The Hollywood Reporter - 30.10.2019

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The Report

THE HOLLYWOOD REPORTER 12 OCTOBER 30, 2019

WATSON: JEFF FUSCO/GETTY IMAGE. SINGER: MISHA FRIEDMAN/BLOOMBERG VIA GETTY IMAGES.

Dish Network

-936K

at other companies in which
Elliott was invested, including
Athenahealth’s Jonathan Bush
and Arconic’s Klaus Kleinfeld. But
sources say Cohn was appeased
by AT&T’s intention to find a new
WarnerMedia CEO and allow
Stankey to focus on his larger role
in the top echelon of the parent
company. “It’s a win because John
Stankey will have a yearlong job
interview for AT&T CEO in which
he’ll have to perform,” says a
knowledgeable source.
Meanwhile, AT&T has begun
a search for a new WarnerMedia
leader and is said to be consider-
ing internal candidates. CNN
topper Jeff Zucker’s na me w a s
floated during a recent board
meeting, says a source. Elliott
is not pushing for anyone
in particular.

you might have something to com-

pete with Comcast,” says Routh.

“You have to ask yourself, what is

the ultimate goal here? Is it just

to get rid of DirecTV? Is that what

Singer wants? I doubt it. Or is it

to position them to do something

they can’t do now because they

own one or both of those?”

But an insider downplays that

scenario, calling it “asinine.”

Despite the fact that AT&T

revealed a steep decline in pay

TV subscribers, the stock jumped

4.3 percent to $38.49 that same

day as the company appeared

to patch up its differences, with

AT&T conceding that it would

take a broader look at various

candidates when Stephenson

exits the CEO post and give Elliott

two seats on the board in the next

18 months. Elliott commended

AT&T in a statement “for the

positive steps,” but there was no

mention of Stankey.

The unloading of assets already

has begun. On Oct. 27, AT&T

announced that it has agreed to

sell its majority stake in Central

European Media Enterprises

for $1.1 billion to pay down debt

accrued during its recent acquisi-

tion spree.

“The question is what’s the

right business for AT&T to be in

given the shifting media land-

scape,” says analyst Eric Handler

of MKM Partners. “What are the

assets you really need to be a suc-

cessful telco company five years

from now, 10 years from now, and

what’s non-core?”

And not all providers are created equal, hence

Supino is bearish on satellite, figuring that shares

of DirecTV parent AT&T are headed for a 3 per-

cent fall in the next 12 months while Dish Network

stock loses 13 percent, as the silver lining of

increased internet access making up for declines

in television doesn’t apply to the satellite services.

During an Oct. 28 call with analysts, AT&T CEO

Randall Stephenson shifted the conglomerate’s

focus toward the launch of its flagship HBO Max

streaming service next spring — but kept some

perspective. “We’re very excited about putting

wireless with HBO Max,” Stephenson said, adding,

“It’s a great bundle with our broadband business,

particularly the fiber business.”

Comcast, Verizon and Charter are convincing investors that their core business — selling

internet access — far outweighs cord-cutting concerns, but satellite services aren’t so lucky BY PAUL BOND

Why Wall Street Doesn’t Mind Cable’s ‘Dark’ Pay TV Future

W

hen Bernstein analyst Peter Supino on
Oct. 15 launched coverage of the telecom,
cable and satellite industries with a 79-page
report, he wrote that “video’s outlook is dark.”
The number of U.S. households that carry the
traditional TV bundle has dropped from 101 mil-
lion in 2014 to just 87 million in 2019, headed for
78 million by 2022.
Nevertheless, Supino has a positive outlook on
the sector as cable firms rack up more cash from
selling the sort of high-speed internet access that
Netflix, YouTube, Hulu, Apple TV+ and, starting in
November, Disney+ are so dependent on. “Stop
worrying about video subscriber
losses and own cable,” Supino told
investors, and he’s not alone in his
bullish assessment.
“The impact of the direct-to-con-
sumer services hasn’t been felt yet,
but the real sea change is that the cable opera-
tors no longer feel compelled to defend the status
quo,” MoffettNathanson analyst Craig Moffett
says. “They’re quite comfortable losing low-value
video subscribers, and they now know that inves-
tors are comfortable seeing video subscriber
losses as well.”
Comcast CFO Michael Cavanagh echoed
the sentiment during the company’s Oct. 24
earnings call when he declared that the par-
ent of NBCUniversal is no longer interested in

pushing cut-rate TV packages. “Video is still

an important profitable component ... but we

continue to be disciplined and are not chasing

unprofitable subs.” Comcast Cable CEO David

Watson added: “If we can’t profitably serve this

segment, then we’re going to move them to a

broadband-only relationship.”

Altice USA and Charter Communications are

a couple of Supino’s top picks because their

“dense fiber networks are precious,” he says, with

customers paying upward of $90 per month for

big-bandwidth internet access. Of course, the

move to digital video isn’t doing channel opera-

tors much good, with Disney’s ESPN, for example,

shedding 2 million subs in its latest fiscal year.

Subscriber-Loss Silver Lining

Year-over-year pay TV losses are mounting, but a Wall Street firm’s forecasts show investors still may profit

0

As for DirecTV, Elliott isn’t

overtly demanding a sale, though

it is pleased that the prospect is

on the table. While Stephenson

previously balked, AT&T said

Oct. 28 that its DirecTV, U-verse

and DirecTV Now brands lost

3.6 million subscribers year-

over-year, ending the quarter

with 21.6 million subs. “It will be

an important part of our strat-

egy over the next three years,”

Stephenson said of DirecTV

during an earnings call. “But

no portion of our business is

ever exempt from a continuous

assessment for fit

and performance.”

Wa l l Street ana lyst

Robert Routh at FBN

Securities speculates

that the hedge fund

might want AT&T to buy Charter

Communications. “There’s no way

AT&T could buy Charter if they

own Direct TV, but if they were to

get rid of DirecTV and combine

AT&T, Charter and Time Warner,

Singer

Watson

Source: Bernstein, SEC filings. Sub losses are for most recently reported quarters.

AT&T

-3.6M

21.6M

Altice USA

3.3M

-74.4K

Comcast

-612K

22M

One-year

stock target

5M

10M

15M

20M

Charter

Communications

-383K

Verizon

-220K

4.2M

↑33% ↑28% ↑11% ↑5% ↓3% ↓13%

AT&T’s Top

Institutional Holders

Vanguard Group 564.4M shares

Blackrock Inc. 459.9M shares

State Street Corp. 296.8M shares

Top Individual

Shareholders

Randall Stephenson (CEO) 2.16M shares

John Stankey (COO) 625,384 shares

John Stephens (CFO) 614,082 shares

second calendar quarter. Individual shareholders includes direct Source: Yahoo Finance, Investopedia, as of end of

and indirect ownership.

Subscribers Subscriber Loss

16.3M

12M