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| AT&T C.E.O. to Stay Another Year After Challenge From Activist Fund | AT&T C.E.O. to Stay Another Year After Challenge From Activist Fund |
| (about 7 hours later) | |
| AT&T has joined the fight in the streaming wars, vying to carve out a digital swath with its planned HBO Max service. At the same time, it has been in an intense skirmish with an activist hedge fund that doubted its move into Hollywood. | AT&T has joined the fight in the streaming wars, vying to carve out a digital swath with its planned HBO Max service. At the same time, it has been in an intense skirmish with an activist hedge fund that doubted its move into Hollywood. |
| On Monday, the embattled telecom giant settled at least one of those dramas by announcing changes to its corporate governance that will keep its chief executive, who had been nearing retirement, in place for at least another year. AT&T also laid out a stepped-up business strategy that would raise profit and lower debt. | On Monday, the embattled telecom giant settled at least one of those dramas by announcing changes to its corporate governance that will keep its chief executive, who had been nearing retirement, in place for at least another year. AT&T also laid out a stepped-up business strategy that would raise profit and lower debt. |
| Randall L. Stephenson, the chief executive and chairman, will remain in charge at least through 2020, the Dallas-based company said. Once he retires, the roles of chairman and chief executive will be split. In addition, two directors will depart within the next 18 months, making way for new blood. | Randall L. Stephenson, the chief executive and chairman, will remain in charge at least through 2020, the Dallas-based company said. Once he retires, the roles of chairman and chief executive will be split. In addition, two directors will depart within the next 18 months, making way for new blood. |
| AT&T also announced a set of financial targets aimed at lifting revenue and profit each year for the next three years, and said it expected to pay off the debt associated with last year’s $80 billion purchase of Time Warner. It will review its sprawling set of businesses to see what could be sold or split off into a partnership with other companies. | AT&T also announced a set of financial targets aimed at lifting revenue and profit each year for the next three years, and said it expected to pay off the debt associated with last year’s $80 billion purchase of Time Warner. It will review its sprawling set of businesses to see what could be sold or split off into a partnership with other companies. |
| The moves are a response to Elliott Management, one of Wall Street’s biggest and most aggressive hedge funds, which owns about 1 percent of AT&T shares. Last month, the firm sharply criticized AT&T for what it called a lack of leadership, a bloated operating structure and several mistimed deals, including its 2015 acquisition of the satellite operator DirecTV. | The moves are a response to Elliott Management, one of Wall Street’s biggest and most aggressive hedge funds, which owns about 1 percent of AT&T shares. Last month, the firm sharply criticized AT&T for what it called a lack of leadership, a bloated operating structure and several mistimed deals, including its 2015 acquisition of the satellite operator DirecTV. |
| “They had some suggestions that I thought were really good,” Mr. Stephenson said in a brief interview. At the same time, “the lion’s share” of the plan was something the board had approved “a while back” he added. Elliott Management’s criticism prompted AT&T to move up the timetable. | “They had some suggestions that I thought were really good,” Mr. Stephenson said in a brief interview. At the same time, “the lion’s share” of the plan was something the board had approved “a while back” he added. Elliott Management’s criticism prompted AT&T to move up the timetable. |
| “It’s good for both sides,” he said. | “It’s good for both sides,” he said. |
| In recent years, AT&T has transformed itself from a phone operator into a major media player, selling satellite TV service to millions of people and owning a large chunk of Hollywood with plans for a forthcoming streaming service. | In recent years, AT&T has transformed itself from a phone operator into a major media player, selling satellite TV service to millions of people and owning a large chunk of Hollywood with plans for a forthcoming streaming service. |
| AT&T plans to spend between $1.8 billion and $2.1 billion over the next two years on HBO Max, which will “be a meaningful business to us over the next four to five years,” Mr. Stephenson said. It plans to aggressively promote HBO Max to its nearly 170 million customers and expects to sign up 50 million subscribers by 2025. | AT&T plans to spend between $1.8 billion and $2.1 billion over the next two years on HBO Max, which will “be a meaningful business to us over the next four to five years,” Mr. Stephenson said. It plans to aggressively promote HBO Max to its nearly 170 million customers and expects to sign up 50 million subscribers by 2025. |
| But analysts and investors have questioned the company’s foray into entertainment, and its shares have declined over the last few years. | But analysts and investors have questioned the company’s foray into entertainment, and its shares have declined over the last few years. |
| AT&T made its announcement as part of its third-quarter earnings report. It saw a steep drop at its DirecTV business, losing more than 1.1 million customers, which cut into profits. AT&T earned $3.7 billion on $44.6 billion in revenue for the July-September period, when Wall Street had expected about $6.8 billion in profit and $45 billion in sales. The company added 255,000 wireless customers and now has more than 79 million total phone customers. | |
| “We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott Management said in a statement. | “We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott Management said in a statement. |
| AT&T’s strategy to bolster profits also includes potential job cuts, which was strongly opposed by a union that represents over 100,000 AT&T workers. | AT&T’s strategy to bolster profits also includes potential job cuts, which was strongly opposed by a union that represents over 100,000 AT&T workers. |
| “The plan that AT&T announced today is something only a hedge fund manager could love,” Chris Shelton the head of the Communications Workers of America, said in a statement. The group said it will “keep a close eye” on AT&T as it evaluates possible cuts. | “The plan that AT&T announced today is something only a hedge fund manager could love,” Chris Shelton the head of the Communications Workers of America, said in a statement. The group said it will “keep a close eye” on AT&T as it evaluates possible cuts. |
| In September, Elliott Management asked the company to stop striking new acquisitions, to increase dividends and share buybacks and to improve its efficiency by cutting workers and selling off underperforming divisions like DirecTV. The fund also said it was seeking seats on AT&T’s board. The two sides have been in talks over the last few weeks to broker an agreement. | In September, Elliott Management asked the company to stop striking new acquisitions, to increase dividends and share buybacks and to improve its efficiency by cutting workers and selling off underperforming divisions like DirecTV. The fund also said it was seeking seats on AT&T’s board. The two sides have been in talks over the last few weeks to broker an agreement. |
| Elliott Management also questioned AT&T’s ability to handle its newest property, WarnerMedia, the company behind CNN, the Warner Bros. movie studio and HBO. AT&T acquired the media giant — then called Time Warner — last year in a bid to find new growth and to distinguish itself from its chief rival, Verizon. | Elliott Management also questioned AT&T’s ability to handle its newest property, WarnerMedia, the company behind CNN, the Warner Bros. movie studio and HBO. AT&T acquired the media giant — then called Time Warner — last year in a bid to find new growth and to distinguish itself from its chief rival, Verizon. |
| Last month, Elliott Management announced it had taken a $3.2 billion stake in AT&T, or about 1 percent of outstanding shares. The telecom behemoth is most likely the largest company the fund has taken on, and its limited stake meant it had less negotiating leverage than it had in previous campaigns. | Last month, Elliott Management announced it had taken a $3.2 billion stake in AT&T, or about 1 percent of outstanding shares. The telecom behemoth is most likely the largest company the fund has taken on, and its limited stake meant it had less negotiating leverage than it had in previous campaigns. |
| The moves by AT&T address most of Elliott Management’s concerns. The hedge fund didn’t get any direct board seats, but AT&T will name a new director in the coming days who has the approval of Elliott Management, said two people familiar with the matter, who did not give their names because the plan has not yet been made public. | The moves by AT&T address most of Elliott Management’s concerns. The hedge fund didn’t get any direct board seats, but AT&T will name a new director in the coming days who has the approval of Elliott Management, said two people familiar with the matter, who did not give their names because the plan has not yet been made public. |
| The investment group had also taken aim at John Stankey, the head of WarnerMedia whose elevation to chief operating officer of AT&T this month put him in line to succeed Mr. Stephenson. Citing the promotion, Elliott Management noted with disapproval that he “would now also be responsible for an additional $145 billion of revenue as the president and C.O.O. of the entire company.” | The investment group had also taken aim at John Stankey, the head of WarnerMedia whose elevation to chief operating officer of AT&T this month put him in line to succeed Mr. Stephenson. Citing the promotion, Elliott Management noted with disapproval that he “would now also be responsible for an additional $145 billion of revenue as the president and C.O.O. of the entire company.” |
| At the time, Elliott Management expressed concern over his lack of experience running a media business and his management of DirecTV. Mr. Stankey has spent the bulk of his career in the telephone business. (AT&T said it is reviewing candidates for chief executive of WarnerMedia.) | At the time, Elliott Management expressed concern over his lack of experience running a media business and his management of DirecTV. Mr. Stankey has spent the bulk of his career in the telephone business. (AT&T said it is reviewing candidates for chief executive of WarnerMedia.) |
| Mr. Stephenson’s commitment to stay through 2020 is a shift from a previous plan. He had considered stepping down next year, but his willingness to remain longer would delay any potential elevation for Mr. Stankey. The soonest he could succeed Mr. Stephenson would be 2021. | Mr. Stephenson’s commitment to stay through 2020 is a shift from a previous plan. He had considered stepping down next year, but his willingness to remain longer would delay any potential elevation for Mr. Stankey. The soonest he could succeed Mr. Stephenson would be 2021. |
| In the interview, Mr. Stephenson emphasized that the board has not set his retirement date. “One thing the board said is I need to see this plan through,” he said. Whether he stays beyond that “involves many factors,” he added. | In the interview, Mr. Stephenson emphasized that the board has not set his retirement date. “One thing the board said is I need to see this plan through,” he said. Whether he stays beyond that “involves many factors,” he added. |
| Of the likelihood that Mr. Stankey will succeed him, Mr. Stephenson said, “If he executes on this plan over the coming years, he obviously has to be one of the primary candidates on the list.” | Of the likelihood that Mr. Stankey will succeed him, Mr. Stephenson said, “If he executes on this plan over the coming years, he obviously has to be one of the primary candidates on the list.” |
| In addition to the profit plan, AT&T said it would evaluate its myriad divisions to see what no longer fits within its main business. This year, it sold off several smaller divisions and some real estate that together generated $6 billion in capital. AT&T said it now aims to sell more assets that could generate between $5 billion and $10 billion. | In addition to the profit plan, AT&T said it would evaluate its myriad divisions to see what no longer fits within its main business. This year, it sold off several smaller divisions and some real estate that together generated $6 billion in capital. AT&T said it now aims to sell more assets that could generate between $5 billion and $10 billion. |
| For the moment that may not include one of its largest divisions, DirecTV, the ailing satellite service. Mr. Stankey has said the service remains vital to its strategy, which includes targeted advertising and HBO Max. | For the moment that may not include one of its largest divisions, DirecTV, the ailing satellite service. Mr. Stankey has said the service remains vital to its strategy, which includes targeted advertising and HBO Max. |
| More details on HBO Max — including its price — will be revealed at an investor presentation Tuesday afternoon on the Warner Bros. lot in Burbank, Calif. | More details on HBO Max — including its price — will be revealed at an investor presentation Tuesday afternoon on the Warner Bros. lot in Burbank, Calif. |