Facing a boycott of sorts from an activist investor calling for senior management changes at AT&T, CEO Randall Stephenson Sept. 17 sought to outline to Wall Street why the telecom under its current management is on the right path in a rapidly changing media landscape.
Speaking Sept. 17 at Goldman Sachs 28th Annual Communacopia confab in New York, Stephenson said his decision to spend hundreds of billions of dollars acquiring satellite operator DirecTV and Time Warner was based in part on an evolving in a digital ecosystem.
“If you had asked me that question five years ago, I’d be hard-pressed to say it makes sense, in the old world,” he said. “In the new world, it makes all the sense in the world. We believe people are going to spend more and more of their day watching premium content.”
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Stephenson said AT&T has more than 170 million “customer relationships” requiring more bandwidth and connectivity to consume content, which is why he spearheaded the telecom’s $85 billion acquisition of Time Warner two years ago and the $67 billion purchase of DirecTV in 2015.
AT&T also operates 5,500 retail stores nationwide.
But it was those acquisitions, which have ballooned AT&T’s debt exponentially, while at the same time DirecTV and AT&T U-verse continue hemorrhaging subscribers (1 million this year) that led investor Elliott Management, who owns a $3.2 billion stake in AT&T, to write a letter to the board seeking changes.
Specifically, Elliott CEO Paul Singer wants Stephenson and COO John Stankey, who is also CEO of WarnerMedia, replaced.
Stephenson, who says the board will “evaluate [the letter] and see what makes sense for our shareholders,” says the content creation business is changing dramatically — moving from a linear TV distribution business model to over-the-top video.
The executive says WarnerMedia is uniquely qualified to meet the challenge with both himself and Stankey in their current positions.
“It’s a hard play to take a legacy company on legacy distribution models and make a pivot into digital distribution,” Stephenson said. “[Stankey] has done a really nice good job breaking down the [intra-company] silos. He’s got experiences that are long, wide and deep.”
“[WarnerMedia] is one of the largest-scaled TV and film production studios in the world,” he said, adding that AT&T has now become the largest distributor of HBO in the world, including 66% bigger than the premium channel’s No. 2 distributor.
Stephenson said acquiring Time Warner was due to the fact the media distribution world was changing and not growing on legacy pay-TV platforms, but rather digital platforms.
“We’ve had to reorient the business,” he said.