Understanding AT&T’s Cash Flow Priorities



AT&T’s debt load to exceed $180 billion

The DOJ (United States Department of Justice) is currently reviewing the proposal for the merger of AT&T (T) and Time Warner (TWX). The deal has already been sanctioned in Europe (EFA). Acquiring Time Warner will make AT&T among the most heavily indebted companies in the world. AT&T is anticipated to have a total debt load of more than $180.0 billion if it acquires Time Warner. At the end of 2Q17, AT&T was carrying a total debt of $143.7 billion.

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During the Goldman Sachs Communacopia Conference on September 12, 2017, Randall Stephenson, AT&T’s chief executive officer, talked about the company’s cash flow priorities after the Time Warner deal closes. He said the Time Warner deal will be EPS (earnings per share) and FCF (free cash flow) accretive and will keep the company within BBB type credit qualities. He also noted that repaying debt will be a key capital allocation priority over the next few years.

AT&T is committed to continued dividend increases

AT&T may look to accelerate its organic delevering by selling non-core assets aimed at paying down debt. Management stated, “We will be continuing to push the envelope in terms of technological deployment and capabilities, 5G and so forth, Internet of Things, we will be investing, continue to invest aggressively there, and as you said, $22 billion is probably a range that we can sustain for a long period of time.”

Management also said the company is committed to continuing dividend increases. It has guided to a dividend payout of ~70.0% over the next few years.


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