Let me try to be as objective and as fair as possible with my evaluation of Randy and John's performance. The most important decisions that a CEO and his/her senior managers make involves capital allocation. Simply put, I believe AT&T’s recent capital allocation decisions have destroyed shareholder value. Since Randall Stephenson took ove ras CEO in 2007, AT&T’s shares have returned about 4.0% annually, with dividends reinvested, trailing Verizon(8.5%), Comcast (11.4%), and the S&P 500 index (8.1%) by wide margins. AT&T’s dividend payout has increased
19% in total over this period versus 49% at Verizon and a near doubling for the S&P 500. The T-Mobile escapade was an outright disaster. I addition to handing over $3+ billion, AT&T gave T-Mobile the capital and spectrum to revive the company and make it a formidable competitor that continues to steal market share from AT&T to this da. In addition, I disagree with the decision to buy DirecTV at a premium price. With 2015’s DirecTV purchase, AT&T acquired a satellite TV business that was, at best, peaking in maturity. By combining DirecTV with U-verse, AT&T became the largest U.S. pay-TV provider, providing it with content cost leverage. However, I don’t expect this scale advantage will deliver significant benefits over the long term as new entrants, like YouTube TV, and direct-to-consumer options, like HBO Go, fragment the television distribution market. AT&T’s subsequent acquisition of Time Warner, also at a premium price, looks to me like an admission that the DirecTV deal hasn’t delivered the content advantages AT&T had sought. AT&T’s pursuit of wireless spectrum has lacked discipline, in my view. In 2015, the firm spent $18 billion at the AWS-3 auction, equating to an unprecedented price/MHz-POP (a common measure of spectrum capacity and usefulness). Dish Network was a heavy bidder in that auction, and AT&T may have pushed prices higher to stall this would-be competitor. However, I don’t believe AT&T has anything to fear from Dish, and I think this capital would have been better spent elsewhere. For context, the AWS-3 purchase equated to nearly $3.50 per share at the time, or about 10% of the stock price. AT&T is only now starting to put this spectrum to use. The current period of heavy capital deployment began in 2012 with a massive share repurchase program that, at the time, was billed as a temporary move away from AT&T’s 1.5 times net debt/EBITDA leverage target. The firm repurchased $27 billion of its shares through 2014, pushing leverage to 1.8 times. That activity reduced balance sheet flexibility as the firm subsequently pursued the AWS-3 auction, the DirecTV deal, expansion into Mexico, and the Time Warner acquisition. With leverage now at nearly 3.0 times EBITDA, I don’t believe AT&T’s capital structure lines up well with the emphasis that it and its shareholders place on a large dividend payout. Dividend growth will likely remain lackluster for the foreseeable future as a result and the company will be lucky to maintain the current dividend. Overall, this performance has been an unmitigated disaster by any measure.