AT&T CEO Has No Second Thoughts on Going Big for C Band

AT&T has no regrets about the $27.4 billion it bid in the C-band auction and will have the cash flow to pay for the spectrum, CEO John Stankey said on CNBC Friday. Executives had a similar message during an investor/analyst day presentation. Verizon defended its C-band spending Thursday (see 2103110034).

The band is “an important step to 5G,” Stankey said. “We start on a great foundation of our low-band spectrum,” with more than any other U.S. carrier, he said. Auctions follow a similar pattern: “You end up investing a little more than you thought you might have to, or you really wanted to,” he said. “Then you get five years down the road, … and you say, ‘Thank God we did that.’”

The same questions came up on the costs of launching LTE 10 years ago, Stankey said. No one today questions those investments: “We didn’t know ride hailing was going to be there and you were going to need that kind of capability,” he said. “We didn’t know there would be this much entertainment video available to us.” It's a similarly early stage in 5G, he said.

AT&T said it’s on the hook for $23 billion in 2021 C-band payments but expects to have access to cash of at least $30 billion. Net debt is expected to increase $6 billion this year. Fitch Ratings downgraded some AT&T debt Friday. Fitch cited “spending in the C-Band auction, near-term pressures experienced due to the coronavirus pandemic and secular pressures in the video business.”

AT&T Communications CEO Jeff McElfresh told analysts the carrier remains focused on various bands. With low-band spectrum, “you get great coverage, great in-building penetration, but you don’t get high capacity, high speed to serve a mass market for the kinds of broadband demands that we see coming,” he said. Midband offers “really wide bandwidth for speed and capacity, but its coverage characteristics don’t penetrate as effectively as the low band,” he said. AT&T plans to serve customers who need high-speed connections with fiber and will rely on wireless when “fiber economics don’t make sense,” he said.

AT&T is No. 3 on wireless and hasn’t grown its premium wireless business for years, McElfresh said. “We have finally gotten this business back to a growth profile.”

Expect “a simpler, more focused AT&T,” Stankey told analysts. To make midband work inside structures, “you’re going to have to change your cell grid,” he said.

AT&T forecast its streaming service HBO Max will reach 120 million-150 million subscribers by 2025. It said the ad-supported tier is expected to launch in the U.S. in June. AT&T plans to grow its fiber footprint by an additional 3 million customer locations in more than 90 metropolitan areas this year.