AT&T Provides Update On Time Warner Acquisition, And Expectations

(RTTNews) - Randall Stephenson, AT&T Inc. (T) chairman and chief executive officer, and John Stephens, AT&T Inc. senior executive vice president and chief financial officer spoke today at the Wells Fargo Securities 2018 Telecom 5G Forum. They discussed the recent acquisition of Time Warner by AT&T and plans for the combined company.

Stephens highlighted the expected financial impacts of the Time Warner acquisition. He said the company expects significant synergies and other financial benefits. Specifically, AT&T expects the deal will Contribute to adjusted earnings per share and free cash flow per share within 1 year of close; Improve AT&T's dividend coverage, with a free cash flow payout ratio in the 60% range;

The company expects to deliver synergies of $2.5 billion. As previously announced, AT&T expects $1.5 billion in annualized cost synergies by the end of 2021. These will include efficiencies at the corporate level as well as savings from marketing and advertising, procurement and content development. The company also expects $1 billion of annualized revenue synergies by the end of 2021, primarily from advertising.

The company expects continued solid growth in its Mexico wireless operations in the second quarter of 2018 with as many as 700,000 net adds and improving churn. However, the strengthening U.S. dollar and volatility in foreign exchange rates are expected to pressure International segment results.

The company expects Wireless service revenue growth for full-year 2018, on a comparable basis. The company expects wireless service revenues will be essentially flat in the second quarter of 2018.

The company expects the transition of the video market to continue to negatively impact revenues and margins in the Entertainment Group. For the quarter, the company expects total video and broadband subscribers to increase, with DIRECTV NOW subscribers more than offsetting continued declines in traditional TV subscribers.

Stephenson said that the mix will continue to shift to over-the-top video. Earlier today, the company announced new unlimited wireless plans — AT&T Unlimited &More Premium starting at $80 for the first line and AT&T Unlimited &More for $70 for one line or $40 per line for four lines— that include access to AT&T's WatchTV service, the company's newest video offering featuring 30+ live channels and more than 15,000 TV shows and movies on demand.

The company expects to eliminate about $2.8 billion of intercompany revenues on an annualized basis.

The company now markets its 100% fiber network to 9 million locations, well on its way to the 12.5 million commitment it made as part of the DIRECTV acquisition. In fact, AT&T expects to reach 14 million customer locations by mid-2019. Also within the next year, the company expects to be in the 40% to 50% range of its FirstNet buildout commitment. And AT&T's 4G LTE build in Mexico is nearly complete. AT&T also expects continuing benefits from its software defined network (SDN) investments.