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Topline: Facing pressure from an activist hedge fund investor, AT&T said on Monday that in addition to adding new board members, the company would divest up to $10 billion of assets in 2020 as it looks to reduce its large debt pile.
- The moves are in response to pressure from Elliot Management, one of Wall Street’s biggest and most aggressive hedge funds, which last month revealed a $3.2 billion stake in AT&T.
- The fund, which pushed for cost cuts and corporate restructuring, has criticized AT&T for its jumbled management structure and several mistimed acquisitions-including the 2015 purchase of DirecTV, which has been hemorrhaging subscribers in recent years.
- To reduce its debt pile of $158 billion as of June 30, AT&T has been divesting noncore assets: It recently sold its businesses in Puerto Rico to Liberty Latin America for $1.95 billion and its majority stake in Central European Media Enterprises for $1.1 billion, for instance.
- So far this year, the company has reduced net debt by $12.7 billion, according to Reuters; AT&T also announced a new plan to improve revenue and profit over the next three years, hoping to fully pay off the debt from last year’s $80 billion purchase of Time Warner.
- CEO Randall Stephenson will stay on through 2020, AT&T announced, but once he retires, the roles of chairman and CEO would be split.
- The company also agreed to add two new board members, a response to Elliot Management’s calls for new blood in AT&T’s management structure.
Key background: AT&T has been transforming itself from a wireless phone company into a major media behemoth: It now owns a large part of Hollywood and has plans to get involved in the streaming wars. The company’s big acquisition in that space was WarnerMedia (formerly Time Warner), which owns CNN, the Warner Bros. movie studio and HBO. AT&T has spent billions on shows like Friends and The Big Bang Theory to stream as part of its new HBO Max streaming service, which could be priced between $15 to $18 per month, CNBC reported.
News peg: The company reported mixed third-quarter earnings on Monday: Overall revenue fell to $44.6 billion, from $45.7 billion a year earlier, while profit came in at 94 cents per share-above the 93 cents expected. TV customers continued to flee in droves, however.
Crucial quote: “We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott Management said in a statement Monday.
I am a New York-based reporter for Forbes, covering breaking news-with a focus on financial topics. Previously, I’ve reported at Money Magazine, The Villager NYC, and T