AT&T doesn’t see cable company growth in mobile subscribers and sees the bar set “pretty high” for a merger of DirecTV and Dish Network, CFO Pascal Desroches told an investor conference Tuesday.
Speaking at the Bank of America C-Suite Technology, Media and Telecommunications Conference in London in a webcast session, he also likened recent chatter that Amazon was looking to offer low-cost wireless services to its Prime members in partnership with a telecom company to Seinfeld.
AT&T, Verizon and T-Mobile, the three providers of nationwide U.S. networks, all said in statements in early June that they were not in talks to offer wireless at wholesale prices for such an offering, Desroches stressed. It was also rumored that Dish had been asked about such a service. Amazon later said it had no plans for such a service at this time.
“Why would Amazon do this?” asked Desroches. “Amazon has a high penetration, let’s say over 80 percent of US households. Would they really enter into a variable price construction for an incremental 10 percent. Also (how about) a player that is unproven and has no built-in network at this stage? I’m just not sure any of the players have the incentive to really get into this at this stage.”
The takeaway from AT&T’s CFO: “It’s kind of like those of you watching Seinfeld. It’s a show about nothing. This was a rumor for nothing.”
Since AT&T sold a 30 percent economic interest in DirecTV and its other video services, U-Verse and AT&T TV, to private equity firm TPG Capital in 2021, creating the new DirecTV, Wall Street has repeatedly discussed whether a long-suggested Dish- DirecTV merger could be on the agenda. The argument behind Dish and DirecTV’s much-discussed possible merger is that they would be better able to compete with cable companies and others in the streaming space.
When asked about that scenario and whether DirecTV could become a Dish buyer, the AT&T exec replied, “We are separate from our satellite platform and we have it in a build where it has been optimized by our partners at TPG. They are doing a really good job optimizing that asset.”
Desroches added that AT&T has a good handle on the future cash flows of the DirecTV asset under TPG’s leadership. “Before they would decide to do anything with any other party, be it Dish or anyone else, I think we have a pretty well-defined bar,” the exec said. “Last year it made us $4.5 billion. This year we came in at about $3.5 billion. We have a very good view of the cash flows that will come out of that business over the next few years. And whatever we would do, it should incrementally be much better than that.” (AT&T uses the standalone DirecTV entity to pay off debt.)
The AT&T exec concluded: “So right now we’re in a really good position with the asset. Should we look at other options? That’s what we always do, that’s our job. But the bar would be set pretty high to do something to accelerate more value creation.”
How big an existential threat to AT&T is the cable industry that offers wireless services? “Their market share gains are not at our expense,” ATT’s CFO said of AT&T, but suggested that at least one major unnamed competitor would likely be affected.
However, Desroches said Dallas-based AT&T expects new phone subscribers for the current second quarter 300,000 range, below Wall Street analysts’ estimate of 476,000.
Desroches also praised record sales and profits in the wireless industry on Tuesday, arguing that the telecom sector was well-established and “incredibly healthy.”
He also stressed that the company is following a strategy and focus that sounded similar to what entertainment giant streaming services are emphasizing: “Let’s not chase subscribers just to chase subscribers.”
The conglomerate finalized the sale of WarnerMedia last year, leaving Discovery entertainment powerhouse Warner Bros. Discovery could create.