Elliott’s AT&T Shake-Up Plan Could Lead to Job Cuts

On October 10, Senator Elizabeth Warren urged AT&T (T) to reject activist investor Elliott Management’s plan to restructure its business. Warren is a potential Democratic candidate for the US presidential election in 2020. She believes Elliott’s restructuring plan for the telecommunications company could lead to job cuts. However, President Donald Trump called the activist investor’s involvement “great news.”

According to a Reuters report on October 10, “Warren said she sided with union workers at the telecommunications and media conglomerate, who have criticized a plan submitted last month by AT&T activist investor Elliott Management Corp to boost the company’s profits.”

Neither AT&T nor Elliott Management commented on the matter.

Elliott Management’s letter to AT&T

In September, Paul Singer’s activist hedge fund, Elliott Management, disclosed a $3.2 billion stake in AT&T. Elliott urged the second-largest US wireless carrier to sell its noncore operations such as DIRECTV and focus on its core telecommunications business. The activist investor also criticized the company for its acquisition of the media behemoth Time Warner for about $85 billion. Elliott suggested the telecommunications company end its acquisition spree and focus more on execution.

The Communication Workers of America also asked the mobile operator to reject Elliott Management’s proposed restructuring plan. To learn more, read CWA Hits Back at Elliott for Its AT&T Critique.

According to a Reuters report on October 9, AT&T is planning to “sell its wireless and wireline operations in Puerto Rico and US Virgin Islands to Liberty Latin America Ltd for $1.95 billion.” The telecom company is under pressure to reduce its huge debt level of $170.6 billion.

Stock performance

AT&T stock has surged 31.7% this year, outperforming the broader-market S&P 500, which has gained 11.1%. The stock rose 0.43% on October 11 and closed at $37.58. That closing price was 3.0% below its 52-week high of $38.75 and 40.2% above its 52-week low of $26.80. Its market cap was $274.6 billion as of October 11.

AT&T’s stock price has fallen 3.0% in the trailing-one-month period but risen 18.4% in the trailing-12-month period. Analysts’ estimates show that the stock could fall 2.8% over the next 12 months. On October 11, the company’s dividend yield was about 5.43%.

AT&T stock is trading 0.5%, 3.9%, and 8.9%, respectively, above its 20-day, 50-day, and 100-day moving averages. The stock has a 14-day relative strength index score of 57, which suggests that the stock is trading close to the overbought zone.

AT&T is scheduled to post its third-quarter earnings results on October 28 before the market bell. On that day, the company is expected to report adjusted EPS of $0.93, which would represent a rise of 3.3% on a YoY (year-over-year) basis. Meanwhile, analysts expect AT&T’s total revenue to fall 1.4% YoY to $45.1 billion in the third quarter.

Read AT&T: Is It Time to Make Your Exit? and The Rumored Merger of AT&T’s DIRECTV and Dish: False to learn more. Also, check out Does AT&T Stock still Have Room To Grow in 2019?