WEBVTT - AT&T President & CEO John Stankey Talks Profit Growth

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<v Speaker 1>AT and T trading high today as it says they

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<v Speaker 1>see sustained profit growth over the next three years, including

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<v Speaker 1>double digit gains in twenty twenty seven. This is the

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<v Speaker 1>company is really doubling down on its fiber rollout as well.

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<v Speaker 1>I'm pleased to say for more. The AT and T

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<v Speaker 1>CEO John Stankey joins us now from your own named stadium. John,

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<v Speaker 1>let's talk a little bit about twenty twenty nine. You're

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<v Speaker 1>expecting to have fifty million plus total locations with fiber.

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<v Speaker 1>Why this big fiber focus? How do you get there?

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<v Speaker 2>Well, look, we've had great success with what we've built

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<v Speaker 2>thus far, and we see customers, first of all, love

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<v Speaker 2>the product, they stay with us longer, they drive better

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<v Speaker 2>value into the business. We're having great success at selling

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<v Speaker 2>multiple products into fiber households. Four out of every ten

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<v Speaker 2>of our fiber subscribers also subscribe to our wireless service

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<v Speaker 2>today and that's getting higher. And when you think about

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<v Speaker 2>where technology is going in the future, workloads are only

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<v Speaker 2>going to go up. We expect data consumption is going

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<v Speaker 2>to increase about eighty percent over the next five years.

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<v Speaker 2>In Fiber is the one that can do that. It's

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<v Speaker 2>the one that has the symmetrical bandwidth characteristics that will

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<v Speaker 2>facilitate AI and sending more data up into a network

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<v Speaker 2>than what comes down, which is traditionally how broadband networks

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<v Speaker 2>are built today, and we think that's a great investment

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<v Speaker 2>for the law Hault.

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<v Speaker 1>John, Just as you speak, we've got some breaking international news.

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<v Speaker 1>We've just got to bring our viewers of South Korean

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<v Speaker 1>lawmakers voting to request lifting martial law. We will bring

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<v Speaker 1>you up to the moment news. But at South Korean

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<v Speaker 1>National Assembly Speaker Wo is saying they will protect democracy. John,

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<v Speaker 1>we return to you and a US focus and a

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<v Speaker 1>business that you are currently wanting to see, really the

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<v Speaker 1>bandwidth and the broadband and the infrastructure play that you're offering.

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<v Speaker 1>What's interesting is the way that you're fueling investment in

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<v Speaker 1>fiber in particular is by doing innovative partnerships like the

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<v Speaker 1>one with Blackrock. Do you need outside investment to commit

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<v Speaker 1>to this sort of infrastructure rollout?

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<v Speaker 2>Look, we have a great portfolio of options. We primary

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<v Speaker 2>portfolio play is owned and operated where we take one

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<v Speaker 2>hundred percent of the economics. We fund it, build it,

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<v Speaker 2>and operate it ourselves. But we also realize we're in

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<v Speaker 2>kind of a constrained window right now. Fiber is needed now,

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<v Speaker 2>there isn't going to be a window that's open for

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<v Speaker 2>a long period of time to do this work. Capital markets,

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<v Speaker 2>of course, private capital markets sometimes provide a little bit

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<v Speaker 2>of insulation that public markets won't, and in order to

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<v Speaker 2>make sure we keep our lead, will balance that portfolio

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<v Speaker 2>out and our relationship with Blackrock and our gigapower work

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<v Speaker 2>has been really effective. What we've proven in the market

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<v Speaker 2>is that we can operate outside of our traditional operating

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<v Speaker 2>territory just as effectively as we have in our home territory.

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<v Speaker 2>I think Blackrock as a partner, has viewed it as

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<v Speaker 2>being a really successful investment. They've been willing to put

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<v Speaker 2>more into it, and we expect we're going to continue

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<v Speaker 2>to use that as one of the tools to grow

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<v Speaker 2>our footprint over time to get past that fifty million

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<v Speaker 2>we're talking about.

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<v Speaker 1>And it's really interest and you brought up, of course,

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<v Speaker 1>AI and the demands there. In many ways, everyone's been

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<v Speaker 1>ringing the hands of the energy infrastructure needs and black

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<v Speaker 1>Croc sort of funding that infrastructure build out. But how

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<v Speaker 1>significant is the AI demand and the strains on what

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<v Speaker 1>you provide.

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<v Speaker 2>It's an interesting issue. I think actually power consumption is

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<v Speaker 2>going to be really important moving forward. That's one of

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<v Speaker 2>the things we're talking about today with our analysts and investors,

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<v Speaker 2>which is how do we shut down our century old

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<v Speaker 2>copper infrastructure and all the electronics and equipment that support

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<v Speaker 2>it that are really power hungry. And that's one of

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<v Speaker 2>the ways that getting more of this traffic over to fiber,

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<v Speaker 2>which is passive and uses a lot less power, that

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<v Speaker 2>we can actually help to offset some of the increase

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<v Speaker 2>of what data demand and AI will drive moving forward.

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<v Speaker 2>And we think that's a really important policy dynamic on

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<v Speaker 2>this look. I think there's going to be a lot

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<v Speaker 2>of issues that the country has to work through on

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<v Speaker 2>getting the power grid to support leadership and AI. It's

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<v Speaker 2>going to happen. Maybe it gets slowed down a little bit,

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<v Speaker 2>maybe there's a few bumps in the road, but what

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<v Speaker 2>we do know is that demand's going to be continuing

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<v Speaker 2>to go up.

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<v Speaker 1>Well, you're also talking to analysts and investors about today,

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<v Speaker 1>is how you're giving money back big returns investors, whether

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<v Speaker 1>you're doing it through driven in but also through buybacks

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<v Speaker 1>as well. Why have you chosen that angle? Now you've

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<v Speaker 1>paid down debt.

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<v Speaker 2>It's a good day when you're giving more back to shareholders. Look,

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<v Speaker 2>we feel very comfortable with our debt position that we're

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<v Speaker 2>going to arrive at in the middle of next year,

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<v Speaker 2>and that's why we're making this announcement today. First of all,

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<v Speaker 2>we did a really nice job of structuring our balance

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<v Speaker 2>sheet properly, so we've got really attractive interest rates on

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<v Speaker 2>our portfolio of debt. We've got it turned out that's

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<v Speaker 2>a really, frankly, a strategic asset. And the way it's

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<v Speaker 2>set up right now, and given that we're largely investing

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<v Speaker 2>organically in the business, reinvesting in our business like this

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<v Speaker 2>and getting our leverage structure the way it is, feels

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<v Speaker 2>very comfortable to us because every year we're reinvesting in capital,

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<v Speaker 2>reinvesting in assets that we hold. And frankly, when you

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<v Speaker 2>kind of look at some of the m and A

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<v Speaker 2>work we've done as we've restructured the business, we spun

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<v Speaker 2>out certain non strategic assets. We haven't really gone back

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<v Speaker 2>after the equity structure and reducing the share count outstanding,

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<v Speaker 2>and when the dividend yield is still over five percent,

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<v Speaker 2>we've got fantastic dividends coverage. This is an opportunity for

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<v Speaker 2>us to maybe balance that out a little bit and

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<v Speaker 2>bring a little bit of equity back in house.

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<v Speaker 1>Okay, let's talk about that changing over your own portfolio

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<v Speaker 1>of the assets you hold DirecTV moving away. I mean,

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<v Speaker 1>will we see that being integraled to these financial forecasts.

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<v Speaker 2>No, we've actually today as we sit down and talk

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<v Speaker 2>with the investment community, we'll be providing restated constructs under

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<v Speaker 2>ex Direct TV. Assuming that we're going to close up

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<v Speaker 2>by the middle of next year. We still see great

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<v Speaker 2>improvements in our cash flow. We'll expect that we'll probably

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<v Speaker 2>grow cash flow by about a billion dollars a year

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<v Speaker 2>even without direct TV. As we move through this planning process,

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<v Speaker 2>we see acceleration on our EPs, our ebit is going

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<v Speaker 2>to continue to grow. So, you know, Direct TV has

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<v Speaker 2>been really good. It's provided us a lot of cash coverage.

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<v Speaker 2>We did a really nice job of managing the asset

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<v Speaker 2>down to this point. It's time to focus on what

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<v Speaker 2>we're going to do moving forward, which is build a

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<v Speaker 2>world class connectivity business. And it's the right decision to

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<v Speaker 2>make at this point.

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<v Speaker 1>A lot of analysts are echoing that, and we are,

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<v Speaker 1>of course with John Sanky, the eight and TCO to

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<v Speaker 1>our worldwide radio and TV audiences. Many relieve that you're

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<v Speaker 1>getting back to what you do best, which is telecoms.

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<v Speaker 1>Within that though, is you know, some really clear clarity

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<v Speaker 1>being given on the numbers. You're getting forty billion dollar

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<v Speaker 1>plus of anticipate anticipated shareholder returns, fifty billion dollars plus

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<v Speaker 1>of financial capacity over the next three years. What are

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<v Speaker 1>the risks we're at this time of a new administration

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<v Speaker 1>coming in? They are a macro headwinds, global headwinds. Are

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<v Speaker 1>their risks to these numbers?

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<v Speaker 2>Well, I think every time there's an administration change, there's

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<v Speaker 2>usually a discussion about boy could change his negatively impacted business.

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<v Speaker 2>I mean a call four years ago, there was a

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<v Speaker 2>little bit of that narrative going on, and I think

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<v Speaker 2>we'd done just fine for the last four years. And frankly,

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<v Speaker 2>some of the things that I hear right now, tax policy,

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<v Speaker 2>possibly reinstituting accelerated depreciation, those things could be very very

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<v Speaker 2>good for our business. And in fact, when they were

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<v Speaker 2>in place and they weren't lapsing, we were investing at

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<v Speaker 2>a higher level. And so I think if this administration

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<v Speaker 2>incoming administration follows through on what they'd like to do,

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<v Speaker 2>which is to put pro investment policies in place for

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<v Speaker 2>the nations one of the nation's largest capital investors. That's

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<v Speaker 2>going to be a really good thing for us. So

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<v Speaker 2>we watched that carefully, certainly like everybody else. There's other

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<v Speaker 2>policies up in the air around tariffs and a few

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<v Speaker 2>other things that we're all kind of wondering what might

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<v Speaker 2>occur with that. I think same minds will prevail. I

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<v Speaker 2>think some of what we're hearing right now is directed

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<v Speaker 2>to make sure that we negotiate from a position of strength,

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<v Speaker 2>and we make sure that we respect the US market

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<v Speaker 2>as strong and as meaningful as it is, that people

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<v Speaker 2>should play on a fair and level playing field when

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<v Speaker 2>they gain access to it. And I'm hopeful that we'll

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<v Speaker 2>see good policy comes out that drives good investment and

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<v Speaker 2>good economic returns as a result.

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<v Speaker 1>Well, returns are up on your shares you're currently training

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<v Speaker 1>at the high since twenty twenty one. More broadly, do

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<v Speaker 1>you think that you can sustain this sort of growth we.

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<v Speaker 2>Do, Otherwise we wouldn't be out giving the three year

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<v Speaker 2>guidance that we're giving. We feel, first of all, strong

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<v Speaker 2>and the fundamentals consumers need to use more Internet. They

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<v Speaker 2>need to get higher performance networks to support that. That's

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<v Speaker 2>the business we're in, and we're going to talk a

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<v Speaker 2>little bit this afternoon with our investors about our ability

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<v Speaker 2>to manage the cost structure in dealing with that accelerating

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<v Speaker 2>and increased growth so that as customers use more that

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<v Speaker 2>we can ultimately drop more cash to the bottom line.

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<v Speaker 2>And that growth dynamic of us getting more efficient people

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<v Speaker 2>using more of the product, we think that's going to

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<v Speaker 2>sustain itself over the next three years, and that's why

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<v Speaker 2>we gave the guidance that we gave.

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<v Speaker 1>We so appreciate you coming live at and T Stadium

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<v Speaker 1>over in Texas. Johns Thanky at and T cdo