AT&T ANALYST MEETING

Transcription

1 AT&T ANALYST MEETING

2 Mike Viola Senior Vice President, Investor Relations, AT&T Inc.

3 Cautionary Language Concerning Forward-Looking Statements Information set forth in this presentation contains financial estimates and other forward-looking statements that are subject to risks and uncertainties, and actual results might differ materially. A discussion of factors that may affect future results is contained in AT&T s filings with the Securities and Exchange Commission. AT&T disclaims any obligation to update and revise statements contained in this presentation based on new information or otherwise. This presentation may contain certain non-gaap financial measures. Reconciliations between the non-gaap financial measures and the GAAP financial measures are available on the company s website at The quiet period for FCC Spectrum Auctions 101/102 (28Ghz and 24Ghz) is now in effect. During the quiet period, auction applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants.

4 Randall Stephenson Chairman and CEO, AT&T Inc.

5 AT&T Composition Latin America / Other Entertainment Group Business Wireline WarnerMedia 100% 100% 5% 3% 15% 25% 17% 15% 17% 16% 3 rd Quarter Mobility 39% 48% Note: WarnerMedia revenue shown net of eliminations REVENUE ADJ. EBITDA

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7 John Donovan CEO, AT&T Communications, LLC

8 Mobility Growing revenues and EBITDA +2.3% service revenue growth YoY 1 ~50% Of AT&T s Adj. EBITDA 1 High quality phone subscriber base +2.7mn smartphones added since 3Q17 Nation s Best Network 1 On a comparable basis; 3Q 18

9 Leading the Path to 5G Laying 5G groundwork Exploring service opportunities Working with Developers

10 Business Steady EBITDA over last 3 years Billions ($B) 3,600 Agencies $2.8 $2.7 $2.7 $2.7 $2.6 $2.8 $2.7 $2.6 $ ,000+ Subscribers ~1/3 FirstNet square miles covered Reimbursements to come 3Q16 3Q17 3Q18 Comparable Business Wireline EBITDA

11 Entertainment Group Broadband growing Video product evolution Path to EBITDA stability

12 Entertainment Group Path to stabilizing EBITDA ~$10B ~($1B) ~$1B ~$0.2B Video Subscriber Losses Linear Improvement 2-year price lock roll-off Xandr advertising OTT Profitability ARPU growth Repackaging Adjusted promotions ~$0.4B Broadband Growth ARPU growth Fiber subscriber growth ~$0.4B Cost Initiatives Increased efficiency and automation ~($1B) Voice and Accounting Pressure ~$10B 2018 EBITDA ~25mn Video Subscribers 2019 EBITDA ~25mn Video Subscribers

13 John Stankey CEO, WarnerMedia

14 WarnerMedia Highlights 12.0 Revenues & Operating Income 1 $ in billions Home Box Office 23 Primetime Emmy Awards in 2018 Over 140 million global subscribers Turner $7.7 $8.7 $8.1 $7.9 $8.2 CNN continues as the #1 digital news destination 3 of the top 5 ad-supported cable nets in primetime YTD $2.4 $2.0 $2.0 $1.8 $2.6 3Q17 4Q17 1Q18 2Q18 3Q18 Revenues Operating Income Warner Bros. Strong 4Q theatrical slate Producing >70 series for the TV season 1 Reflects historic Time Warner adjusted results and RSNs. Otter Media is included in WarnerMedia results following AT&T's 8/7/18 acquisition of the controlling interest. Note: All stats through Q3; (2) As of year end Includes Cinemax and unconsolidated joint ventures; (3) Among adults 18-49

15 The Entertainment Industry is Evolving RAPIDLY SHIFTING TOWARDS DIGITAL CONSUMPTION AND SPENDING Watching Dynamic & Mobile Monetization Models Longform & Shortform Premium / Native Digital AND DIRECT CUSTOMER RELATIONSHIP IS CRITICAL

16 Well Positioned to Capitalize Iconic brands and franchises Award winning content Creative excellence Top talent relationships Strong global presence

17 Complements existing businesses Good for distribution partners Direct to Consumer Enables expanded reach and growing subscriber bases Captures data and analytics to inform new products and enable better monetization

18 Our New Direct to Consumer Offer TARGET LAUNCH: 4Q 2019 ENTRY SERVICE Movie-Focused PREMIUM SERVICE Premium & Popular Original Programming Blockbuster Movies BUNDLE SERVICE Entry-level Service Premium Service Additional Classics Kids & Family Theatrical Comedy Niche/Genre WARNERMEDIA AND LICENSED CONTENT FROM OTHERS

19 Positioned for the Future Engagement Penetration svod avod Wholesale Distribution ARPU AT&T Reach

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21 Lori Lee CEO, AT&T Latin America and Global Marketing Officer

22 At a Glance 31M SUBSCRIBERS Descriptive content for stat is Aleck Sans 40pt. 12 COUNTRIES $8.3B 2017 REVENUE

23 Q-2018 Mexico Environment for Growth Network Investment Completed MOBILE SUBS 9M 12M 15M 17M PEOPLE COVERED 44M 78M 94M ~100M The Most Reliable Network in Mexico 1 1 Claim based on a 3rd party analysis during drive-testing developed by Nielsen. The test reported that AT&T s network leads in overall composite reliability indicator ( Note - reliability factors in 2G, 3G and 4G LTE networks).

24 Vrio Sustained track record of growth and cash generation Opportunity with OTT Simple free cash flow % 8.5% 8.5% Revenue growth Q Simple Free Cash Flow = Adjusted EBITDA less Capital Expenditures 2 Revenue growth figures are on a constant currency basis, excluding Venezuela.

25 Brian Lesser CEO, Xandr

26 Buying in mass buying audiences BUYING CONTEXTUALLY DIGITAL ADVERTISING IS BORN EXPLOSION OF AD TECH AND PLATFORMS AD SUBSCRIBER DATA TV VIEWERSHIP DATA AD LOCATION DATA PURCHASE DATA BROWSING DATA 3 RD PARTY DATA SITE VISIT DATA COMEDY CENTRAL NFL NETWORK GOOGLE ESPN FOX SPORTS FACEBOOK A&E NETFLIX YOUTUBE AMAZON PRIME VIDEO

27 Ad tech has brought us to a critical MAJOR PLAYERS NOT WELL POSITIONED IN PREMIUM TV AND VIDEO ADVERTISERS AND AGENCIES ARE FRUSTRATED NO SINGLE PLAYER HAS ASSEMBLED THE ASSETS moment in time

28 Compelling Set of Assets DATA CONTENT DISTRIBUTION TECHNOLOGY

29 Our Media Sales Business and Platform Businesses Complement Each Other to Magnify the Opportunity INVENTORY Direct Sales TV Platform AGENCIES & ADVERTISERS Programmatic Sales Digital Platform 3 rd party AUDIENCES/ VIEWERS

30 OUTPACE THE MARKET Measuring Success INTERNAL USE OF PLATFORM SCALE WITH 3 RD PARTIES

31 John Stephens CFO, AT&T Inc.

32 The Integrated Growth Story AT&T COMMUNICATIONS AT&T LATIN AMERICA Mobility: top and bottom line growth Stable EBITDA in Entertainment Group in 2019 Continued solid performance with managed growth Direct-to-consumer plan to launch in 4Q 19 AT&T Mexico improving profitability Sustained cash generation at Vrio Nearly $7B annualized revenues and growing Management team, ad inventory and platform in place

33 END OF YEAR RUN RATE RUN RATE TARGET Merger Synergies COST SYNERGIES REVENUE SYNERGIES $1.5B $1.0B Marketing Corporate overhead Procurement Advertising Churn reduction Cross selling TOTAL SYNERGIES $2.5B ~ $0.7B ~ $2.0B ~ $2.5B

34 Leverage Update PLAN ~$170B ~2.8x 1 ~$12B Free cash flow after dividends ~$158B ~$150B ~$6-$8B LIQUIDITY AND REFINANCING Other cash generation initiatives ~2.6x 1 ~2.5x 1 YE YE 2019 Pension plan essentially fully funded Hedged against rising interest rates Successfully managed near term maturities and refi risk 1 Net debt to Adj. EBITDA ratio; illustrative of $60B Adj. EBITDA

35 2019 FREE CASH FLOW $26B range 2019 DIVIDEND PAYOUT High 50s % Consolidated Guidance NET DEBT TO ADJ. EBITDA GROSS CAPITAL INVESTMENT 1 2.5x range $23B range ADJ. EPS GROWTH % 2 Low single digits 1 Excludes expected FirstNet reimbursement in the $1 billion range; includes potential vendor financing. 2 Adjustments include merger-related adjusted amortization costs in the range of $7.5 billion, a non-cash mark-to-market benefit plan gain/loss, merger integration and other adjustments. We expect the mark-to-market adjustment which is driven by interest rates and investment returns that are not reasonably estimable at this time, to be a significant item. Accordingly, we cannot provide a reconciliation between forecasted adjusted diluted EPS and reported diluted EPS without unreasonable effort.

36 AT&T ANALYST MEETING