G, and HBO Max.
Stephens said that AT&T's integrated fiber strategy is expected to improve the company's connectivity offering for both consumer and enterprise markets and enhance its 5G network quality in a cost-efficient manner.
The telecommunications company is also generating savings from efficiencies, organizational alignments, and the optimization of cash returns from select business operating units.
Why It Matters: AT&T saw traction in the third-quarter in mobility and broadband. It reported 5.53 million mobility net adds, significantly beating Bloomberg's consensus of 2.84 million.
Broadband net adds of 158,000 was a surprise beat as analysts expected a net add loss of 73,000. Domestic HBO and HBO Max subscribers totaled more than 38M and 57M, exceeding its year-end target of 36 million subscribers.
Price Action: AT&T shares closed higher by a marginal 0.14% at $28.32 on Friday.
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