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AT&T (T) Provides Major Business Updates to Shareholders

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Recently, the top management of AT&T Inc. (T - Free Report) debriefed investors about its progress on various operational metrics. John Stankey, the chief executive officer of the company, also shed some light on its continued business transformation initiatives to create long-term value for shareholders.

AT&T is increasingly focusing on its customer-centric business model to attract and retain customers for a lower churn rate. The company is witnessing healthy momentum in its postpaid wireless business with increased adoption of higher-tier unlimited plans. This, in turn, is expected to result in a year-over-year growth in wireless customers with unlimited tariff plans.  At the same time, AT&T expects more than 1 million customer additions in the fiber optic network with solid demand trends for seamless broadband connectivity.

Stankey further revealed that streaming content from HBO Max is gaining traction with 12.6 million activations to date, up from 8.6 million as on Sep 30, 2020. The availability of HBO Max on Amazon Fire TV — the standalone streaming device from Amazon.com, Inc. (AMZN - Free Report) — has likely enhanced its customer appeal.

Solid cash flow, along with prudent capital management strategies, is likely to offer the company the requisite financial strength and flexibility to maintain the growth momentum through continued infrastructure investments. Stankey expects to generate in excess of $26 billion in free cash flow in 2020, raising the tally to $26 billion for 2021. Through continuous debt-reduction initiatives driven by monetization of non-core assets and cost cuts, AT&T expects to maintain a dividend payout rate of more than 50% as it aims to reward shareholders with attractive risk-adjusted returns.    

An integrated fiber expansion strategy is expected to improve the broadband connectivity for both enterprise and consumer markets, while steady 5G deployments are likely to lend support for improved end-user experience. AT&T remains focused on business transformation efforts to augment operational efficiency and facilitate optimum utilization of resources to enhance value. The company expects this holistic growth policy to add significant customer value and generate healthy ROI across the business.

Moving forward, AT&T is poised to benefit from the impending 5G boom. As the first carrier in the industry, the company has unveiled its 5G policy framework that will hinge on three pillars — mobile 5G, fixed wireless and edge computing. In order to have a seamless transition among Wi-Fi, LTE and 5G services, AT&T intends to deploy a standards-based nationwide mobile 5G network. Its 5G service entails the utilization of millimeter-wave spectrum for deployment in dense pockets, while in suburban and rural areas it intends to deploy 5G on mid- and low-band spectrum holdings. It believes that as the 5G ecosystem evolves, customers can experience significant enhancements in coverage, speeds and devices.

The stock has lost 19% in the past year against the industry’s growth of 4.4%.



We remain impressed with the inherent growth potential of this Zacks Rank #4 (Sell) stock. Some better-ranked stocks in the industry are Gogo Inc. (GOGO - Free Report) and Cambium Networks Corporation (CMBM - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gogo delivered a positive earnings surprise of 23.9%, on average, in the trailing four quarters.

Cambium has a long-term earnings growth expectation of 20%. It delivered a positive earnings surprise of 137.8%, on average, in the trailing four quarters.

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