350
2024
2024
2015
2019
VERIZON
2015
AT&T 2019
105
FORTUNE.COM // JUNE .1 .19
FORTUNE 500
distinguished corporate names and largest
companies, No. 9 on the Fortune 500.
Right now, AT&T’s stalled stock price sug-
gests that investors are far from convinced.
T
HE GRAND VISION begins with com-
bining all the major elements of
the media and telecom busi-
nesses, which no company has
ever done before. Time Warner’s film and
TV studios make some of the most success-
ful and honored entertainment anywhere.
Its cable networks—including TBS, TNT,
CNN, Cartoon Network, and Turner Clas-
sic Movies—are distribution powerhouses.
DirecTV carries those networks and others
into homes through its satellite system.
Add in AT&T’s wireless and landline cus-
tomers, and Stephenson boasts that AT&T
has “170 million distribution points we can
push this through.”
With such a combination of media
assets, the theory goes, AT&T can achieve
unprecedented advantages. It can differen-
tiate its fast-commoditizing wireless network by offering customers
deals on its proprietary content. It can expose its content to vast
audiences through all its networks. Because it collects staggering
volumes of customer data through its wired, wireless, and satellite
networks, it can enable advertisers to target their messages with
new precision and, in some cases, even track customers who have
seen specific ads and thus gauge how the ads performed—services
for which advertisers will gladly pay a big premium.
The immediate next step in the transformation, likely the big-
gest and most visible step, will be to introduce a video-on-demand
Internet streaming service—a Netflix competitor—in this year’s
fourth quarter. AT&T says the new service eventually will include
original content, HBO, movies from multiple studios, and library
content from HBO and Warner Bros.
Making that all happen is the job of John Stankey, a 34-year
phone company man who’s now in charge of the former Time
Warner, rechristened WarnerMedia. At the heart of the grand
plan, he says, is something the old phone company wouldn’t have
known much about: emotion. Cell phones have become so indis-
pensable that people are emotionally attached to them, and “our
ability to now place content with that connectivity is another way
to keep it emotionally relevant,” says Stankey, sitting in a sunlit
conference room on the executive floor of the Time Warner Center
in Manhattan.200 250 300 400 450 $500 billion
CAPITAL INVESTEDECONOMIC PROFIT
0
2
4
6
8
10
12
$14 billion2015–2019 DATA SHOWS ACTUAL RESULTS FOR THE MOST RECENT FOUR QUARTERS. DATA FOR
2020–2024 SHOWS WALL STREET CONSENSUS EXPECTATIONS.
ECONOMIC PROFIT = NET AFTER-TAX OPERATING PROFIT MINUS A CAPITAL CHARGE.
SOURCE: ISS ANALYTICS
OUTSPENDING THE COMPETITION—
FOR AN INFERIOR RETURN
To turn itself into a media giant, AT&T has had to use far more
capital than Verizon, but its return on capital has been con-
sistently lower than its rival’s. That’s a big reason why AT&T ’s
economic profit—a measure of earnings that deducts a capital
charge—is consistently lower than Verizon’s. Economic profit
correlates closely with stock prices. And AT&T ’s has stalled.