What Did We Learn?

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Before AT&T’s Analyst Day in Dallas, Texas, the company announced revised guidance for the year, and provided an outlook for 2016 to reflect the closing of DirecTV. The company now expects 2015 earnings per share of $2.62 to $2.68, which most consider a positive starting point for the company. Management also noted that capex for 2015 will be in the $21 billion range. Amir Rozwadowski of Barclays explained, “Our initial take is that this is a pickup in spending. If we assume a half a year of ownership of DIRECTV, on a straight line basis that would suggest $1.5 billion in capex (assuming a steady $3.0 billion run rate). Coupled with AT&T’s prior capex outlook would suggest total capex of $19.5 billion vs. guidance of $21.0 billion.” During Analyst Day, more color came to light on the capex and the company’s 2015 and 2016 outlook. Jonathan Schildkraut of Evercore ISI noted that the $21 billion in capex for 2015 does include capitalized interest for spectrum, but that for 2016 to 2018, AT&T expects capital intensity (including merger related items) in the 15% range of revenues or lower. Jonathan Chaplin at New Street Research noted, “AT&T’s core businesses will all face tough structural headwinds over the next few years…The majority of AT&T’s value is still in wireless. The company’s primary structural challenge is capacity (33% of revenue vs. 21% of capacity).”

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August 13, 2015 |
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