AT&T CEO John Stankey speaks with Yahoo Finance's Brian Sozzi about the company's turnaround plan, 5G investment, demand for new Apple iPhones, customers paying their bills, and the outlook for the company after it spun off its media division.
- Around this time last year, AT&T CEO John Stankey revealed he was not satisfied with his company's brand and was skeptical about its future. Well, today, Stankey is singing a different tune. Yahoo Finance's Brian Sozzi sat down with him at the Goldman Sachs Technology Conference in San Francisco and first asked Stankey about what's changed over that last year.
JOHN STANKEY: We've seen improved sentiment in the wireless business as well, so strong recovery in that regard. We're closing the gap to our competitors. And I feel, frankly, we're in a really good position. So I like the momentum and the progress. Still got some work to do, as always, but really good progress.
BRIAN SOZZI: How do you get that momentum going in the right direction? So a year into this, how do you get the ship-- a ship this large-- going in the direction you want it to go?
JOHN STANKEY: Well, you got to get all the sailors on the ship to do the things you want them to do first.
BRIAN SOZZI: Well, that would help.
JOHN STANKEY: And I think, in this case, we've seen tremendous amount of effort from our employees that have really rallied behind what we're trying to do to be the best connectivity provider in the United States. They're not only deploying infrastructure at a record rate right now, they're doing really well in the market. You've seen that momentum in our wireless growth. You've seen it in our fixed broadband growth. And I think, more than anything else, that's really the secret behind it, which is a lot of great employees working really hard, understanding that customers are very important to us, and doing great work.
BRIAN SOZZI: How much will you spend over the next three years rolling out 5G?
JOHN STANKEY: Well, we haven't given a specific guidance on 5G. But we're in a situation right now where we're probably spending $2 billion incremental this year. We'll probably do something pretty similar next year in that regard. And when you think about putting out an entirely new air interface like LTE, over the course of the full deployment in the network, it's not uncommon to get close to an $8 billion investment to make that air interface over a number of years work fully.
BRIAN SOZZI: We're getting some early reports that the iPhones are off to a hot new start. Are you seeing that in your business?
JOHN STANKEY: Well, we're early into it, right? We just started preorders last week. Certainly, there's been a lot of activity. It's been consistent with what we would have expected.
There's always a lot of interest at the front end of an Apple launch. We're seeing that. I think we've seen public social dynamics saying they're really pleased with how we've been handling it at AT&T, the ease of getting a new device, how quickly we made it available out in the market. So we feel like it's going well. But time will tell over the next couple of weeks to see if volume sustains itself.
BRIAN SOZZI: I just paid off my phone, John. Now I'm going to have to go and buy another phone.
JOHN STANKEY: There you go. Now it's time.
BRIAN SOZZI: I guess that's music to your ears, right?
JOHN STANKEY: Now it's time.
BRIAN SOZZI: All right, well, last time we talked-- we talked to your CFO a couple of weeks ago when you reported earnings. And the big headline was that consumers are waiting longer to pay their bills, I imagine because of various economic circumstances, inflation, you name it. Any improvement in that trend?
JOHN STANKEY: Well, we haven't seen any changes in the trend. It hasn't deteriorated any further. Frankly, we wouldn't expect it to. We're seeing, right now, consumers are generally back to about a prepandemic level.
I would say that a lot of this impact has been in the segments of the economy and consumers that maybe are a little more strapped and living paycheck to paycheck. But I don't expect that we're going to see it dramatically different, especially as we start to see easing in things like gasoline prices. Maybe we'll catch a break here in the fourth quarter and start to see some food inflation drop off. Those are the segments of the economy and the demographic base that are probably most impacted by this.
BRIAN SOZZI: Does the economy, just based on the forward indicators you and your team track, does it feel recessionary?
JOHN STANKEY: It's hard to say. I would tell you right now, when you see the numbers coming in on inflation, it's hard to believe it's not going to have an impact at some point. And even if we miss a full-on recession, the question is, is the growth strong enough to really supplant the high levels of inflation. And we see more of a stagflation environment. But I think we're going to have to wade into the fourth quarter, first quarter of next year, to really see what the outcome of that game is.
BRIAN SOZZI: We talk to a lot of analysts that cover AT&T and they all say, we want debt to come down. We want it lower. Where are you at in that process?
JOHN STANKEY: Look, we've set out a very deliberate process at the close of the WarnerMedia transaction as to how we were going to restore ourselves at a 2 and 1/2 times debt-to-EBITDA ratio. We've been making good progress around that, as you see this year, with the proceeds from the transaction. We've remarkably improved our balance sheet. And as we said, we expect we'll be back to 2 and 1/2 times debt-to-EBITDA probably in about the 2025 time frame. And I'm confident we're going to get there.
BRIAN SOZZI: Would that include-- when you hit that mark, does that include another look at the dividend, to bring it back to where it was?
JOHN STANKEY: Look, the dividend yield is very, very competitive where it is today. It's one of the highest in the Fortune 500.
BRIAN SOZZI: It is, 6 and 1/2%
JOHN STANKEY: And depending on where the stock is trading in any given day, it's North of 6. And so I think that's incredibly competitive. And I don't feel a need, right now, to do anything to readjust it. As long as we have great opportunities to reinvest in the business, which I think we have right now, our priority is to get the balance sheet in order first and then secondly, to make sure we're seizing all the growth opportunities we have to grow the business and keep the dividend yield competitive, which I think we're at that point right now.
BRIAN SOZZI: A couple of things that recently popped up-- T-Mobile and seniors, what happened here?
JOHN STANKEY: You probably need to ask T-Mobile. They've issued some statements and went out into the market with some communications that were inaccurate and not true. And we've seen this pattern over a number of months and a number of years. We've been using industry channels to largely try to discipline it through the National Advertising Association. I've gotten a little frustrated that that takes a long time for that process to work its way through.
BRIAN SOZZI: And they also teamed up recently with Elon Musk to launch-- to try to get rid of dead zones-- is that even possible-- working with Starlink?
JOHN STANKEY: Look, I think there can be much more progress made in improving dead zones. When we say "get rid of dead zones," you can go find, even with satellite, a place in a canyon where you're not going to get a signal and you can still have a dead zone
BRIAN SOZZI: Makes sense.
JOHN STANKEY: But you can cover a lot more of the United States with satellite than what we do today. And it makes really important sense because we've been doing the same thing. In fact, a satellite that launched this weekend actually has two of our bands on it that we're beginning our testing for a service that's a bit more robust than what was described a couple of weeks ago by T-Mobile.
It's a full complement of voice data and texting services to a wireless handset. We have, with our partner that we're working on in that testing, full rights from the FCC to begin that testing process. We're really excited about what might transpire with it. And we hope that the tests come back that we have an effective technology solution here that we can deploy and get licensing at the FCC to ultimately bring it to market.
BRIAN SOZZI: It's been an interesting few years for you as a leader. Of course, you had the WarnerMedia transaction. That is no longer part of your business. What have you learned just dealing with everything you've had to go through the past couple of years?
JOHN STANKEY: Well, I've actually been working for a fair amount of my life. So in some respects, things don't feel a lot different. And I suspect I'm going through the same thing every other leader in the United States is going through, which is it's been a bit of an unprecedented time with the pandemic and some of the social dynamics we're dealing with in this country.
At the end of the day, we've been in a competitive industry for a long time, it continues to be competitive, it causes us to have to be at our best. I think getting employees' heads around everything that's going on in the United States and how to keep their work life and their personal life in context, has been a bit of a challenge. And I have to say I've learned a few things around that and how to communicate with folks to make that happen. But I'm really proud of the team, what they've been able to do, and the progress we've made.
BRIAN SOZZI: Is it a little bit easier on you, from a leadership perspective, to not be dealing with the media division?
JOHN STANKEY: My days are a little bit more predictable than they were a couple of years ago. And that's one of the reasons why we made the decision to do what we're doing. I felt focus was really important. And I didn't think I could do my best work or the broader management team could do their best work if we were trying to fight too many battles on too many different fronts. So yes, I think we are a more focused company today I think we're executing each week better than we were the week before. But we still have room to go.
BRIAN SOZZI: All right, I wish you much success in the path forward. AT&T CEO John Stankey, good to see you. Thanks for joining Yahoo Finance.
JOHN STANKEY: Thanks, Brian, appreciate you having me in.
- Thanks to Brian Sozzi for bringing us that interview.