AT&T (T) stock rose in the premarket trading session today, and it was up 0.22% today at 10:26 AM EDT. The stock jumped on the news that the wireless carrier plans to sell its Puerto Rico and US Virgin Islands operations to Liberty Latin America (LILA). This deal could be worth $1.95 billion.
Notably, this news comes as AT&T seeks to reduce its high debt levels. Shares of Liberty Latin America rose 4.14% today at 11:57 AM EDT.
Reuters reported, “The deal comes as the company faces calls from activist investor Elliott Management to end its acquisition spree and focus on improving its business.”
According to Reuters, AT&T CFO John Stephens noted, “This transaction is a result of our ongoing strategic review of our balance sheet and assets to identify opportunities for monetization.”
AT&T’s debt levels
The deal is expected to close in mid-2020, subject to regulatory approvals from the Department of Justice and the FCC. In July, Reuters reported that the second-largest wireless carrier might divest its Puerto Rico operations for $3 billion. This action would offload the debt it took on to acquire Time Warner.
At the end of the second quarter, AT&T had total debt of $170.56 billion. This high debt level was primarily driven by the company’s $85.4 billion acquisition of Time Warner last year.
Randall Stephenson, AT&T’s chairman and CEO, stated during the September Goldman Sachs Communacopia Conference that the company is on track to reduce its leverage to about 2.5x by the end of 2019.
AT&T’s stock performance
On October 8, AT&T stock fell 0.5% and closed at $37.48, with a market capitalization of $273.87 billion. Notably, the stock is trading 39.85% above its 52-week low of $26.80 per share. AT&T stock is also trading 3.28% below its 52-week high of $38.75 per share.
AT&T’s stock price has risen 3.4% in the trailing-one-month period and 9.9% in the trailing-12-month period. Its stock has risen 31.3% year-to-date. Analysts’ estimates show that the stock could fall 2.6% over the next 12 months. On October 8, AT&T’s dividend yield was about 5.44%.
AT&T intends to reward its shareholders through share buybacks in the fourth quarter as the company “aims at balancing its debt and profit.”