How Stank steered AT&T into multibillion-dollar disaster

On Friday, May 14, simply hours earlier than the telecom and media world was turned upside down, the 2 males on the middle of that upheaval, AT&T chief John Stankey and his deal-making wingman and former boss, Randall Stephenson, met for a quiet dinner in Dallas, the house of their sprawling company empire.

Along with their wives, they had been seen at their swanky non-public membership, the place pillars of the native enterprise scene collect to have fun their rarefied standing.

As it turned out, the dinner was something however a celebration. It’s unclear precisely what was mentioned, however presumably Stankey informed his previous crony that he was about to unwind the ultimate remaining vestige of their expensive empire-building fantasy that evaporated billions of {dollars} in shareholder worth over the previous decade.

This previous Monday, AT&T made it official and introduced it was spinning off its WarnerMedia conglomerate, defenestrating manufacturers corresponding to CNN, HBO and Warner Studios into an odd new firm that might be run by a smallish rival, Discovery Inc.

Again, I can’t say precisely what went down throughout the dinner, however with the deal, Stankey all however admitted to corporate America that the final 10 years of his profession — and Stephenson’s — was a major waste of time.

The story of AT&T’s disaster is one in all hubris (these guys thought they might remake a world that didn’t want remaking) and ego (they thought they might do no improper till it was obviously apparent they had been doing so).

It’s additionally a narrative about staying in your lane. What seems to be good on paper typically falls aside within the execution whenever you’re unfold so painfully skinny.

Wall Street-types who’ve been following the Steph & Stank present say the indicators the duo had been operationally unequipped to “transform” AT&T got here as early as 2011. That’s after they tried to purchase Deutsche Telekom’s T-Mobile unit for $39 billion.

The duo was so assured (that ­hubris factor once more) they might get the deal by the Obama Department of Justice that they even negotiated a whopping $6 billion breakup price if it failed as a method to get DT to the bargaining desk. 

And guess what: The Obama DOJ did what many observers (besides Steph & Stank) noticed coming a mile away and mentioned “no go” as a result of the merger would eradicate a wi-fi provider and presumably trigger customers to pay extra for service.

Steph & Stank had been left licking their wounds and paying John Legere, then the flamboyant CEO of T-Mobile recognized for his lengthy hair and leather jackets, that $6 billion price. Legere, in fact, is an ideal foil for the buttoned-down Texas fits — each optically and, because it seems, operationally. He rapidly rebranded T-Mobile as “Un-Carrier” and started a large growth together with the acquisition of Sprint. His inventory worth soared.

Still undeterred of their quest for greatness, Steph & Stank then conjured up the odd notion that getting into the satellite-TV enterprise was the important thing to success. They bought DirecTV for $49 billion in 2015, apparently unaware that the streaming revolution and rope slicing was making this enterprise more and more nugatory.

In 2016 got here the $85 billion deal for Warner (then known as Time Warner) that all of a sudden made the Texas fits gamers in media (CNN), cable (HBO) and Hollywood (Warner Bros).

AT&T’s acquisition of DirecTV proved to be a colossal failure as the satellite-TV business was becoming history as streaming services became the norm.
AT&T’s acquisition of DirecTV proved to be a colossal failure because the satellite-TV enterprise was changing into historical past as streaming providers turned the norm.

Again, all of it sounded good on paper. But with a lot time devoted to purchasing Warner, integrating it into the bigger firm and defending it to then-President Donald Trump’s antitrust police who challenged the deal, Steph & Stank appeared to disregard nearly all the things else.

AT&T’s rollout of the subsequent era of wi-fi connectivity, superfast 5G, has now lagged significantly behind T-Mobile, and by having to concentrate on media a lot, Steph & Stank allowed different opponents to get into the sport at a quicker clip. 

Assets such because the floundering Direct­TV unit remained a drag on earnings as a result of folks hated the service, even in the event you may get “Game of Thrones” at a reduction.

Steph & Stank had been sluggish as Texas molasses to reply the Netflix and Amazon streaming juggernauts with one thing known as HBO Max that got here on-line solely final 12 months.

Through all of it, Steph & Stank remained assured, not less than publicly. Shares had been getting crushed and an activist investor demanded adjustments, however Stephenson and his board final 12 months appointed Stankey as new CEO.

Almost as quickly as Stephenson was out of the way in which and on to retirement, Stankey bought a bit of DirecTV, now valuing the asset at a fraction of its authentic price. Ditto for the ill-fated Warner buy, which after the Discovery deal will fetch AT&T solely about $43 billion of the $85 billion it spent on shopping for the property, to not point out the numerous thousands and thousands the corporate invested to struggle the DOJ. (AT&T in the end prevailed in court docket.)

AT&T officers say on paper the deal is nearer to a wash due to money circulate produced over the previous three years and different financial savings, however they don’t deny the error in technique. Plus, you bought at hand it to Stankey. That he nonetheless has his job as CEO is a testomony to his willingness to throw his boss and himself underneath the proverbial bus. On the opposite hand, he ­actually didn’t have a lot alternative given what went down at AT&T.

But in the event you’re a shareholder, do you actually belief this man to run the present?

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