I was working on a piece about AT&T’s latest horror today.
It’s sort of my bete noir. My blog was originally titled after AT&T’s continuing theft of government subsidies. I have followed it since before the 1984 break-up and remain constantly amazed at the stupidity and arrogance of its management. They’re lost in a bubble of superiority and have destroyed the company twice.
The first was midwifed by the government. The 1984 break-up turned the onetime monopoly into 10 companies, and for a while it built a lot of stock market value. But each of the 10 was dumber than the others. Had AT&T not bought McCaw Communications, an early cellphone pioneer, it would have disappeared.
The second was all Randall Stephenson. I have a “Mt. Rushmore” of 21st century stock market value destroyers and he’s on it. The others are Virginia Rometty of IBM, Jeff Immelt of GE, and Brian Krzanich of Intel. Stephenson inherited the AT&T name after Southwestern Bell bought what was left of it.
Stephenson claimed to see the cloud coming. He even made his own brother, then a phone engineer, become conversant in it. Then he completely missed the point. Stephenson decided AT&T should become a content powerhouse. He bought DirecTv and Time Warner. He destroyed hundreds of billions in value. If stupid were a crime, he’d be in a cell next to Sam Bankman-Fried.
Save AT&T
This leads me to 2024. AT&T is now two businesses, one a sort-of success and one an astonishing failure. The failure is its wireline business, which remains essential for people seeking connections to the Internet, and to Google. The success is its cellular business, but that’s burdened with $155 billion in debt. The market cap is down to $122 billion.
Alphabet is worth $1.93 trillion, with just $28 billion of debt. It competes with AT&T on wireless and has an overbuild on its fiber business. Less than 10% of that market cap could buy the whole thing. The debt could then be refinanced at lower costs. AT&T’s debt rating is Baa2, Google’s is AA+.
Biden and FTC head Lina Khan won’t like this, but without a buyout from somewhere, AT&T will die, and so will much of America’s broadband. Google could negotiate with the government to spin the wireless unit out, in whole or in part, and expand Google Fi as a utility. It would make a huge profit on the deal. It could win goodwill with Washington instead of stonewalling it.
Google has the financial strength, and the interest, to save AT&T. No other company does.
