AT&T is the world's largest telecommunications holding company and is the #1 network corporation in North America. The company operates several subsidiaries in the telecommunications, communications technology and media industries around the world. The business is divided into three sectors: 1. Communication 2. WarnerMedia 3. Latin America.
The Communication segment provides global communications services to companies and customers located in the US. It is largely divided into three services.
Mobility service provides wireless communication networks and equipment.
Enertainment Services provides video services including OTT and broadband communications services to US customers. It also sells advertisements.
Business Wireline service is an IP-based service that provides call and data services to businesses.
The WarnerMedia segment develops, produces and distributes films, TV programs and game contents in both physical and digital form. It is largely divided into three services.
Turner services primarily operate multi-channel TV networks and own digital intellectual property. They also sell advertisements through this TV network.
Home Box Office service provides premium TV and OTT programs.
Warner Bros Services primarily develops, produces and distributes TV shows and film productions, and home entertainment content and games.
The Latin America segment provides entertainment content and wireless communications services outside the US. It is largely divided into two services.
Vrio service provides video service to customers in the region using satellite communications in South America and the Caribbean.
Mexico Services provides wireless communications and communications equipment to Mexico.
This is a table of sales increase and decrease by business. In all divisions except the Communications division, sales fell by about 23% and 30% on a quarterly basis compared to the same period last year. Total sales declined by about 9%. Sales in the WarnerMedia segment declined due to cancellations and delays in live sports broadcasts and delays in theatrical releases. Sales in the Latin America segment declined as stores closed due to exchange rate effects and COVID-19.
Operating income decreased by about 53% on a quarterly basis compared to the same period last year. Net profit declined 60.7%. Operating expenses decreased by 3.1% on a quarterly basis.
This is the sales increase/decrease table by service in the Communications division. Mobility services are modest year-over-year. Entertainment Group and Business Wireline saw their sales decline as COVID-19 reduced exchanges between countries and closed stores.
The WarnerMedia division is divided into Turner, Home Box Office (HBO) and Warner Bros businesses. Quarterly sales decreased by about 23% compared to the same period last year. As sports broadcasts on the Turner service were canceled and postponed, advertising sales fell 37% year-on-year, resulting in a decline in sales. In addition, HBO and Warner Bros revenue declined as movie releases were delayed and theaters closed due to the impact of COVID-19. As a result, quarterly operating profit decreased by 16.6% compared to the same period last year.
In the Latin America segment, quarterly sales declined by about 30% compared to the same period last year as service stores were closed due to fluctuations in foreign currency exchange rates and COVID-19. It was decided to close the Venezuela service store in May 2020. It was a decision due to political instability in Venezuela and sanctions by the US government.
The figure on the left is AT&T, and the figure on the right is the industry average. Its ROE is around 9%, which is lower than the industry average. The average 5-year EPS growth rate is about 9%. The current ratio is 0.81, so there is no big problem with the ability to pay off short-term debt. LT Debt to Equity is 87.2%, and the debt payment ability is excellent. Asset turnover is 0.32, which is lower than the industry average. Dividends are paid quarterly and the dividend payout rate is 125.74%, which is characteristic of a mature business. The dividend growth rate is not high at about 5.34%, but the current stock price is undervalued and the dividend rate is 6-7%. Currently, we are not sure if the dividend will be able to remain at the current level as we enter the new business. Although the dividend rate is high, it is important to consider that the dividend growth rate is low and the payout ratio is already high, so there is little room for additional payments.
AT&T is growing as a global content streaming company by acquiring Time Winner in 2018 based on a long tradition of solid communication business. Netflix is currently the largest operator, but we are on track with the launch of HBO max in May of this year. The business is in progress with a target of 50 million subscribers by 2025. This seems to be a low target compared to Netflix's current 170 million subscribers. Netflix currently occupies most of the market due to its preemptive effect, but fierce competition is expected as Disney's Disney + and Hulu, Apple's Apple TV, and AT&T's HBO max enter the market. Based on the cash flow from the telecommunications industry, which is operated by our monopoly, we are preparing a new growth engine by entering a new business with higher productivity. Netflix and Disney's competing content includes Harry Potter, DC Comics, Friends, Game of Thrones, and more, and offers about 20,000 content. However, the fact that higher prices than other companies' services and the inability to support high resolution screens are hindering business growth. This is the time for careful investment decisions.
Comments
Post a Comment