The John Stankey Era Begins at AT&T

The John Stankey era has begun at AT&T. Stankey, an AT&T veteran, takes the helm from Randall Stephenson who led AT&T the past 13 years. During Stephenson’s leadership, AT&T made major media purchases of $49 billion for DirecTV and $85 billion for Time Warner. The goal of these media purchases was to provide stickiness to wireless subscribers, which to date, has not been realized. But it is early and there remains opportunity within these media purchases. For instance, AT&T launched the HBO Max service on May 27, which it claims has attracted good initial attach rates with wireless, in addition to helping push subscribers into larger data packages. We will be watching this development closely.

Counterpoint The John Stankey Era Begins at AT&T

During the Stephenson reign, there were also Latin America network asset purchases. The thinking was AT&T could use the network rollout expertise it has and implement abroad. There could be advantageous roaming agreements, too. It could be argued these economies-of-scale purchases have been disappointing. At the very least, the investments could be better put to use integrating the major media purchases. And, there could be more focus on continuing the work of rolling out a 5G and IoT network in the US. Once the required hardware is ready in 2H20, AT&T will get more aggressive offering fixed wireless broadband. Time will tell how these investments pan out or if Stankey takes a different course.

On the wireless front, the Q2 results were quite resilient considering the COVID-19 pandemic. Handset connections were only down 8% year-over-year. April and May were hammered due to lockdowns and store closings. June saw business bounce back to near-normal levels. July continues to see improvement. The company managed to upgrade 3.3% of the postpaid base, which was actually flat year-over-year. The majority of these upgrades came in June, which emphasizes how resilient the wireless business remains.

Another highlight during the quarter was the speed of 5G rollouts and the rollout of its FirstNet first responders network. 5G now passes over 205 million POPs with its low-band blanket coverage, and this is without the benefit of DSS, which is being trialed and will be rolled out in 2H20. mmWave continues to be rolled out in strategic major metros. The FirstNet network is 80% built out. Finally, 5G SA trials have started with likely initial rollout in 2020 and a more earnest rollout in 2021.

Verizon and T-Mobile have given up on the goal of owning and maintaining massive amounts of own media content. AT&T is full speed ahead with running a 5G network and WarnerMedia. The upcoming quarters will be interesting to watch.

Complete coverage of AT&T’s 2Q20 results here.