thependulumswings

Randall Stephenson, AT&T CEO, answered a wide range of questions yesterday in a back and forth with Maria Bartiromo while appearing on the Fox Business Channel.  In ten minutes or so of air time Bartiromo had Stephenson cover his companies finances, outlook, debt, direction, long view of tv viewing, content, etc, etc.

We paraphrase the exchange.  Their 2018 acquisition of Time Warner drove their debt up 40 billion to 173 billion last year.  No worries he said.  Free cash flow from operations would reduce the 40 billion by 75% by year-end 2019 and the dividend was safe.  What does Time Warner bring to your business? Content.  A 90 year library of goodies.  Are you selling CNN?  No, It’s an integral piece.  Your subscriptions for Direct TV have slid 4 consecutive years, did you over pay for this mammoth division?  Not at all he said.  It gives us a platform to reach millions and a chance to convert them to our Direct Now streaming services.  Plus its original content rich as well.  People are getting their content from many other non conventional sources she stated such as YouTube TV, Roku, Netflix.  He agreed and stated that the future looked to him like most households would use two or three different services and that AT&T was well positioned to be a provider of the means as well as the content.

In ten minutes not one word was spoken about the origins of the business, aka the phone, nor its outlook, nor its profitability.  AT&T is the world’s largest telecommunications company, the second largest provider of mobile telephone services, and the largest provider of fixed telephone services in the United States through AT&T Communications.  The phone biz is a cash cow farm.   In short the phone biz is paying for the entertainment acquisition and endless repackaging of its content.  The race for your money by winning your viewing pleasure is on yet again.

AT&T can trace its origin back to the original Bell Telephone Company founded by Alexander Graham Bell after his patenting of the telephone. One of that company’s subsidiaries was American Telephone and Telegraph Company (AT&T), established in 1885.   AT&T eventually established the monopoly known as the Bell System, and during this period, AT&T was also known by the nickname Ma Bell.   The former AT&T was the world’s largest phone company.

In 1982, U.S. regulators broke up the AT&T monopoly, requiring AT&T to divest its regional subsidiaries and turning them each into individual companies. These new companies were known as Regional Bell Operating Companies, or more informally, Baby Bells.  AT&T continued to operate long distance services, but as a result of this breakup, faced competition from new competitors such as MCI and Sprint.  AT&T was in the phone business and phone business only then, but no more.

Speaking of new competition, all of that brings us to this.  Is your telephone and television quality of calls, service, and content any better than it ever was?  On one hand the answer is a resounding yes.  Phone communication is mobile/wireless now.  TV is in 4k Ultra HD and headed to 5.  The plethora of choices in live programming as well as recorded is head spinning.  Watch programming on your phone or on your Ipad or Surface?  No problem.  You can watch what you want, where you want, on what you want, and when you want to.

On the other hand the answer on phones lies in still too many dropped calls, intermittent call clarity, background noisy air pods, tangled ear pods, low battery, dead battery, and lost chargers.  On the other hand the answer on TV lies in much higher costs, satellite bad weather outages, blocked programming, local blackouts, ever-changing content companies, to stream or not, and how many providers do you want providing what you want.  Oh, and there is this small matter of passwords.

AT&T has the word “telegraph” in its name for a reason.  How far have we come?  Very, very.  We’ve come from Morse Code to Al Gore’s Internet at your door/car/phone.

How far and fast will these tied at the hip industries yet go?  Our guess is very and very still.

WWAGBS?  What Would Alexander Graham Bell Say?  Our guess is that he would say one or two things.  One, he would likely say “I would just like a damn phone that works.”  And, two, “Roku this!”