How Stank Led AT&T Into A Multi-Billion Dollar Disaster
On Friday May 14, just hours before the telecommunications and media world was turned upside down, the two men at the center of that upheaval, AT&T boss John Stankey and his winger and former boss Randall Stephenson, met for a silence. dine in Dallas, the birthplace of their vast corporate empire.
Along with their wives, they were seen in their chic private club, where mainstays of the local business scene come together to celebrate their rarefied status.
In fact, dinner was anything but a celebration. It’s unclear exactly what was said, but it’s safe to assume that Stankey told his old pal that he was about to unravel the last vestige of their costly empire-building fantasy that has evaporated billions. dollars in shareholder value over the past decade.
Last Monday, AT&T made it official and announced the split from its conglomerate WarnerMedia, defending brands such as CNN, HBO, and Warner Studios into a bizarre new venture that will be run by a small rival, Discovery Inc.
Again, I can’t say exactly what happened over dinner, but with the deal, Stankey practically admitted to American business that the last 10 years of his career – and Stephenson’s – were a waste. of considerable time.
AT & T’s disaster story is one of pride (these guys thought they could remake a world that didn’t need to be remade) and ego (they thought they couldn’t do hurt until it was obvious they were doing it).
It is also a matter of staying in your lane. What looks good on paper often crumbles when running when you’re spread out so painfully.
Wall Street guys who watched the Steph & Stank show say signs the duo was not up and running to “transform” AT&T appeared as early as 2011. That’s when they tried to. buy Deutsche Telekom’s T-Mobile unit for $ 39 billion.
The duo were so confident (again this pride business) that they could get the deal through Obama’s Justice Department that they even negotiated a massive $ 6 billion breakage fee. if that failed to bring DT to the bargaining table.
And guess what: Obama’s DOJ did what many observers (with the exception of Steph & Stank) saw coming a mile and a half away and said ‘no’ because the merger would eliminate an operator from mobile telephony and may encourage consumers to pay more for the service.
Steph & Stank were left to lick their wounds and pay John Legere, so the flamboyant CEO of T-Mobile known for his long hair and leather jackets, that charge $ 6 billion. Legere, of course, is a perfect foil for Texas button-up suits – both optically and, ultimately, operationally. He quickly rebranded T-Mobile as “Un-Carrier” and began massive expansion, including the acquisition of Sprint. Its share price has skyrocketed.
Still undeterred in their quest for greatness, Steph & Stank went on to bring up the bizarre idea that entering the satellite TV business was the key to success. They bought DirecTV for $ 49 billion in 2015, seemingly unaware that the streaming revolution and the cord cut were making the business less and less useful.
In 2016 came the $ 85 billion deal for Warner (then called Time Warner) that suddenly made Texas suitable for media (CNN), cable (HBO) and Hollywood (Warner Bros) players.
Again, everything sounded good on paper. But with so much time spent buying Warner, integrating him into the bigger company, and defending it to President Donald Trump’s antitrust police who challenged the deal, Steph & Stank seemed to ignore just about everything else.
AT&T’s deployment of the next generation of wireless connectivity, super-fast 5G, has now lagged behind T-Mobile a lot, and by focusing so much on media, Steph & Stank has allowed other competitors to enter. in the game faster.
Assets like the routed DirectTV unit were still a drag on profits because people hated the service, even though you could get “Game of Thrones” at a discount.
Steph & Stank have been slow as Texas molasses to respond to streaming behemoths Netflix and Amazon with something called HBO Max that only came online last year.
Through it all, Steph & Stank have remained confident, at least publicly. Shares were crushed and an activist investor demanded changes, but Stephenson and his board last year appointed Stankey as the new CEO.
Almost as soon as Stephenson was on the sidelines and retired, Stankey sold part of DirecTV, now valuing the asset at a fraction of its original cost. Ditto for the unfortunate purchase of Warner, which, after the Discovery deal, will only earn AT&T about $ 43 billion of the $ 85 billion it spent to buy the assets, not to mention the millions of dollars it lost. the company has invested to fight the DOJ. (AT&T ultimately prevailed in court.)
AT&T officials say on paper the deal is closer to a wash because of the cash flow produced over the past three years and other savings, but they don’t deny the mistake of strategy. Besides, you have to deliver it to Stankey. The fact that he still has his CEO job is a testament to his willingness to throw himself and his boss under the proverbial bus. On the other hand, he really didn’t have much of a choice considering what happened at AT&T.
But if you’re a shareholder, do you really trust this guy to run the show?