AT&T is a leading provider of telecommunications services to consumers, enterprises, and small businesses. Following a series of divestitures, the company has returned to its roots and is once again a pure-play telecom company.
AT&T has dramatically reorganized itself by divesting its Warner Media business in April 2022, which followed the partial sale of its DirecTV satellite business. Execution has improved as it focuses more on customer retention and competitive plan pricing which has translated into an increase in net new postpaid wireless subscribers and low churn.
AT&T’s management said it will continue to use excess cash after dividends to reduce debt, with a goal of reaching a net debt to adjusted EBITDA of about 2.5x by 2025 compared to about 3.0x as of 3Q23. AT&T is expected to maintain its stable issuer credit outlook. Risks include economic conditions, competition, and a potential monetary liability stemming from legacy lead-sheathed wrapped telephone cable wires.
After outperforming in 2022, AT&T’s spreads have tightened to the peer group level. AT&T is a core credit issuer in its segment and its bonds are generally highly liquid with spreads that will likely continue to lead the market.