AT&T 5G SA Core Network to run on Microsoft Azure cloud platform

AT&T will run its 5G SA Core network on Microsoft’s Azure public cloud computing platform.  Microsoft AZURE, which is the second largest cloud computing provider by revenue behind rival Amazon Web Services, has been building out specific cloud computing offering to attract carriers.  AT&T is Microsoft’s first major deal in the 5G SA Core network space.

The two giant companies said that Microsoft will purchase software and intellectual property developed by AT&T to help build out its offerings for carriers. The companies did not disclose the terms of the deals, but said that Microsoft will make job offers to several hundred AT&T Network Cloud engineers.

Microsoft will use AT&T’s software and IP to grow its telecom flagship offering, Azure for Operators. Microsoft is acquiring AT&T’s carrier-grade Network Cloud platform technology, which AT&T’s 5G core network (when completed) will run on.

The companies disclosed a few key details about their new deal, but did not provide any firm numbers or any financial arrangements/guidance:

  • Microsoft will “assume responsibility for both software development and deployment of AT&T’s Network Cloud immediately,” according to the companies, and will transition AT&T’s existing network cloud operations into Azure over the next three years. Eventually, all of AT&T’s mobile network traffic will run over Microsoft’s Azure.
  • The effort will start with AT&T’s 5G core, but will eventually include virtually all of the company’s network operations, including its 4G core.
  • Microsoft will be the company to certify all of AT&T’s software-powered network operations for inclusion in the AT&T network. That will include software from other vendors. AT&T has not yet named its 5G core network vendors.
  • Microsoft will acquire AT&T’s Network Cloud technology – including its AT&T engineering and lifecycle management software – and its cloud-network operations team. The companies did not disclose exactly how many AT&T employees that transaction might cover, but an AT&T official suggested it will be in the “low hundreds.” Microsoft will then incorporate AT&T’s intellectual property into its Azure for Operators offering, which is for sale to other 5G network operators.
  • Microsoft and AT&T did not provide the logistics of their deal, including exactly how many Azure computing locations might be necessary to power AT&T’s network. It’s an important issue considering AT&T’s cellular network spans an estimated 70,000 cell towers across the country, and the operation of the radios on top of those towers might eventually be handled by programs running inside of Microsoft’s cloud. A top Microsoft executive involved in the deal told Light Reading that Microsoft’s Azure software will be installed into some of AT&T’s existing computing locations. Several of those compute server locations are staffed by AT&T technicians.
  • AT&T said the company plans to continue to run its network workloads inside of its own data centers and facilities. However, AT&T added that the deal today is focused on AT&T’s 5G core network and that the companies might explore additional elements of the network such as Open Radio Access Network (O-RAN) technology over the course of the agreement.


Sidebar5G SA Core networks to run on cloud service provider platforms:

  • In late April, Dish Network made a similar deal to have Amazon run its 5G core network on AWS.
  • In late May, Telefónica said it had validated AWS Outposts as option for 5G SA core deployment in Brazil.
  • Earlier this week, TIM said it was building its 5G SA Core network on “Google’s cloud solutions” (whatever that means?)

Do you think the cloud service providers will essentially take over the implementation, operations, and maintenance of 5G SA Core networks, especially since they will likely all be “cloud native.”  Please post a comment in the box below this article to express your opinion and why.  Thanks!


“This deal is not exclusive, so I fully expect Azure will try to assert itself as the telecom cloud provider for many carriers around the world,” said Roger Entner of Recon Analytics LLC.

“It’s the first time a Tier One operator has trusted their existing consumer subscriber base to hyper-scaler technology,” Microsoft’s Shawn Hakl, VP of the company’s 5G strategy, told Light Reading. Before joining Microsoft in 2020, Hakl was a longtime Verizon executive.

The deal follows a $2 billion agreement in 2019 in which AT&T said it would start using Microsoft’s cloud for software development and other tasks. At that time, AT&T said it would continue to run its core networking functions in its own private data centers.

Andre Fuetsch, AT&T’s chief technology officer, said that shifting to a public cloud vendor will let AT&T take advantage of a larger ecosystem of software developers who are working on technologies such as wringing more use out of pricey 5G spectrum or creating new features for users.  “That’s what we at AT&T want to do, and we think working with Microsoft gives us that advantage,” Fuetsch told Reuters in an interview.

“AT&T has one of the world’s most powerful global backbone networks serving hundreds of millions of subscribers. Our Network Cloud team has proved that running a network in the cloud drives speed, security, cost improvements and innovation. Microsoft’s decision to acquire these assets is a testament to AT&T’s leadership in network virtualization, culture of innovation, and realization of a telco-grade cloud stack,” said Andre Fuetsch, executive vice president and chief technology officer, AT&T. “The next step is making this capability accessible to operators around the world and ensuring it has the resources behind it to continue to evolve and improve. And do it securely. Microsoft’s cloud expertise and global reach make them the perfect fit for this next phase.”

Microsoft intends to use the newly acquired technology – plus the experience gained helping AT&T run the network – to build out a product it calls Azure for Operators, which it will use to pursue 5G core network business from telecommunications companies in the 60 regions of the world where it operates.

“I think we’re going to have operators around the planet that are quite interested in that,” Jason Zander, executive vice president of Microsoft Azure, said in an interview.  On the AT&T website, Zander said: “With Azure, operators can provide a more flexible and scalable service model, save infrastructure cost, and use AI to automate operations and differentiate customer offerings.  Through our collaboration with AT&T, Microsoft will expand its telecom portfolio to support operators with a carrier-grade cloud that provides seamless experiences across Microsoft’s cloud and the operator’s network.”
According to the GSMA, operators are expected to spend $900 billion worldwide between 2021 and 2025 in mobile capital expenditures (CapEx), roughly 80% of which will be in 5G and much of it could run on cloud infrastructure. Operators moving to the cloud can save on hardware and development, benefit from cloud-enabled automation and data analytics, and manage real-time responses and peak traffic on demand. The delivery of new services can be accelerated through cloud-driven AI and IoT.
Post MWC comment by Iain Morris of Light Reading:
“AWS, Microsoft Azure and Google Cloud muscled into the sector, promising innovation and cost savings for their debt-ridden (telco) clients.”
AT&T’s Cost Cutting Continues:
In 2020, AT&T announced a cost-cutting program aimed at trimming $6 billion from its budget by 2023. Part of that effort includes an “IT rationalization” that involves eliminating unneeded applications and moving other applications into the cloud.  With its new Microsoft Azure deal, AT&T said it hopes to “substantially reduce engineering and development costs.” However, the companies haven’t provided a firm cost-savings estimate for AT&T’s 5G SA Core network running on Microsoft’s Azure cloud platform.  One would think that would have financial implications for both companies.
Addendum —  Cloud Service Providers led by Amazon and Microsoft:
John Dinsdale, a Chief Analyst at Synergy Research Group, said: “Amazon and Microsoft tend to overshadow the market, with Amazon share staying at well over 30% and Microsoft growing its share from 10% to 20% over 16 quarters. However, after excluding those two, the rest of the market is still growing by over 30% per year, pointing to growth opportunities for many of the smaller cloud providers.”
“We’ve seen a dramatic increase in computer capabilities, increasingly sophisticated enterprise applications and an explosion in the amount of data being generated and processed,” he added.

Will AT&T’s huge fiber build-out win broadband market share from cablecos/MSOs?

AT&T added 235,000 fiber connections in the first quarter, ending the period with nearly 5.2 million total fiber customers. AT&T says they have a total of around 15 million fiber and non-fiber customers, so fiber access is approximately 1/3 of total customers now.

The company recently announced it plans to build fiber to 3 million new customer locations this year and 4 million next year. AT&T plans to double the number of locations where it offers fiber Internet, from approximately 15 million to about 30 million, by 2025. To do that, AT&T is planning to increase its annual capital expenses from $21 billion to around $24 billion.

AT&T’s new focus on connectivity over content is a direct result of its spinning off Warner Media to Discovery, as we chronicled in this IEEE Techblog post. Thaddeus Arroyo, head of AT&T’s consumer business, made that crystal clear at a recent BoA investor event:

“We expect capital expenditures of about $24 billion a year after the Warner Media discovery transaction closes. That’s an incremental investment that’s going to go to fiber to 5G capacity and 5G C-band deployment.

We have another great opportunity, the one we continue to talk around fiber. So as part of this capital, we’re going to be investing in fiber expansion to meet the growing needs for bandwidth that require a much more robust fiber network regardless of the last mile serving technology. Fiber is the foundation that fuels our network. Expanding our fiber reach serves multiple services hanging off at each strand of fiber. It includes macro cell sites, small cell sites, wholesale services, enterprise, small business, and fiber that’s extended directly into our customers’ homes and into businesses.

We plan to reach 30 million customer locations passed with fiber by the end of 2025. That’s going to double our existing fiber footprint. And investing in fiber drives solid returns because it’s a superior product. Where we have fiber we win, we’re improving share in our fiber footprint, and the penetration rates are accelerating and growing, given our increased financial flexibility. We’re comfortable in our ability to invest and achieve our leverage targets that we outlined of getting to 2.6% at close and below 2.5% by the end of 2023.”

Mo Katibeh, the AT&T executive responsible for fiber and 5G build-outs, added on via a recent post on LinkedIn:  “We are building MORE Fiber to MORE homes and businesses. And we’re talking A LOT of fiber – MILLIONS of new locations every year, planning to cover 30 MILLION customer locations by the end of 2025! And you know what comes with all that investment in America? JOBS. Our AT&T Network Build team is GROWING..”

Previously, Katibeh wrote on LinkedIn : “Contributing to a large portion of the $105B Capital spend between 2016 and 2020 – our team is building out AT&T #Fiber to MILLIONS of new customer locations in 2021, as well as augmenting America’s best mobility network with more capacity, more speed – and more #5G (you know I love 5G!).”


So with all that said, will AT&T’s fiber build-out keep pace with cable companies/MSOs DOCSIS networks?

Tom Rutledge, Charter’s CEO, made a brief comment about plant upgrades on the earnings call (note – Dave Watson made similar comments on the Comcast earnings call):

“We’re continuously increasing the capacity in our core and hubs and augmenting our network to improve speed and performance at a pace dictated by customers in the marketplace. We have a cost-effective approach to using DOCSIS 3.1, which we’ve already deployed, to expand our network capacity 1.2 gigahertz, which gives us the ability to offer multi-gigabit speeds in the downstream and at least 1 gigabit per second in the upstream.”

According to Leichtman Research Group, the top cable companies had 68 million broadband subscribers, and top wireline telecom companies had 33.2 million subscribers at the end of 2019.

“Based on the currently available information, cable stole wired broadband market share in Verizon and AT&T markets as well. Oy vey!” said Jim Patterson of Patterson Advisory Group in his May 2, 2021 newsletter.  “Think about Comcast and AT&T as having roughly the same number of homes passed (AT&T probably closer to 57 million homes versus the nearly 60 million shown for Comcast),” he added.  Patterson noted that top cable companies Comcast, Charter and Altice managed to capture 86% of broadband customer growth in the U.S. in the first quarter of this year.

“(AT&T) fiber connections simply aren’t growing fast enough to keep up,” wrote colleague Craig Moffett of MoffettNathanson in a recent note to clients.  Here’s more:

To be sure, there are questions about the extent to which these deployments will overlap cable (or will instead be focused on unserved rural communities), and the extent to which labor and supply chain contraints might limit acheivability of announced targets. Still, taken together, these deployments suggest that, after a precipitous decline in new fiber construction in 2020, planned fiber deployments do, indeed, rise over the next two years; we expect that both 2021 and 2022 will represent new all-time peaks in total number of fiber homes passed. Typically, the competitive impact from overbuilds is felt with some lag, suggesting the impact on cable operators will peak in 2024/2025.

At the same time, we expect that federal stimulus to accelerate broadband market growth in 2021 and 2022, perhaps significantly, with new household formation, in particular, driving upside to 2021 and 2022 forecasts.

Longer term, however, Cable operators will have to contend with more fiber overbuilds, as TelCos increasingly see both more favorable economics for fiber deployment and increasingly acknowledge that their copper plant faces imminent obsolescence without it. The forecasts for fiber deployment in this note suggest that 2021 will be a record for fiber construction – assuming labor and materials capacity can accommodate the TelCos’ own forecasts – and 2022 will step up higher still. After that, deployments are expected to abate, at least to a degree.

“Cable can upgrade its plant quickly and at low cost to offer at least 4.6Gbit/s down and 1.5Gbit/s up, well beyond current fiber offerings. They can do this before the move to DOCSIS 4.0, which is still years off,” wrote the financial analysts at New Street Research in a recent note to investors.   The result, according to the New Street analysts, is that fiber providers like AT&T won’t necessarily be able to dominate the fiber market with a 1 Gbit/s FTTH/FTTP connection and take market share from cable incumbents.

“Cable will face new fiber competition in more of its markets over the next few years; however, there is little to no prospect of fiber delivering a service in those markets that cable can’t easily match or beat,” New Street concluded.


“Looking back and being a little critical, we probably allowed the cable companies to execute and to take share in that market in a significant way,” AT&T CFO Pascal Desroches said at a recent Credit Suisse investor event.

AT&T executives have said that the company’s fiber investment ultimately will generate internal returns of around 15%. Desroches said that return on investment will be due to a variety of factors. Fiber “supports not only consumer needs, it supports needs for our enterprise businesses as well as needs for potentially our reseller business. So being able to look across and integrate the planning for fiber deployment such that it not only serves consumer needs, but it serves these other market adjacencies as well is something that we haven’t been very good at historically, That’s why we’re really bullish and we believe we’re going to be able to execute really well here,” AT&T’s CFO concluded.



AT&T to spin off Warner Media group and combine it with Discovery Inc.

With great fanfare, AT&T thundered its way into the media business three years ago with grand visions of streaming video to millions of its customers’ cellphones, etc. Now the telecom and media giant implicitly admits its mistake:  AT&T has agreed to spin off its Warner Media group and merge it with a rival content provider, Discovery Inc., the companies announced today.

[We hinted that this might happen in a recent article titled, “Verizon Explores Sale of Media Assets; Wake up Call for AT&T?”  We also chronicled AT&T’s spin off of their TV business in the article titled: Analysis: AT&T spins off Pay TV business…. Finally, we voiced our objection to the June 2018 AT&T-Time Warner deal in Analysis & Huge Implications of AT&T – Time Warner Merger.]

The transaction will combine HBO, Warner Bros. studios, CNN and several other cable networks with a host of reality-based cable channels from Discovery, including Oprah Winfrey’s OWN, HGTV, The Food Network and Animal Planet.

The new company will join together two of the largest media businesses in the country. AT&T’s Warner Media group includes the sports-heavy cable networks TNT and TBS. In addition to Discovery’s strong lineup of reality-based cable channels, the company has a large international sports business.

The new company will be bigger than Netflix or NBC Universal. Together, WarnerMedia and Discovery generated more than $41 billion in sales last year, with an operating profit topping $10 billion. Such a sum would have put the new company ahead of Netflix and NBCUniversal and behind the Walt Disney Company as the second-largest media company in the United States.

Under the terms of the agreement, which is structured as an all-stock, Reverse Morris Trust transaction, AT&T would receive $43 billion (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt, and AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29% of the new company. The Boards of Directors of both AT&T and Discovery have approved the transaction.

As part of the deal, AT&T will be able to shed some of its debt and get some cash and bonds that altogether would amount to $43 billion. AT&T shareholders will own 71 percent of the new business, with Discovery investors owning the rest.

The new company will be run by David Zaslav, 60, a media veteran and the longtime chief executive of Discovery, casting into doubt the future (yet again) of the top ranks of WarnerMedia. Jason Kilar, 50, who was hired to run AT&T’s media group only last year, could lose his job.

“Jason is a fantastic talent,” Mr. Zaslav said on a call with reporters following the announcement. He also praised other executives within WarnerMedia, including Toby Emmerich, the head of the film division, Casey Bloys, who runs HBO, and Jeff Zucker, the leader of CNN. Mr. Zucker and Mr. Zaslav are also longtime golfing buddies.

Mr. Zaslav said he would be looking for ways to “get the best people to stay,” but he didn’t elaborate on his plan for the new company’s management team.

John Stankey, the head of AT&T, who appeared alongside Mr. Zaslav in the news conference via Zoom, said “Jason remains the C.E.O. of WarnerMedia.” He added: “David’s got decisions he’s got to make across a broad cross section of how he wants to organize the business and who will be in what roles moving forward during this transition period.”

The companies said they expected the deal, which must be approved by Discovery shareholders and regulators, to be finalized in the middle of next year. The companies anticipate they will cut annual costs by $3 billion as a result of the transaction.  AT&T will also cut its dividend (more below).

The deal highlights the need for even large media companies to get bigger. Traditional entertainment firms are struggling to maintain their grip on viewers as the likes of Facebook, YouTube and TikTok

continue to draw big audiences. Consolidation appears to be the quickest way to buy more eyeballs — the deal could set off another round of media mergers. ViacomCBS, the smallest of the major entertainment conglomerates, is often seen as a possible target.

To compete with Netflix and Disney, both AT&T and Discovery have invested heavily in streaming. AT&T has spent billions building HBO Max, which now has about 20 million customers. Discovery has 15 million global streaming subscribers, most of them for its Discovery+ app.

The new company expects to generate $52 billion in sales and $14 billion in pretax profit by 2023. Streaming will be a big driver of that growth and is estimated to bring in $15 billion in revenue.

Our analyst colleague Craig Moffett wrote in a note to clients:

This deal makes strategic sense for each side. Discovery’s linear networks are helped by the inclusion of CNN for news and by the inclusion of TV rights to the NBA, NFL, MLB and NCAA Basketball for sports. By our math, the new company will instantly become the largest home of linear impressions, sourcing 28% of the 2020 U.S. viewing time and 24% of U.S. national advertising. Better still, it will be under-monetized, as it will generate only 20% of national affiliate fees. While we rightly worry about the long-term health of TBS and TNT, we would assume that Discovery will move key Turner sports and news content to Discovery+, to make it a broader and more attractive offering which will help
their ability to grow those more valuable impressions. Internationally, Discovery’s linear and SVOD offerings will be strengthened by the inclusion of CNN and Cartoon Network into their offerings. Simply put, Discovery+ becomes a more relevant service for a wider group of people in the world.

For WarnerMedia, they benefit from having a more natural destination for Turner’s product in a DTC world. We have noted time and time again that TNT and TBS were poorly positioned, and appeared to have no clear path forward to a DTC world. We have similarly lamented that HBO Max, while immensely attractive to U.S. audiences, were not nearly so well positioned outside the U.S. Discovery’s international footprint and focus creates both an accelerator and greater scope for HBO Max’s international rollout.

The new company will now be able to have unified conversations with the same set of global distribution partners – Roku, Amazon, Apple, wireless operators, broadband services – with greater strength and urgency. We assume that both brands Discovery+ and HBO Max will maintain separate identities but will be offered in a bundle a la Disney. In short order, the new company will be able to join the upper tier of global SVOD/AVOD players: Netflix, Disney and Amazon.

For AT&T, while the timing was surprising, the action was not. The market was never going apply a Disney-like multiple (say, by using on 2024 revenue multiple for HBO Max) that would give AT&T full sum-of-the-parts credit for the potential value of HBO Max. Moreover, AT&T’s balance sheet allowed neither the aggressive investment required for HBO Max nor the 5G wireless push (nor, for that matter, for the consumer fiber business). Ultimately, they had no choice. The die was cast even before the ink was dry on their initial acquisition.

Not at all unexpected, AT&T said its 52-cent-a-share dividend would be cut if its merger of Warner Media and Discovery is approved.  AT&T’s dividend’s health had been in question given a debt load that was exacerbated by the company’s 2018 acquisition of the WarnerMedia assets, which include TNT, CNN, HBO, and the Warner Bros. movie studio. As of March 31st, long-term debt totaled about $160.7 billion, up from $153.8 billion at the end of 2020.

In an interview with CNBC Monday morning, AT&T CEO John Stankey said “there’s been some overhang on our equity that’s been driven by the balance sheet dynamic,” notably debt. The deal will allow AT&T to “accelerate our deleveraging of the business,” he added


Verizon Explores Sale of Media Assets; Wake up Call for AT&T?

Analysis: AT&T spins off Pay TV business; C-Band $23.4B spend weakens balance sheet

Analysis & Huge Implications of AT&T – Time Warner Merger


AT&T Exec: 5G Private Networks are coming soon + 5G Security Conundrum?

Just two weeks after Verizon won a 5G Private Network contract in the UK, AT&T now says that Private 5G Networks are coming soon to your office or campus.  AT&T’s Rita Marty wrote in a blog post that many companies want “5G in a private space.”

“We’ve done exactly that at AT&T Stadium in Dallas. Fans will get experiences like live stats projected over the field on their smartphone camera.”

“Some organizations want a truly private, standalone 5G system. They envision full control of a “local area network” similar to corporate Wi-Fi, but with the performance, reliability and security of cellular.  Nellis Air Force Base in Nevada is testing one flavor: a 5G-powered command-and-control center on a trailer. It will form the hub of a moveable, private cellular network for local personnel in a conflict area.

Ms. Marty alluded to network slicing and edge computing in her blog post.  Those are two ultra hyped technologies that have yet to be deployed at scale by any 5G network operator.

“Other organizations are enhancing their 5G coverage with the ability to control specific local traffic themselves. They can peel off (via network slicing) certain data flows for “edge computing.” This means alarms in a factory, for instance, could be processed right on the premises – and thus much more quickly. MxD, a manufacturing innovation center in Chicago, is showing how fractions of seconds can help solve quality, safety and inventory issues.

Network slicing allows 5G network operators to create different sub-networks (which can be private) networks with different properties. Each sub-network slices the resources from the physical network to create its own independent, no-compromised network for its preferred applications.  It requires a 5G standalone core network, the implementation of which has not been standardized and AT&T has yet to deploy.

Most of AT&T’s activities in mobile edge computing and private 5G networks are in trials and testing.  AT&T is working to bring enhanced capabilities to their edge computing solutions by testing AT&T Network Edge (ANE) with cloud providers.  AT&T says ANE’s potential benefits include:

  • Lower latency: Deliver low-latency connectivity to high performance compute
  • Network routing optimization: Network integration with cloud providers
  • Extended cloud ecosystem: AT&T intends to develop an extended ANE ecosystem, allowing customers to use cloud services like they do today.

Image Credit:  AT&T

Private networks also need careful thought and consultation, Ms. Marty stated. “Considerations include design, spectrum, and who’s going to actually run it. Even a standalone network, and even 5G, must be set up properly to achieve the highest security against cyberattacks,” she added.

5G Security Conundrum:

As leader of AT&T’s 5G security team, Ms. Marty has her work cut out for her.  Especially considering choosing which of the 3GPP 5G SA security specs to support.  Many of them are not complete and targeted for 3GPP Release 17.  Also, European network operators have taken different approaches to 5G security and this will likely be a global phenomenon.

The real work on 5G security is being done by 3GPP with technical specification (TS) 33.501 Security architecture and procedures for 5G system being the foundation 5G security document.  That 3GPP spec was first published in Release 16, but the latest version dated 16 December 2020 is targeted at Release 17.  You can see all versions of that spec here.

3GPP’s 5G security architecture is designed to integrate 4G equivalent security. In addition, the reassessment of other security threats such as attacks on radio interfaces, signaling plane, user plane, masquerading, privacy, replay, bidding down, man-in-the-middle and inter-operator security issues have also been taken in to account for 5G and will lead to further security enhancements.

Another important 3GPP Security spec is TS 33.51 Security Assurance Specification (SCAS) for the next generation Node B (gNodeB) network product class, which is part of Release 16.  The latest version is dated Sept 25, 2020.

Here’s a chart on 3GPP and GSMA specs on 5G Security,  courtesy of Heavy Reading:

Question: When do you plan to implement the following 5G security specifications? (n=105-108) (Source: Heavy Reading)

Scott Poretsky, Ericsson’s Head of Security, wrote in an email:

“The reason for the inconsistent implementation of the 5G security requirements is the language in the 3GPP specs that make it mandatory for vendor support of the security features and optional for the operator to decide to use the feature.  The requirements are defined in this manner because some countries did not want these security features implemented by their national telecoms due to these security features also providing privacy.  The U.S. was not one of those countries.”




5G Security Issues Raise Mission Critical Questions & Issues


AT&T Lab to research 5G use cases, 5G+ available in Houston, TX

AT&T is opening a lab in Plano, Texas, to research 5G use cases with help from Nokia and Ericsson. AT&T says the 5G Innovation Studio will provide a venue for developing next-generation products, such as holographic communications and drone services, and cutting down on their time to market.

The studio is outfitted with AT&T 5G connectivity, using its millimeter wave and sub-6 GHz spectrum. It also boasts standalone 5G core network (5G SA) and edge capabilities, along with network KPIs to enable creation, testing and validation of new 5G experiences.

AT&T VP of 5G Product and Innovation Jay Cary disclosed the Lab in this video. The goal of the Lab is to help bring products to market faster, providing a space where customers can explore and try out tech using advanced network capabilities. Along with current and potential customers, and Ericsson and Nokia, industry players like Microsoft will be involved, as well as smaller companies according to Raj Savoor, VP of Network Analytics and Automation at AT&T (formerly with AT&T Labs in Pleasanton, CA).

“Startups are a big part of the innovation ecosystem, and in fact, one of the first use cases was in collaboration with the drone infrastructure startup, EVA,” Savoor wrote in an email.

“We deployed a test environment representative of our Microsoft Azure Edge Zone with AT&T, which provided a low-latency path between the drone and the compute environment. This allowed much more responsive control over the drone’s flight path and is just one example of what’s possible when you combine 5G with edge computing,” Raj added.

“To really bring to life the unforeseen possibilities of 5G, we’ve partnered with Ericsson and Nokia who are helping us build out the technology and really the environment we need to be able to deliver those end-to-end consumer experiences that are really going to wow you and me when we see them on our phones,” Cary said.


Separately, AT&T’s 5G+ [1.] will be available for customers to experience during Houston Rockets games and other events at the Houston Toyota Center.

First responders in Houston will also gain access to 5G+ on FirstNet®, America’s public safety network.  They will maintain voice communication through always-on priority and preemption on 4G-LTE and the intuitive FirstNet network will determine the best route for data traffic, whether that’s 5G+ or 4G-LTE spectrum.

Note 1.  AT&T’s 5G+ is the version of its 5G that uses millimeter wave (mmWave) spectrum. A 5G capable device that supports mmWave frequencies is needed to get access. [Note that the mmWave frequencies for IMT/5G have not yet been standardized in ITU-R M.1036 Recommendation.]

AT&T stipulates that it may temporarily slow data speeds if the network is busy. The move falls in line with AT&T’s strategy of treating existing customers similarly to new ones.

AT&T 5G+ is available in parts of 38 cities and more than 20 venues across the U.S. Learn more about AT&T’s 5G network at and check out AT&T’s 5G coverage in the Houston area and across the Gulf coast of Texas here.



AT&T Provides Update on Fiber Rollouts, 5G Expansion, and Financial Outlook

Here are the highlights of AT&T Investor Day Announcements:

3 million new fiber locations:

AT&T plans to deploy fiber-to-the-premises (FTTP) to another 3 million-plus residential and business locations across more than 90 metro areas in 2021, and is already sizing up plans to push that to an additional 4 million locations in 2022, Jeff McElfresh, CEO of AT&T Communications, said today during the company’s investor day event.

“The margin economics are attractive.  These areas are adjacent to our current footprint, driving cost efficiencies in our build as well as our marketing and distribution efforts.”

McElfresh expects its fiber subscriber volumes increase in the second half of the year after the initial buildouts, but noted that he likes what AT&T is seeing in the early part of 2021. The company noted that about 70% of its gross broadband adds in fiber buildout areas are new AT&T customers.

“And if we keep up with that pace, our vision would be to have over half of our portfolio, or 50% of our network, covered by that fiber asset.  As our integrated fiber plan improves the yield performance on that fiber it will further give us conviction on continuing that investment in the coming years.”

AT&T is also looking to broaden its reach of fiber amid rising data demand and network usage that has occurred during the pandemic, and isn’t expected to stop any time soon.  That’s shown in the graph’s below:

Click here for a larger version of this image. (Source: AT&T)




AT&T’s 5G Strategy:

AT&T’s 5G network now covers 230M Americans in 14,000 cities and towns and AT&T 5G+ is now available in parts of 38 cities in the U.S. 

Note: AT&T may temporarily slow data speeds if the network is busy.

“Connectivity is at the heart of everything we do – 140 years and counting. From our fiber network backbone to the layers of wireless spectrum technology, we provide 5G network coverage that delivers the speeds, security and lower latency connections that customers and businesses need,” said Jeff McElfresh, CEO – AT&T Communications. “Over the past five years, AT&T has invested more capital in the U.S. than any other public company.”

Here is what the company said about its 5G Strategy:

AT&T has planned a balanced approach to 5G. Our strategy of deploying 5G in both sub-6 (5G) and mmWave (5G+) spectrum bands provides a great mix of speeds, latency and coverage for consumers and businesses. We rolled out nationwide 5G that now covers 230 million people, and offer 5G+ providing ultra-fast speeds to high-density areas where faster speeds can have huge impacts for our customers. So far, AT&T has deployed 5G+ nodes in parts of 38 cities across the U.S.

AT&T 5G is opening up some impressive opportunities for businesses and consumers and mid-band and mobile edge computing will help us go even further. There is an emerging multi-sided business model across 5G, edge computing and a variety of use cases from healthcare to gaming.

Our mobile edge computing plus 5G network will help satisfy the need for ultra-responsive networks and open up new possibilities for consumers and businesses. With our investments, we will take advantage of new technologies like spatial computing to enable applications across industries from manufacturing automation to watching immersive sports.



C-band spectrum deployment to begin in 2021:

  • AT&T acquired 80 MHz of C-band spectrum in the FCC’s Spectrum Auction 107. The company plans to begin deploying the first 40 MHz of this spectrum by the end of 2021.
  • AT&T expects to spend $6-8 billion in capex deploying C-band spectrum, with the vast majority of the spend occurring from 2022 to 2024. Expected C-band deployment costs are already included in the company’s 2021 capex guidance and in its leverage ratio target for 2024.
  • AT&T expects to deliver 5G services over its new C-band spectrum licenses to 70 to 75 million people in 2022 and 100 million people in “early” 2023.
    • Funding C-band spectrum: AT&T’s investment in C-band spectrum via Auction 107 totals $27.4 billion, including expected payments of $23 billion in 2021.
    • To meet this commitment and other near-term priorities, in 2021 the company expects to have access to cash totaling at least $30 billion, including cash on hand at the end of 2020 of $9.7 billion, commercial paper issued in January 2021 of $6.1 billion and financing via a term loan credit agreement of $14.7 billion.

Jeff McElfresh, CEO of AT&T Communications, explained the operator’s focus on both 5G and fiber: “Our value proposition is to serve customers how they want to be served with enough bandwidth and capacity and speed, and we’ll let the technology service architecture meet that demand or that need.”

“When you get up into the midband segment of spectrum, while it offers us really wide bandwidth for speed and capacity, its coverage characteristics don’t penetrate [buildings and other locations] as effectively as the lowband does,” he said. “And so as we design our network and our offers in the market, you will see us densify our wireless network on the top of our investments in fiber.”

–>Yet McElfresh didn’t really address how AT&T Communications would overcome those challenges.



Financial Targets and Guidance:

  • End-of-year 2021 debt ratio target of 3.0x. The company expects to end 2021 with a net debt-to-adjusted EBITDA ratio of about 3.0x,3 reflecting an anticipated increase in net debt of about $6 billion to fund the C-band spectrum purchase.
    • 2024 debt ratio of 2.5x or lower. During 2024, AT&T expects to reach a net debt-to-adjusted EBITDA ratio of 2.5x or lower.3 To achieve this target, the company expects to use all cash flows after total dividends to pay down debt and will continue to look for opportunities to monetize non-strategic assets. The company also does not plan to repurchase shares during this period.

Click here for a larger version of this image. (Source: AT&T)

  • 2021 guidance unchanged. AT&T’s 2021 financial guidance, announced in January 2021, is unchanged on a comparative basis. For the full year, the company continues to expect:
    • Consolidated revenue growth in the 1% range
    • Adjusted EPS to be stable with 20204,5
    • Gross capital investment6 in the $21 billion range, with capital expenditures in the $18 billion range
    • 2021 free cash flow7 in the $26 billion range, with a full-year total dividend payout ratio in the high 50’s% range




AT&T Adds 5G to Nationwide Business-Focused Broadband Network

AT&T is adding fixed 5G wireless solutions to what it claims is the first nationwide business-focused broadband network, which combines AT&T Wireless Broadband and its business fiber optics network.

AT&T’s business fiber network already connects more than 2.5M business customer locations with fixed and wireless solutions nationwide, delivering speeds 20 times faster than cable. AT&T is now adding more 5G power to AT&T Wireless Broadband.

Beginning in April, the telcoand media giant will be offering new fixed wireless router options from Sierra Wireless and Cradlepoint to give businesses better access to all the benefits of 5G – and the flexibility to choose the right speeds and quality of service options for their business.

AT&T Wireless Broadband with 5G is helping businesses boost their performance with a variety of router choices. Businesses can use it as a primary connection, a secondary connection to enhance reliability, to set up a temporary work site, or even to deliver highly secure connectivity needs for work-from-home employees independent of their home broadband connection.

AT&T Wireless Broadband has no overage charges. This fixed wireless solution is an essential ingredient we laid out more than two years ago in our pathway to 5G for businesses. New 5G routers, combined with the AT&T Wireless Broadband plans, will together provide options that make sense for how businesses use the service.

“It is now almost a full year since the global pandemic accelerated remote work adoption by almost a decade – and throughout the rapid evolution of related business needs, AT&T has been there to enable continued success,” said Mo Katibeh, Chief Product and Platform Officer, AT&T Business. “And today, we’re excited to build on the first, true nationwide business-focused broadband network with fixed wireless 5G connectivity. It’s the ideal solution for businesses to continue to innovate, serve their customers and enable employees to efficiently and effectively work – even when they can’t walk down the hall to someone else’s office.”

Other Voices:

“We work in construction sites across the country, designing and building the electrical systems for new buildings, and we need to be agile for fast-moving construction projects,” says Joe Meadors, Vice President of Information Services for Gaylor Electric. “While working in our trailers at these construction sites across the country, quick service turn up, reliability and flexibility, without overage costs, are hugely important. The lower latency and higher bandwidth that will come with AT&T Wireless Broadband using 5G will be perfect for keeping us connected on the job sites.”

Louis Malooley, Owner and General Manager of AlphaGraphics in Atlanta uses AT&T Business Fiber to keep his printing and marketing business connected. With equivalent Fiber speeds for downloads and uploads, he can reliably process huge documents and presentations that need immediate attention. With AT&T Office@Hand, he can keep employees connected and productive while on the go with voice, fax, text messaging, and audio and video conferencing cloud -based services. “You guys are reliable. The service just works,” he said.

“At The Washington Post, we value being forward-looking especially when it comes to new ways to think about news gathering, production and immersive storytelling. As our staff works outside of the office, even in remote areas, it’s critical that we have fast and reliable technology tools, such as wireless connectivity and 5G capabilities, to keep our teams connected and to ensure our readers can be quickly informed,” said Shailesh Prakash, Chief Information Officer at The Washington Post.

“AT&T is very strong in the global enterprise mobility services market, offering professional services, mobile platforms, devices, and managed applications, with single billing and point of care, to provide business transformation,” says Kathryn Weldon, Research Director at GlobalData. “AT&T continues its investment in the breadth, densification and technical capabilities in mobile security, device management, and end-to-end gigabit connectivity options for businesses looking to transform to match today’s environment. In 2020, AT&T announced a collaboration with Cradlepoint, to bring end-to-end gigabit LTE and 5G wireless WAN solutions to enterprise and public safety customers; and alliances with Nokia and Ericsson to build private cellular networks solutions over CBRS. AT&T’s enterprise mobility management portfolio leverages the best platforms available, alongside professional services to manage and secure devices.”

Why choose “enterprise-grade” solutions?

AT&T says they have always been focused on delivering enterprise-grade solutions. Businesses of all sizes turn to us because we’re mission-tested and compete on a global scale.

Dating back to March 2020, AT&T quickly saw large-scale work-from-home policies become commonplace. Enterprise-grade solutions were quickly needed for everyone working from home, and broadband connectivity was essential. And the right data plans were critical for AT&T’s customers. (Shared, pooled rate plans are desired for thousands of businesses across every vertical industry.)

AT&T says they have continued delivering enterprise-grade solutions to solve real business CIO and CTO challenges – collaboration tools for employees, managing networks that balance performance and privacy, and protecting its users, devices, data, and applications.

  • Enterprise-grade work-from-everywhere collaboration: All of us are accessing different video and voice platforms throughout the day. Businesses everywhere must ensure they have the right software-based collaboration tools to meet their needs. This is why we deliver recognized industry leading enterprise-grade options – for well over a decade blending the wired and wireless worlds to ensure businesses never miss a call. And we don’t limit you to only mobile solutions. AT&T creates the seamless ability for your business to be on, across all devices – mobile, desk phones, tablets, personal computers – in the office, or on the go.
  • Enterprise-grade security: From small businesses to global enterprises, everyone needs unified protection against security threats for office, home office and roaming users. Businesses must protect their employees against these threats, while also restricting access to unauthorized content. We provide remote workforce security solutions, including AT&T’s Global Security Gateway, to protect work-from-home capabilities.
  • Enterprise-grade customer experience: To help ensure seamless employee remote capabilities, businesses of all sizes have turned to us to help navigate the shift to work from home. In fact, from mid-March through May 2020 when the pandemic quickly dispersed the workforce to work from home, we quickly delivered over 16,000 business-critical requests for our customers. Businesses turn to us because we’re mission-tested, compete on a global scale and provide trusted advice to develop the right path aligning to their needs. And, of course, because most businesses don’t close on the weekends, we don’t either in our 24×7 customer support. Surprisingly, some of our competitors don’t do this … that’s an odd “customer-first approach.”

Businesses can learn more about AT&T’s remote and home workforce connectivity solutions and sign up for AT&T Wireless Broadband. You can check out AT&T’s connectivity solutions here, and check out all our AT&T Wireless Broadband Plans and find out how your business can sign up here.

SOURCE AT&T Communications

Leichtman Research Group: Top U.S. Broadband Providers Add; PayTV Providers Lose Subscribers in 2020

Leichtman Research Group reports that largest U.S. broadband network providers added almost twice as many fixed subscribers in 2020 as they did the previous year, largely due to the Covid-19 pandemic.  However, some large broadband providers (like AT&T) lost customers.

The largest cable and wireline phone providers in the U.S. – representing about 96% of the market – acquired about 4,860,000 net additional broadband Internet subscribers in 2020, compared to a pro forma gain of about 2,550,000 subscribers in 2019.

These top broadband providers now account for 105.8 million subscribers, with top cable companies having 72.8 million broadband subscribers, and top wireline phone companies having 33 million subscribers.

Comcast and Charter accounted for 4.19 million, or 86%, of the total number of net additions, with the other six cablecos’ adds coming in significantly lower, ranging from 210,000 for Cox to just under 38,000 for Atlantic Broadband.

For wireline telcos, the best performance came from Verizon, which added a fairly respectable 173,000 fixed broadband customers, but three of the eight posted net customer losses.  In particular, AT&T’s net broadband losses came in at 5,000 while CenturyLink and Frontier both lost well over 100,000 customers.

[As per the report below, AT&T’s DirecTV lost more than 3.26 million subscribers which was ~60% of all U.S. pay TV losses in 2020.]


*    LRG estimate

**   Includes recent small acquisitions/sales and LRG pro forma estimates

^    Frontier’s total for 4Q 2020 is an LRG estimate due to later year-end reporting

TDS includes 283,900 wireline broadband subscribers, and 209,400 cable broadband subscribers


Key findings for the year 2020 include:

  • Overall, broadband additions in 2020 were 190% of those in 2019, and more than in any year since 2008
  • Top cable and wireline phone companies represent approximately 96% of all subscribers
  • The top cable companies added about 4,820,000 subscribers in 2020 – compared to about 3,145,000 net adds in 2019, and the most in any year since 2006
    • Charter’s 2,215,000 net broadband additions in 2020 were more than any company had in a year since 2006
  • The top wireline telecom companies added about 40,000 subscribers in 2020 – compared to a loss of about 590,000 subscribers in 2019
    • Telcos had positive net annual broadband adds for the first year since 2014
  • At the end of 2020, cable had a 69% market share vs. 31% for Telcos

“With the impact of the coronavirus pandemic, there were more net broadband additions in 2020 than in any year since 2008,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc (LRG).  “The top cable and Telco broadband providers in the U.S. cumulatively added about 4,860,000 subscribers in 2020, compared to about 5,100,000 subscribers in 2018 and 2019 combined.”


Separately, LRG found that the largest pay-TV providers in the U.S. – representing about 95% of the market – lost about 5,120,000 net video subscribers in 2020, compared to a pro forma net loss of about 4,795,000 in 2019.

The top pay-TV providers now account for about 81.3 million subscribers – with the top seven cable companies having 43.9 million video subscribers, satellite TV services having about 21.8 million subscribers, the top telephone companies having 7.9 million subscribers, and the top publicly reporting Internet-delivered (vMVPD) pay-TV services having 7.7 million subscribers.

AT&T had a net loss of about 3,260,000 subscribers across its four pay-TV services (DIRECTV, AT&T U-verse, AT&T TV, and AT&T TV NOW) in 2020 – compared to a net loss of about 4,095,000 subscribers in 2019.

AT&T “Premium TV” services (not including the vMVPD service AT&T TV NOW) lost 15.3% of subscribers in 2020 – compared to a 4.6% loss among all other traditional pay-TV services.

Key findings for the year include:

  • Satellite TV services lost about 3,440,000 subscribers in 2020 – compared to a loss of about 3.700,000 subscribers in 2019
  • The top seven cable companies lost about 1,915,000 video subscribers in 2020 – compared to a loss of about 1,560,000 subscribers in 2019
  • The top telco TV companies lost about 405,000 video subscribers in 2020 – compared to a loss of about 630,000 subscribers in 2019
  • The top publicly reporting Internet-delivered (vMVPD) services (Hulu + Live TV, Sling TV, AT&T TV NOW, and fuboTV) added about 640,000 subscribers in 2020 – compared to about 1,095,000 net adds in 2019
  • Traditional pay-TV services (not including vMVPDs) lost about 5,765,000 subscribers in 2020 – compared to a net loss of about 5,890,000 in 2019

“Net pay-TV losses of over 5 million subscribers in 2020 were slightly higher than in 2019, and more than in any previous year,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc.  “Overall, the top pay-TV providers lost 5.9% of subscribers in 2020, compared to 5.2% in 2019.”

About Leichtman Research Group, Inc.

Leichtman Research Group, Inc. (LRG) specializes in research and analysis on broadband, media and entertainment industries. LRG combines ongoing consumer surveys with industry tracking and analysis, to provide companies with a richer understanding of current market conditions, and the potential impact and adoption of new products and services. For more information about LRG, please call (603) 397-5400 or visit


Verizon is again top U.S. telco brand; AT&T falling behind T-Mobile

According to Brand Finance’s new rankings, Verizon recently widened its lead over AT&T as the world’s most valuable telecoms brand. The firm reported Verizon’s brand rose 8% in its rankings to a value of $68.9 billion.

For the second year in a row Verizon has claimed the title of the world’s most valuable telecoms brand following an 8% increase in brand value to US$68.9 billion. This brand value growth has not only propelled it back into the top 10 most valuable brands globally in the Brand Finance Global 500 2021 ranking, but has meant the brand has continued to widen the lead over second placed AT&T (brand value down 13% to US$51.4 billion). 15 further US brands feature in the Brand Finance Telecoms 150 2021 ranking, with a combined brand value of US$182.8 billion.

Two years since the beginning of Verizon’s business transformation program, Verizon 2.0 – focusing on the transformation of the network, the go-to-market, the brand, and the culture of the business – the brand continues to make leaps and bounds across the industry. The giant is widely recognized to have the best-in-class network and the widest coverage in the US, with the network’s usage surging during the pandemic, handling a staggering 800 million phone calls and 8 billion texts per day.

Meanwhile, Cowen and Company sees T-Mobile overtaking AT&T to be the second most popular telecom brand after Verizon.  Cowen analysts conduct quarterly surveys of mobile customers, asking them to rank providers for “overall brand/image.”

In the 4th Quarter of 2020, the perceived difference between T-Mobile and AT&T was at its narrowest point since they started conducting their survey. As per the chart below, there was only a 0.06 difference between the two brands (we do not know how Cowen calculated the Rank Spread).


Cowen stated this brand perception issue will be an important to watch during 2021 because “network quality/coverage has historically been one of the main reasons for subscribers to leave their current wireless provider and likely a key driver of brand perception.”

The Cowen Telco Perceptions report (clients only) comes months after T-Mobile boasted that it surpassed AT&T in terms of total number of mobile phone customers.

Analyst Craig Moffett was shocked with AT&T’s $23.4 billion spent at the recently completed C-band auction.  He wrote in a note to clients:

“At $23.4B, AT&T spent more than would have been expected a month ago, but expectations for their spend had been rising (notwithstanding the fact that they have only financed half of what they bought, and even that with only short-term debt), so the surprise may not be large there, either. But again, it’s a shock to see the number.”

“AT&T emerges from the auction with leverage of 4.1x EBITDA (assuming all debt financing). Can their dividend be sustained?”

AT&T bought 80 MHz of C-band spectrum in almost all of the top 50 U.S. markets.

How will they be able to finance the buildout of their 5G network to deploy that spectrum?

If you have an opinion on that, please post a comment in the box below this article. Thanks in advance!


Analysis: AT&T spins off Pay TV business; C-Band $23.4B spend weakens balance sheet

AT&T has agreed to create a new company for its U.S. video business unit together with private equity firm TPG Capital.  The company will be called New DirecTV and include:  today’s Direct TV, U-verse TV and AT&T TV (AT&T’s OTT video service) which AT&T said was “the future of TV” only 11 months ago.   That was, indeed, a very short lived future!

The new company will have an estimated enterprise value of $16.25 billion. It will be headed by DirecTV CEO Bill Morrow and have its headquarters in El Segundo (California) and Denver (Colorado).

AT&T will own 70 percent of the new company, while TPG will hold 30 percent and will pay AT&T $1.8 billion in cash.

AT&T CEO John Stankey said the agreement is in line with the operator’s strategy to focus on core assets such as 5G, fiber optic network build-outs and HBO Max. The New DirecTV will provide “dedicated management focus” for the pay-TV operations while reducing AT&T’s huge debt burden.

AT&T bought DirecTV in 2015 for $48.5 billion but the actual value was closer to $66 billion including debt.  AT&T recently struck $15.5 billion off the value of the DirecTV, reflecting the service’s dimmer prospects.  AT&T said it would get about $7.8 billion in cash from the transaction to help pay down debts. Those proceeds include $5.8 billion that the new company will borrow from banks and pay back to AT&T.

“The disruption in pay TV did exceed our original expectations,” AT&T finance chief John Stephens said in an interview, adding that the satellite-TV business had helped generate cash for the company even as its customer base declined. Mr. Stephens said the new ownership structure is “a very attractive transaction, getting TPG’s expertise and that upfront cash payment.”

The new company will not include the WarnerMedia HBO Max streaming platform, AT&T’s Latin American video operations Vrio, AT&T’s regional sports networks, U-verse network assets and AT&T’s Sky Mexico investment.

At completion, all existing AT&T video subscribers will become New DirecTV customers and all existing content deals, including NFL Sunday Ticket on DirecTV, will become of the new company.  New DirecTV will have a commercial agreement with AT&T and continue to provide bundled pay-TV services for mobile and internet customers.

New DirecTV video subscribers will also continue to receive HBO Max (which currently costs $15 per month) plus any associated discounts. AT&T and New DirecTV will also continue to serve customers through multiple distribution channels, including retail, online, call centers and indirect sellers; and share revenues for ad inventory management and ad sales.

The new company’s board will have two representatives from both AT&T and TPG, with Morrow holding the fifth seat.  Most AT&T video services employees will move to New DirecTV. The new company plans to recognize its unionized labor force and will assume and honor all existing collective bargaining agreements.

The deal is expected to close in second half of this year. Under the terms of the agreement, AT&T will receive $7.8 billion from New DirecTV, including $7.6 billion in cash and the assumption from AT&T of $200 million worth of existing DirecTV debt. AT&T will use the proceeds to reduce its debt. TPG will contribute $1.8 billion in cash to New DirecTV in exchange for preferred units and its 30 percent stake in the new company.

“This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fiber and HBO Max. And it supports our deliberate capital allocation commitment to invest in growth areas, sustain the dividend at current levels, focus on debt reduction and restructure or monetize non-core assets,” said AT&T CEO John Stankey.

“As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability. TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”

“We look forward to working with AT&T, Bill and the entire talented team at the new DIRECTV to create a seamless customer experience through the separation of the company,” John Flynn, Principal at TPG said. “We are particularly excited by the opportunity to grow new DIRECTV’s streaming video service, leveraging the company’s leading pay-TV platform, talented labor force and large subscriber base to transition it into a leading next-generation video provider with best-in-class content and customer experience.”

AT&T lost 7 million domestic pay-TV subscribers over the last two years. Comcast lost about 2 million such customers over the same period. Dish Network Corp. , DirecTV’s satellite-TV rival, shed roughly 1 million subscribers.

Financing the Deal:

New DirecTV has secured $6.2 billion in committed financing from its bank group, $5.8 billion of which will be used to pay AT&T and assume the $200 million of agreed debt.

AT&T also agreed to cover up to $2.5 billion in losses tied to DirecTV’s NFL Sunday Ticket package.

AT&T financial impact:

AT&T’s net debt load, which was listed above $180 billion after the Time Warner transaction, recently stood around $148 billion.

In 2021, AT&T expects to apply the cash proceeds from the transaction toward debt reduction and does not expect a material impact to its 2021 financial guidance for:

• Consolidated revenue growth in the 1% range

• Adjusted EPS to be stable with 2020

• Gross capital investment in the $21 billion range with capital expenditures in the $18 billion range

Following close of the transaction, AT&T expects to deconsolidate the U.S. video operations from its consolidated results. The company will continue to look at ways of “monetizing non-core assets.”

Opinion – AT&T’s C-Band Spend Adds to Debt and Weakens its Balance Sheet:

The company added that it has proactively managed its debt portfolio, reducing near-term debt maturities by about $33 billion in 2020 and lowering the overall portfolio average rate to 4.1 percent at the end of 2020, down 20 basis points from first-quarter 2020 levels.

However, AT&T has not said how it would pay for the $23.4B they spent to acquire spectrum at the recently completed C-Band auction, other than the $14.7B it raised raised in a loan-credit agreement with Bank of America earlier this year.

Moody’s Investors Service on Wednesday told clients that AT&T’s C-Band spectrum splurge could pressure AT&T’s credit rating, which sits two notches above junk territory. In a brief note Thursday, Moody’s called the DirecTV deal “moderately credit positive” because it would produce cash to help cover the spectrum costs.

Oppenheimer analysts believe that spectrum build-out in new 5G deployments will take at least a year and the resulting revenue won’t show up for a few years.  We believe that AT&T will be very hard pressed to fund the spectrum buildout within the next two or three years due to delays in installing hundreds of thousands of small cells and fiber to them for backhaul.

Analyst Craig Moffett had this to say: “At $23.4B, AT&T spent more than would have been expected a month ago, but expectations for their spend had been rising (notwithstanding the fact that they have onlyfinanced half of what they bought, and even that with only short-term debt), so the surprise may not be large there, either. But again, it’s a shock to see the number.”

“AT&T emerges from the auction with leverage of 4.1x EBITDA (assuming all debt financing)……AT&T, in particular, will face enormous pressure to withdraw its hyper-aggressive promotional stance in order to produce enough free cash flow to sustain their dividend – but that is cold comfort for an industry whose ROI will inarguably be even worse than it has been in the past.”

SNL Image

Craig noted that C-Band spectrum will require many more small cells which require permits, time and effort to install. That will delay AT&T’s 5G network expansion using the newly acquired spectrum:

“3.5 GHz spectrum (again, as a rough proxy for C-Band) requires sixteen times as many cell sites as would 2.0 GHz spectrum for the same free space coverage. And because C-Band will have very limited ability to penetrate obstructions (trees, walls and windows, intervening buildings, etc.), real world propagation limitations will likely be even greater than what a free space model would suggest.”

References: (paywall) (SEC 8K report on $14.7B loan with BoA)