AT&T Analyst Day: Strategy Update & 5G Strategy

Analyst Day: Strategy Update & 5G Strategy, Presentation

• HBO expansion
• HBO Max AVOD tier to launch June 2021 (has $80m in ad bookings), will not include 2021 theatrical releases, HBO original series will not have ads inside
• raises subs targets HBO/HBO Max (excl free trials, Cinemax) to 120-150m YE 2025 (from 75-90), 67-70m YE 2021 (61m YE 2020 o/w 41.5m in US)
• HBO rev target $15b in 2025 (2020: $6.8b), HBO Max investements peak in 2022, break-even in 2025
• HBO Max to expand to 60 new markets in 2021 (39 in Latam June, 21 in Europe H2)
• no plans to add live sports to HBO Max in 2021
• target HBO Max ARPU $12 in 2021, $14 in 2025 (2020: $11.7)
• FTTP expansion
• to add 3m lines in >90 metro areas in 2021 (current BB coverage 52.97m HH o/w 14.93m on FTTH, 22.6m on FTTN/VDSL, 13.9m on ADSL)
• 70% of FTTH gross adds are new to AT&T
• C-band spectrum (80 MHz in 3.7-4.2 GHz band)
• acquired for $27.4b (o/w $23b payable in 2021)
• deployment from 2021 (40 MHz), associated capex $6-8b (mostly 2022-24)
• current 5G coverage 230m pops in 14k cities, 5G+ (mmWave) in 38 cities
• 5G key areas
• Sports & venues (5G+ in new 17 venues YE 2021, total >40; interactive experiences, holographic capabilities)
• Entertainment Retail (5G+ at >30 locations; from immersive AR experiences to IoT integrations) & Gaming (low latency 5G+, unique streaming opportunities, cloud gaming, plans gaming alliances)
• Travel & transportation (5G+ at 7 new airports YE 2021, autonomous vehicles, connected trains)
• Business transformation (complement business fiber with FWA with Sierra Wireless and Cradlepoint routers; universities, healthcare incl AR & VR; MEC for Private 5G, autonomous drones, video AI, synchronous media collaboration, connected vehicles)
• Security & public safety
• Guidance 2021 unchanged
• rev growth 1% (wireless SR 2%)
• adj EPS stable
• gross capital investment $21b (capex $18b)
• FCF $26b
• div $15b (pay-out ratio high 50s)
• leverage target YE 2021 3.0x (incl $6b debt increase for C-band spectrum), by 2024 2.5x
• Expected business trends
• wireless EBITDA growth from share gains, customer growth, adoption of unlimited plans
• increased fiber penetration
• business wireline margin improvement from portfolio simplification
• WarnerMedia improvements (HBO Max scales, ad improvements, cost savings from restructuring)
• AT&T Latam improvements (customer growth, expense mgt)
• Other
• current data usage average (GB/line/mo) over fixed 280 down, 39 up, fixed 318 (CAGR 2015-2020 38%), wireless 5.6 (CAGR 35%)
• current spectrum 72 MHz low-band, 173 MHz midband, 1040 MHz mmWave
• current FTTH ARPU $58