Elliott Associates, which now holds a $3.2 billion equity stake in AT&T, published an open letter to the AT&T Board of Directors urging that now is the time for a serious restructuring of the company.
Elliot argues that shareholder returns for AT&T have underperformed for a long period of time. Over the past decade, AT&T’s Total Shareholder Return (stock price plus dividends) has lagged the S&P 500’s TSR by well over 100 percentage points.
Elliot attributes much of the poor performance to a misguided merger & acquisition strategy, pointing to the failed T-Mobile bid, the $67 billion acquisition of DirecTV at the peak of the linear TV business, and the $109 billion acquisition of Time Warner. The letter criticizes the Time Warner deal as having failed to deliver any strategic benefit to the company so far.
On the positive side, the letter recognizes that AT&T “still possesses a world-class collection of leading assets, priced today at historically discounted levels,” offering the potential to unlock significant value for shareholders.
Elliot also argues that 5G represents a renewed opportunity for AT&T to reset the wireless narrative because of its premier spectrum positioning, early LTE-Advanced work, the First-Net build, and early market advantage.
Elliot’s Activating AT&T Plan calls for: divesting non-core assets; reducing operational inefficiency; instituting capital discipline and aggressively de-levering; and enhancing leadership and oversight. Key to the plan is improved strategic focus, with no more material mergers/acquisitions. Increasing the operational efficiency of the wireless network has to be a priority.
The bottom line: Elliot states that “AT&T can achieve $60+ per share of value by the end of 2021, prior to any strategic actions regarding the portfolio.”
https://activatingatt.com/letter/
For its part, AT&T said it looks forward to engaging with Elliott Management and issued the following statement: “AT&T’s Board and management team firmly believe that the focused and successful execution of our strategy is the best path forward to create value for shareholders. This strategy is driven by the unique portfolio of valuable businesses we’ve assembled across communications networks and media and entertainment, and as Elliott points out, is the foundation for significant value creation. We believe growing and investing in these businesses is the best path forward for our company and our shareholders.”
