Fourth Quarter Reports Indicate Uncertain Times for Telcos

Best Cable Deals
High Speed Internet

The shares of AT&T® dropped by 25% since the start of 2018 and the recently published full-year reports did not help to lift the stocks. Profits showed signs of recovery, although growth remained stagnant. This can be attributed to the company’s controversial acquisition of Time Warner Media empire last year. The company closed the deal at $85 billion, which is said to have raised the company’s debts. As for value investors, this is a dream period to pounce on the opportunity.

2018 Recap

Overall, AT&T® had a good 2018. There was an improvement in revenue by mid-single digits. Besides, the lower tax rate resulting from the tax reforms passed at the end of 2017 also benefitted the company. The bottom lines saw a big double-digit increase.

Note that many of these improvements were due to the deal to buy Time Warner. In fact, the number of postpaid retail subscribers of the company grew by just 200,000. When compared to Verizon®, which saw a growth of 1.1 million, this is an unimpressive showing. Furthermore, the debt of the company reached a tally of $166 billion from $126 billion, triggered by the purchase of Time Warner in what was said to be one of the best cable deals.

AT&T’s Acquisitions

Fastest Internet Provider
5G Networks

Many investors are of the opinion that the purchases of the company lack foresight. Meanwhile Verizon®, yet another of the fastest internet provider, was very conservative in its approach to M&A activity. It restricted itself to smaller purchases such as those involving AOL and Yahoo! It also noted the value of its acquisitions and is also laying off employees in the various sections, thereby admitting that the spending campaign was a blunder.

Nonetheless, AT&T® expects its revenue to improve significantly in the year 2019. Free cash is anticipated to be $26 billion, which would be a 16% increase over the previous year. These changes are predicted despite the expected higher capital expenses. This figure is expected to be $23 billion in comparison to $21.3 billion in 2018. This increase will be caused mainly due to the upcoming rollout of 5G networks, which is also taking place in Verizon®.

CEO Randall Stephenson commented on the company’s upcoming strategies, With its cash flow expected to rise this year, AT&T® says that paying down its massive debt load is a top priority. “Our dividend payout as a percent of free cash flow was 46% for the [2018 fourth] quarter and 60% for the year, allowing us to increase the dividend for the 35th consecutive year,” Stephenson said. “This momentum will carry us into 2019, allowing us to continue reducing our debt while investing in the business and continuing our strong record for paying dividends.”

Add a Comment

Your email address will not be published. Required fields are marked *