AT&T still looks weak after divestitures, says Moffett

AT&T will officially spin off its WarnerMedia business this month, merging that with Discovery to form Warner Bros. Discovery. And WarnerMedia CEO Jason Kilar has resigned, effective Friday. 

Next Monday, Warner Bros. Discovery will be run by Discovery CEO David Zaslav.

The WarnerMedia spin-off follows on the heels of AT&T’s divestiture of its DirecTV business last year in a deal with TPG Capital.

The divestitures conclude a turbulent couple of years for AT&T, which one could argue began when activist investor Elliott skewered the company in 2019 for poor management.

Today, AT&T is a simpler company.

But a new research note from MoffettNathanson – an SVB company analyzes the prospects of the remaining AT&T. The analysis is not glowing.

By revenue AT&T will be about two-thirds wireless and one-third wireline. And on the wireline said, business accounts for two-thirds and consumer accounts for one-third.

“The company isn’t growing,” said Moffett. “Their troubled Business Wireline segment is shrinking at a mid-single digit rate. Their Consumer Wireline segment is little better than flat. And their Mobility segment is adding subscribers, but only at a very high cost, leaving ARPU stagnant. The composite, on a pro forma basis, is a business generating no service revenue or EBITDA growth whatsoever.”

Of the wireless segment, Moffett said AT&T “faces a competitor in T-Mobile with both a better network and much lower prices…and AT&T now faces well-heeled competitors in Comcast and Charter that offer much lower prices as well.”

The analysts added that AT&T currently doesn’t have a credible growth story nor a discernible competitive advantage in any of its business segments.

“Breaking AT&T apart doesn’t undo the damage that was done by overpaying for DirecTV and then doubling down on Time Warner,” concludes Moffett.