📡 Has AT&T Suffered Another Setback?

Tesla breaks delivery records in Q4.

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📡 AT&T: Network Problems?

2022 has not begun on a very promising note for AT&T (T). The US Transportation Secretary and the Federal Aviation Administration have asked it to delay the launch of the new 5G wireless devices. The company has flat out rejected any such possibility. What gives? (Tweet This)

The Debt Trap?

AT&T shares are down 40% over the past five years. The company is saddled with debt totaling $179.2B as of the quarter ended September 30, 2021. The $108.7B mega-merger with Time Warner didn’t turn out the way it was intended.

The company finally announced spinning off its media assets and combining them with Discovery. The transaction will supposedly fetch AT&T $43B in cash. It’s much needed since the company has liabilities worth $82.7B due within a year and $282.7B in the year after that.

Management has forecast a free cash flow of $26B for the business in 2021. It has achieved half of its $6B annual cost reduction target, with more on the way. Once the Discovery deal is done, the company’s net debt should fall to $51B.

The company recently won a 10-year $304.4M contract for broad telephony services across the Northern and Southern command regions. On the other hand, the FCC also fined $460M as the company couldn’t meet the emergency calls (911) reliability rules during 2020 network outages.

Last month, AT&T began rolling out 5G services in Mexico, with plans to deploy across the country’s main markets over the next three years. In Q3 2021, AT&T’s Mexico business reported wireless net additions of 427K, with services revenue rising 20.3% Y-o-Y to $463M.

Just as the 5G rollout in the US was about to get underway came the bolt from the blue in the form of an order from former Presidential candidate and current Transportation Secretary Pete Buttigieg.

5G Vs. Airlines

Both AT&T and Verizon were supposed to launch their respective 5G wireless devices on January 5. However, last week, Secretary Buttigieg and the head of the FAA asked both the companies to delay the launch by two weeks over aviation safety concerns.

At issue are concerns raised by the FCC and the aviation industry about 5G communications interfering with sensitive aircraft electronics such as radio altimeters which could disrupt flights. The question is whether 5G deployments in the C-band of the spectrum impact safe flight operations.

AT&T and Verizon have been at loggerheads with the trade group Airlines for America, which warned that thousands of flights could be disrupted with the advent of 5G. Predictably, the Wireless Industry Group has sided with the communications companies saying 5G is safe and highlighted that the spectrum is already being used in 40+ countries.

The CEOs of both AT&T and Verizon promptly rejected the suggestion to postpone the 5G deployment while agreeing to not do so around airports for the next six months. Instead, they termed the request from the FAA as “irresponsible.” The ball is now back in the government’s court.

Several things have to fall in place for AT&T: clearance for the large media deal; debt reduction that’s predicated on the deal closing; 5G that needs to answer a few more questions.

Will two weeks be enough to answer some very important questions? Will the deadline be pushed out further? Shareholders will be waiting with bated breath to find out whether 5G can work wonders for the company or if it’ll just turn out to be another case of network troubles for the beleaguered operator.

Market Reaction
T ended at $24.60, down 0.73%.

Company Snapshot 📈

$24.60 -0.18 (0.73%)

Analyst Ratings (28 Analysts) BUY 29%  HOLD 57%  SELL 14%

Newsworthy 📰

Defying: Tesla surmounts supply chain woes with blockbuster Q4 deliveries (TSLA -1.27%)

Desperation: United Airlines offers pilots triple pay to ease omicron flight disruptions (UAL -0.79%)

Concerns: Goldman Sachs asks US employees to work from home until January 18 (GS -0.77%)

Today’s Market Terminology: Floating Debt

Floating debt is a kind of short-term debt that is renewed and refinanced constantly to fund the capital needs of a firm or an institution

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