On Monday, a significant investor in AT&T Inc. (NYSE:T) indicated that the company needed to change its strategy to improve its business performance. The investor claimed that a run of missteps by the management had affected the company’s performance.
Elliot Management Corp made the suggestions through a letter addressed to the board. The activist investment company which owns $3.2 billion investment in the company raised issues regarding poor execution and decisions at the company’s’ wireless division.
Ill-judged acquisitions not helping AT&T
Primary concerns are about the acquisition of Time Warner and Direct TV as well as the attempted acquisition of T-Mobile US (NASDAQ: TMUS) back in 2011. The investor says that the operator had not articulated a precise strategic rationale as to why it needed to acquire Time Warner. It also indicated that concessions associated with the failed attempt to buy T-Mobile helped create a strong competitor.
The activist investment company wants the company to stop ‘distracting’ M&A activity and rid some of its non-core assets and significantly reduce operational costs. They also want the company to continue paying down debt as well a grow dividends. They advise for the divestiture of all assets that don’t have a strategic rationale as part of the company such as DirectTv, its wireless operations in Mexico as well as pieces of its fixed footprint.
AT&T should focus on 5G
Transition to 5G offers the company a massive prospect to redefine the wireless narrative and thus reclaim its market position. The company should thus focus on the deployment of 5G to help in retention of subscribers and gaining of new ones. 5G promises faster speeds and strong connection, and carriers are already investing in the technology. AT&T, as well as other carriers such as T-Mobile, Sprint Corp (NYSE: S) and Verizon Communications (NYSE: VZ), has all started building and deploying 5G.
AT&T lost the ground I the last wave of wireless technology to Verizon in 4G LTE coverage. Verizon earned more revenue of over $20 billion as a result. The letter claims that AT&T appears to be losing the opportunity of 5G and falling behind competitors.