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US telecom giant AT&T's Q4 2019 earnings disclosed disappointing results while also outlining a strategy for future growth. The second-largest US wireless carrier by volume, AT&T collected $36.5 billion in revenue, 1.9% less than its Q4 2018 revenue.
During the quarter, the company also gained 3.6 million new wireless customers, down more than 5% year-over-year (YoY) from 3.8 million in Q4 2018. Additionally, the company experienced a higher rate of customer churn at 1.29%, up from 1.23% in Q4 2018. Amid these mediocre results, AT&T laid out its vision for the next few years, with both short- and long-term plans.
Here's what AT&T intends to accomplish in the next year:
In 2020, the company plans to turn its massive investments into sources of revenue. AT&T plans to establish nationwide 5G coverage by mid-2020, a costly endeavor - in July 2019, the company spent almost $1 billion on 5G spectrum alone at an FCC auction. Building a nationwide 5G network will expand the addressable audience for AT&T's service, which launched in December 2019 in just 10 US cities - by comparison, rival Verizon finished 2019 with 5G service in over 30 cities, after launching commercial 5G in April 2019.
On the entertainment front, AT&T has spent $1.2 billion, in addition to the $85 billion spent to acquire Time Warner, to develop its HBO Max streaming service, which it plans to launch in May 2020. The debut of HBO Max is expected to be bolstered by the company's nationwide 5G network; AT&T anticipates the subsequent 5G device upgrade cycle will present an opportunity to distribute HBO Max, likely by bundling the service with new 5G data plans.
Here's what AT&T plans to do in the long term:
Over the next three years the telecom will focus on unburdening itself of debt. AT&T aims to pay off the massive debt it took on to fund its acquisition of Time Warner, and plans to avoid incurring additional debt by abstaining from major acquisitions during that three-year period.
The company's efforts to scale down its debt could also lead it to sell off additional assets, like non-core businesses or cell towers. In October 2019, amid pressure from investors, AT&T sold off its business in Puerto Rico and the US Virgin Islands to pay down some of its debt; later that month the company sold over 1,000 cell towers to monetize non-strategic assets as part of its debt reduction effort. Focusing on debt reduction will limit AT&T's flexibility to make strategic purchases or investments, meaning the company could be receptive to partnerships that would split the cost of continuing to grow.
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