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AT&T CEO Retiring as Telco Plans for Three Years of Cost Cuts and Layoffs
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AT&T CEO retiring as telco plans for three years of cost cuts and layoffs [arstechnica.com]:
AT&T CEO Randall Stephenson is retiring at the end of June and handing the reins to executive John Stankey, who will lead the telco through a multi-year cost-cutting program. Stankey, the company president and COO, will become CEO on July 1, AT&T announced today [att.com]. Stephenson "will serve as Executive Chairman of the Board of Directors until January 2021 to ensure a smooth leadership transition."
Stephenson, 60, has been AT&T's CEO since 2007; he began his AT&T career in 1982 with Southwestern Bell Telephone, a subsidiary.
"Stankey's selection as AT&T's next CEO completes the final phase of a succession planning process that AT&T's Board began in 2017, which included a thorough evaluation of internal and external candidates," today's announcement said.
Stankey, 57, has been with AT&T since 1985 and has been president and COO since October 2019. He has recently taken on a more prominent role as part of succession planning. Last month, Stankey detailed [arstechnica.com] a cost-cutting plan to "generate double digits of billions over a 3-year planning cycle." That will include job cuts, which Stankey called "headcount rationalization."
Stankey gave a lower savings number when talking to investors this week [att.com], saying, "We're working on 10 broad areas of opportunity that we expect will deliver $6 billion in cost savings over the next three years and improve market effectiveness, everything from IT and field operations to call centers and retail distribution."
AT&T lost another 897,000 premium TV subscribers in Q1 2020, as DirecTV customers continue to flee in droves. AT&T acquired DirecTV in 2015 under Stephenson's leadership. AT&T has lost more than 4 million TV customers over the past year [arstechnica.com].
AT&T's mobile business remains a big moneymaker, but overall company revenue in Q1 2020 was $42.8 billion, down from $44.8 billion in last year's first quarter. AT&T's WarnerMedia division, a result of Stephenson's Time Warner acquisition, reported a 12.2-percent [att.com] year-over-year revenue decline and expects tough times ahead as the pandemic forced the cancellation of big sporting events and TV and film production.
23,700 job cuts since end of 2018
AT&T had 244,490 employees at the end of March. The company had 268,220 employees at the end of 2018 but cut more than 20,000 jobs in 2019 [att.com] and another 3,310 in Q1 2020. In March, Stankey said AT&T plans "additional work" in the "headcount-rationalization" area, meaning more job cuts are on the way. AT&T has conducted heavy layoffs over the past couple of years despite Stephenson claiming [arstechnica.com] AT&T would use a corporate tax cut to create thousands of jobs.
In today's succession announcement, Stephenson said he looks forward to working with Stankey "as the leadership team moves forward on our strategic initiatives while navigating the difficult economic and health challenges currently facing our country and the world. John has the right experiences and skills, and the unflinching determination every CEO needs to act on his convictions."
Stankey said he "couldn't be more excited about the new opportunities we have to serve our customers and communities and create value for our shareholders."
After Stephenson leaves the board-chairman position, AT&T said it "will elect an independent director" as a new chairperson. Having separate people as CEO and chair is a concession AT&T made to [arstechnica.com] an activist investor group in October 2019. AT&T also promised to make "no major acquisitions" over the next three years. AT&T's acquisitions have contributed to a long-term debt load of $147.2 billion [investis.com], which AT&T is focusing on reducing [arstechnica.com].
Stephenson's total compensation [arstechnica.com] in 2019 was $32.03 million, while Stankey's was $22.47 million.
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AT&T’s massive TV losses continue as another 900,000 customers flee [arstechnica.com]:
AT&T lost another 897,000 premium TV subscribers in Q1 2020, as the DirecTV owner's string of massive customer losses continued. An AT&T executive today said the company is moving ahead with a company-wide cost-cutting program.
AT&T's earnings announcement [att.com] today said the 897,000-customer net loss reduced the total number of premium TV subscribers to 18.6 million. AT&T said [att.com] the latest customer loss was "due to competition and customers rolling off promotional discounts as well as lower gross adds from the continued focus on adding higher-value customers."
AT&T's premium TV category includes DirecTV, U-verse TV, and the new AT&T TV online offering that mimics cable and satellite [arstechnica.com] services by imposing contracts, hidden fees, and a big second-year price hike. In 2019, AT&T lost 3.43 million [arstechnica.com] premium TV customers, an average of nearly 860,000 per quarter.
AT&T hasn't done much to stop subscriber losses, as the company seems focused on raising the average revenue per customer instead of offering deals that would entice people to stick around.
The company today also reported a 138,000-subscriber net loss in AT&T TV Now, a streaming service that's separate from the premium TV category. AT&T TV Now is down to 788,000 subscribers, only a year after AT&T reported more than 1.5 million subscribers to the service. Formerly known as DirecTV Now [arstechnica.com], the streaming service hit a peak of 1.86 million subscribers on September 30, 2018, before customers started canceling as their discounts expired. AT&T attributed the latest customer loss to "higher prices and less promotional activity."
Video-service revenue in the quarter was $7.4 billion, "down 8.4 percent year over year due to declines" in TV subscribers, "partially offset by higher" average revenue per user, AT&T said. Video is part of the AT&T Entertainment Group, which also includes broadband and landline phone services. The Entertainment Group reported operating revenue of $10.5 billion in Q1, down 7.2 percent year over year due to declines in video "and legacy services," AT&T said. Operating income in the group was $1.3 billion, down 9.7 percent year over year.
Going forward, AT&T has expressed high hopes for HBO Max, a $15-per-month service that's due to launch on May 27. AT&T has set a goal [arstechnica.com] of 50 million HBO Max subscribers in the United States within five years, but plans to include HBO Max with certain mobile, TV, and Internet plans [att.com] mean that many customers will get it for no extra charge.
Cost-cutting in progress
As we reported in early March [arstechnica.com], AT&T is planning at least $10 billion worth of cost cuts, including job cuts, over the next three years. Today, AT&T COO John Stankey told investors that "we're not backing off our cost and efficiency transformation initiatives that remain largely under our control," according to Light Reading [lightreading.com].
The first of those cost-cutting efforts "focus on AT&T's retail and third-party distribution operation" and the company's field operations, the Light Reading article said. Those two cost-cutting efforts are "now underway" and "would cut a combined $1 billion in recurring costs from the operator's bottom line," Light Reading reported. Stankey said AT&T will try to get more efficient at solving customer problems so the company can reduce the number of technician visits to customer homes.
DSL-customer losses outstrip fiber gains
As for home Internet service, AT&T added 209,000 fiber customers in Q1 but lost 73,000 customers overall as the decline of DSL continued. AT&T said the 73,000-customer net loss was caused by "competition in slower speed territories and loss of bundled video subscribers, partially offset by recent higher demand and lower churn due to the COVID-19 crisis." AT&T has 4.1 million fiber-Internet customers and 14.05 million Internet customers overall, down from 14.45 million a year ago.
AT&T mobile revenue was $17.4 billion, up 0.2 percent year over year. Operating income in AT&T's mobile division was $5.8 billion, up 9 percent.
For the entire AT&T Communications division, revenue was $34.2 billion, down 2.6 percent year over year "due to declines in Entertainment Group, wireless equipment and Business Wireline that were partially offset by gains in wireless service revenues," AT&T said. Total operating income in the quarter was $8.2 billion, up 2.4 percent.
Across all of AT&T, revenue was $42.8 billion, down from $44.8 billion in last year's first quarter. Company-wide operating income was $7.5 billion, up from $7.2 billion year over year.
AT&T said its results "underscored the financial strength and ample liquidity of the business even with current economic conditions" caused by the pandemic. Still, CNBC reported [cnbc.com] that "AT&T's first-quarter revenue fell short of Wall Street expectations and the company pulled its annual forecast on Wednesday, as the impact of the coronavirus outbreak overshadowed a strong growth in monthly phone subscribers."
Advertising revenue "was severely hit due to the postponement of live sports such as March Madness, and lower wireless equipment sales led to a $600 million decline in revenue," CNBC noted. AT&T's WarnerMedia division "suffered the brunt of the impact from the pandemic, report[ing] $7.4 billion in revenue, down from $8.4 billion from a year earlier."
Correction: This article originally stated that AT&T reported company-wide revenue of $34.2 billion and operating income of $8.2 billion; those numbers are only for the AT&T Communications division.
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not looking good for AT&T
