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AT&T Might Unload Regional Sports Networks to Reduce Debt

Zacks Equity Research

AT&T Inc. T is mulling over a sale of its four regional sports networks in a bid to reduce its heavy-debt balance sheet, per Bloomberg. The move is part of the telecom giant’s ongoing efforts to trim up to $8 billion in liability by the end of 2019. Although, no official announcement has been made by the company about this deal.

The wireless service provider is actively working out ways to honor its de-leveraging goals with healthy free cash flow and asset sales. At the end of first-quarter 2019, AT&T had $6,516 million in cash and equivalents with $163,942 million of long-term debt. It remains committed toward managing its debt portfolio and is on track to achieve its target of 2.5x debt-to-EBITDA range by 2019.

Reportedly, the company’s regional networks could bring in around $1 billion as sale proceeds. These comprise AT&T SportsNet Pittsburgh, AT&T SportsNet Rocky Mountain (available in Utah, Nevada and Colorado), AT&T SportsNet Southwest (areas of Texas and Louisiana), and Root Sports Northwest (Alaska, Washington and Oregon).

Moving on, Sinclair Broadcast Group, Inc. SBGI, which in May decided to buy 21 Fox regional sports networks from The Walt Disney Company DIS for $9.6 billion, could be among the probable buyers. In this context, Sinclair’s purchase of the Fox networks is still awaiting approval from the Department of Justice and the FCC.

AT&T expects to continue its growth momentum through 2019 and beyond as it is well positioned to benefit from the impending 5G technology and extended LTE coverage. Over the past five years, the company has invested about $145 billion in wireless and wireline networks, including capital investments and acquisitions of wireless spectrum and operations. Its fiber network is one of the nation’s largest and connects more Internet of Things devices compared to any other provider in North America.

In addition, AT&T has been raising cash by divesting holdings, including its stake in Hulu and its offices in New York. Together, the deals procured $3.6 billion. The company is spending heavily on a number of projects, including expansion of its 5G wireless network. However, it is likely to benefit from the solid momentum in its wireless business and 5G deployments in multiple U.S. cities.

Further, the company is building networks that will likely enable fiber-based connectivity and LTE to work efficiently in parallel with 5G solutions, making the most of business transformation alongside opportunities to enhance revenues and reduce operating expenses.

AT&T has long-term earnings growth expectation of 4.5%. Driven by diligent execution of operational strategies, the stock has rallied 18.6% compared with the industry’s rise of 10.6% in the year-to-date period.

AT&T currently has a Zacks Rank #3 (Hold). A better-ranked stock in the industry is Verizon Communications Inc. VZ, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Verizon has long-term earnings growth expectation of 4.3%.

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