6. AT&T Inc. (NYSE:T)
Number of Hedge Fund Holders as of Q4: 80
SICM’s Equity Stake: $12.40 Million
Over time, AT&T became the dominant telecommunications provider in the United States, maintaining a near-monopoly on local phone services.
In 2005, the company was acquired by Southwestern Bell, one of the regional companies formed after the Bell System breakup, and the merged entity adopted the AT&T Inc. name. Today, it is a leading multinational telecommunications company headquartered in Dallas, Texas, ranking among the world’s largest telecom firms by revenue. As the third-largest wireless carrier in the United States, behind Verizon and T-Mobile, AT&T Inc. (NYSE:T) continues to expand its services across wireless communications, broadband, and media. With a history rooted in innovation and strategic growth, the company remains a major player in the industry, adapting to technological advancements and market demands.
AT&T Inc. (NYSE:T) has rebounded from past financial missteps, shifting its focus back to its core telecommunications business after costly media ventures. With the sale of its remaining DirecTV stake, the company is now a pure telecom provider, a move that has already shown positive results. It continues to gain wireless subscribers, while its fiber internet business thrives, benefiting from bundled services that improve customer retention and lifetime value. Excluding DirecTV, the company generated $15.3 billion in free cash flow in 2024, with projections to surpass $16 billion in 2025 and exceed $18 billion by 2027. Despite recent stock gains reducing the dividend yield to 4.3%, AT&T Inc. (NYSE:T) plans to spend $20 billion on share buybacks over the next three years. While not a high-growth stock, its strong cash flow, stable wireless and fiber operations, and shareholder-focused strategy make it a compelling investment.
TCW Relative Value Large Cap Fund stated the following regarding AT&T Inc. (NYSE:T) in its Q3 2024 investor letter:
“AT&T Inc. (NYSE:T), based in Dallas, TX, is a nationwide provider of voice, video, and data communications services to businesses and consumers in the wired, wireless, and broadband. At initiation, the stock had a $141 billion market capitalization and met all five valuation factors with an above market dividend yield of 5.6%. From a sustainability prism, the company completed its commitment to invest $2 billion by the end of 2023 to help bridge the digital divide. AT&T is working on enabling low-income households to access to low-cost broadband services through its Access service plan as well as reaching out to more rural communities and Tribal lands where internet access remains a challenge. It is nearly 85% the way to providing one million people in need with digital resources through AT&T Connected Learning® with the goal to be reached by the end of 2025. In 2020, the company announced that it is committed to be carbon neutral by 2035 with zero carbon emission across all operations. It is deploying Smart Climate Solutions – through efforts like its Connected Climate Initiative – that will help enable its business customers to reduce their emissions as well. The company’s goal is to help collectively reduce its emissions by one billion metric tons – a gigaton – by 2035, compared to 2018 levels. The primary catalysts are new/strong management and restructuring. John Stankey was appointed CEO in July 2020 and he is committed to refocusing the company and improving its financial performance. The company combined its WarnerMedia operation with Discovery during 1Q:22 which eliminated AT&T’s exposure to the rapidly evolving media industry and refocused its core telecommunication business thus eliminating a major drag on profitability and the company’s balance sheet by reducing long-term debt from a peak $176 billion during 2020 to $142 billion at the end of June 2024 quarter. AT&T is moving aggressively to reduce cost and sell non-core assets such as its advertising platform Xander to Microsoft† which was accomplished during 2022. The company has redesigned its network to be software driven structure reducing the capital investment cycle in its national network – resulting in a network that is flexible with unrivaled speed and reliability – thus enhancing its nationwide position. By the end of 2023, it expanded its 5G network to reach more than 302 million people in nearly 24,500 cities and towns in the U.S. The company’s mid-band 5G+ network alone grew to cover more than 210 million people. AT&T is one of the largest investors in digital infrastructure in the U.S. Over the five years ending 2023, the company invested nearly $150 billion primarily in its wireless, fiber optics, and wireline networks. The extensive restructuring and refocusing of AT&T on its core business should result in improved earnings and cash flow while at the same time reducing uncertainty for shareholders.”
