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Bank of America Believes in AT&T’s Deleveraging Story

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AT&T’s debt levels 

AT&T (T) had total debt of $176.5 billion at the end of 2018. This high debt burden was the result of the company’s acquisition of Time Warner for $85.4 billion in mid-June. In the first quarter, the company paid off ~$9.8 billion in long-term debt. As of March 31, 2019, AT&T’s net debt balance was $168.9 billion.

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AT&T is focusing on retiring debt

AT&T is focusing on deleveraging its business using its free cash flow. In May, during the J.P. Morgan Global Technology, Media & Communications Conference, AT&T’s CEO, Randall Stephenson, stated that the company had plans to lower its leverage to 2.5x by 2019 and return to its historical level of 1.8x by the end of 2022.

Stephenson further stated that the company needs $26 billion in free cash flow as well as asset monetization in the range of $6 billion–$8 billion to achieve the target. The company made ~$5 billion in asset monetization after selling its stake in Hulu and from the sale of its Hudson Yards properties, along with some working capital reconfigurations.

AT&T is also planning to sell its DIRECTV unit to Dish Network. If the deal materializes, it will help AT&T reduce its debt and focus on WarnerMedia’s upcoming streaming service.

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