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AT&T CEO defends strategy in wake of activist shareholder criticism

Chairman and CEO Randall Stephenson defended AT&T Inc.'s strategy on the heels of an activist shareholder questioning several of the company's recent large acquisitions.

Investor Elliott Management Corp. recently wrote a letter to AT&T's board specifically criticizing the company's recent purchases of satellite TV provider DIRECTV and content company Time Warner, saying they were damaging to AT&T's value over the last decade.

But at a Sept. 17 industry conference, Stephenson said people are going to consume more content and media, which warrants increased bandwidth and connectivity. He called those beliefs "unassailable" and "kind of basic." Those who agree on these basic premises are "going to like the assets that we put together," he said.

AT&T's 170 million customer relationships, whether via pay TV, broadband services, mobility products or its 5,500 retail stores, afford it "a very powerful opportunity," Stephenson said.

He also noted that the company will be introducing its new streaming service HBO Max at an Oct. 29 investor day. Set to bow next spring, HBO Max recently struck a deal for exclusive rights to the sitcom "The Big Bang Theory," as well as an extension of the syndicated deal for WarnerMedia's TBS (US), which will keep it on the cable network through 2028. Like the sitcom "Friends," which will also be exclusive to HBO Max, "The Big Bang Theory" was produced by Warner Bros. Television.

During the discussion, Stephenson praised the work John Stankey is doing as CEO of WarnerMedia as it gears up for the launch of HBO Max. He also said Stankey, who was promoted to the newly created position of president and COO while continuing to lead WarnerMedia, is the right person for the job as the company transitions to a digital distribution outfit paired with a major communications company. The executive said the AT&T board considered a very short list of potential candidates who could execute on those strategies and Stankey "quickly rose to the top."

Asked if Stankey could ultimately be his successor as CEO, Stephenson said, "the board hasn't informed me I'm retiring yet, so I take offense."

"I will say if Stankey is successful [with] this play over the next two years, he's in a pretty good position," said Stephenson.

The executive also addressed distribution woes at its DIRECTV and U-verse video platforms, which lost some 778,000 premium TV subscribers during the second quarter and are expected to drop another 300,000 to 350,000 customers on top of that number when the third quarter is completed. Stephenson conceded the recent disconnects with broadcasters CBS Corp. and Nexstar Media Group Inc. tied to retransmission-consent disputes were "painful." Pay TV operators pay retrans fees to broadcasters in exchange for permission to carry local stations' signals.

Nevertheless, he called those tough negotiations "the right thing to do."

"We landed in a place that I think is rational and reasonable both [for] the content providers as well as us as a distributor of the content," he said. Stephenson added that "you're going to see these things kind of play out."

AT&T's current carriage negotiations with The Walt Disney Co. were not addressed at the event.