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AT&T Expects 2019 Gross Capital Investment In $23 Bln Range

AT&T (T) expects gross capital investment in the $23 billion range with free cash flow1 in the $26 billion range with approximately $12 billion remaining after dividends. The company intends to use the $12 billion — as well as $6 billion to $8 billion it expects to raise from asset monetization — to reduce debt. John Stephens, AT&T chief financial officer, addressed the company's 2019 priorities at the 2019 Global TMT West Conference in Las Vegas.

"In light of recent reports about the misuse of location services, we have decided to eliminate all location aggregation services — even those with clear consumer benefits," AT&T said in a statement. "We are immediately eliminating the remaining services and will be done in March."

The company plans to lower its net-debt-to-adjusted EBITDA ratio to the 2.5x range by the end of 2019 and to continue deleveraging through 2022. The vast majority of AT&T's debt is fixed rate, protecting the company against interest rate increases.
AT&T has increased its quarterly dividend for 35 consecutive years. The company expects its 2019 dividend payout ratio will be in the high 50% range.

Stephens said AT&T expects wireless service revenue growth to continue in 2019. AT&T is also focused on the transition to 5G technologies and is seeing speeds substantially faster than traditional LTE and with ultra-low latency.

AT&T expects 5G will eventually represent a significant revenue stream for the company but does not expect it to be a significant revenue stream in 2019. The company expects 5G investment to be managed within current capital intensity levels.

Stephens said AT&T remains confident in its ability to keep EBITDA levels in its Entertainment Group stable in 2019 as the company focuses on cost controls, profitability and retaining customers with offers that meet their needs.

The company will also focus on enhancing profitability in its over-the-top offerings. At the end of the second quarter last year, about 500,000 DIRECTV NOW subscribers were on $10 per month promotional pricing plans; By yearend 2018, virtually no subscribers remained on this plan. The company expects this and the expansion of its cloud DVR offer for DIRECTV NOW will support ARPU growth in 2019.

AT&T also expects growth in broadband revenues in 2019 driven by customer additions and ARPU increases as it expands its fiber network, which offers higher speeds and high reliability. By mid-2019, AT&T expects to cover 14 million customer locations, a nearly 30% increase from the end of 2018.

Xandr is working with WarnerMedia's Turner unit to improve the relevancy of advertising, fueled by data and content connections. The two organizations bring together a unique set of assets — valuable consumer data and insights, advanced advertising capabilities and engaged, passionate fanbases. This will let them better serve marketers and deliver better experiences to consumers. AT&T expects to realize $1 billion in revenue-related synergies, including its advertising operations, by year end 2021.

AT&T announced fourth-quarter and full-year 2018 results on Wednesday, January 30.

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