As the record date comes to a close for AT&T’s divestiture of the last vestige of its most recent foray into the media business -- Warner Media -- MoffettNathanson’s Craig Moffett drove another nail into the telco’s already bullet-riddled coffin, slapping a $19 per share price target on the company, while maintaining his “neutral” outlook on the shares.

Tuesday (April 5) is the record date for the deal, when AT&T will spin-off 100% of WarnerMedia to its shareholders. Those shareholders will later receive 0.24 shares of Warner Bros. Discovery for every AT&T share they own. That final tax-free exchange is expected to happen later in the month.

AT&T agreed to sell its WarnerMedia unit (the former Time Warner Inc.) to Discovery last May, unwinding what was the last of its big media assets -- the other was DirecTV, which it sold to TPG in 2019. While AT&T shareholders will technically control a 71% interest in the combined Warner Bros. Discovery, former Discovery CEO and soon to be Warner Bros. Discovery CEO David Zaslav and his team will clearly be in the driver’s seat operationally. For AT&T investors, it is a welcome “see ya” to what was an enormous albatross around the telco’s corporate neck.

In unloading WarnerMedia, AT&T sheds a big debt load ($38.5 billion) as well as a big chunk of cash flow ($6.6 billion) that the analyst argues proportionally cancels each other out. While he cheered the divestiture, Moffett said AT&T still has an enormous debt obligation ($177 billion) and he wasn’t really convinced that this deal solves all of AT&T’s problems.

“It is tempting to think of this moment as a fresh start,” Moffett wrote. “Unfortunately for AT&T, the damage done by their acquisition of Time Warner, and by their earlier acquisition of DirecTV, cannot be undone with the stroke of a pen.”

On the surface it seems pretty simple: by moving WarnerMedia to Discovery, AT&T gets to focus on businesses it knows best -- wireless and wireline telecom. Except, Moffett pointed out, those businesses aren’t doing so hot either. 

Moffett wasn’t all doom and gloom. He said AT&T’s valuation is fairly unchallenging, has a fat dividend, low expectations and sentiment around the stock is already negative. But his main beef is that the growth outlook is nearly non-existent. 

In its Mobility segment, where AT&T has more than 180 million wireless customers, the company is expected to lose share in what Moffett called a “sub-GDP growth industry.” Its Business Wireline segment is expected to deliver negative mid-single-digit percentage growth, and its Consumer Wireline segment, which accounts for about 11% of revenue, is still mostly copper. Although AT&T has a fiber deployment plan, Moffett writes that it will mainly offset the declines in the copper network, and generate low single digit growth.

“The resultant mix yields little or no growth in an industry with little or no pricing power... At a time of high (cost) inflation,” Moffett wrote.

Moffett has been down this road before. In February he issued a detailed analysis of what AT&T would look like after the WarnerMedia spin, putting a $20 per share price target on the stock. Today, his outlook is equally glum, it’s just that now he sees AT&T as a $19 stock. For context, AT&T closed at $23.88 each on April 5, down about 30 cents per share, or 1%. In the past 12 months, AT&T shares have fallen about 15%. 

Maybe AT&T will shock us all. Maybe with its hands firmly on the telecom wheel, with no distractions, it will be able to drive this truck to Hawaii and make us all look like idiots. (You’ll understand that metaphor better if you’re a Robin Williams fan.)  

But history shows us this simply isn’t the case. Yes, AT&T is now in a business it knows. But it is also a business that has a lot of competitive pressure. How long will it be before the next crop of executives decides it’s time to branch out again? 

In the meantime, several analysts see telcos like AT&T positioning themselves to take broadband share away from cable, with AT&T committing to building fiber to 3 million homes this year and 4 million in 2023. Moffett agrees that is a plus for its Consumer Wireline business, but notes that segment is about 60% copper at the moment. In other words, it’s going to take a while. And we all know how important speed is in the telecom business. ■

Warner Bros. serial-killer thriller The Little Things opened to a better-than-expected $4.8 million at 2,171 theaters in the U.S. and Canada this weekend, despite simultaneously debuting on the HBO Max streaming service.

The Little Things, which stars Denzel Washington and Rami Malek as serial-killer-hunting cops, and Jared Leto as their prime suspect, is the second Warner film to debut day-and-date on HBO Max, part of a controversial WarnerMedia strategy that has drawn the ire of the pandemic-hobbled theatrical exhibition industry, and pretty everyone else in Hollywood not employed by the studio. 

Also read: HBO Max Gets WarnerMedia’s Entire 2021 Film Slate Day and Date

The performance “provides theaters with some confidence in having new and high-profile releases during the early months of this year,” said Shawn Robbins, chief analyst at Boxoffice Pro, to Bloomberg.

Only around 38% of U.S. and Canadian movie houses are open right now. 

“We are absolutely thrilled by how Warner Bros.’ The Little Things is performing on HBO Max--it immediately shot up to No. 1, where it currently remains,” said HBO Max executive VP and general manager Andy Forssell, to Variety. “Following the breakthrough success of Wonder Woman 1984, The Little Things shows the insatiable appetite our audience has for high quality, feature films.”

Perhaps more impressive The Little Things: The box office performance was achieved despite a poor 48% aggregate critics reception on Rotten Tomatoes. 

 AT&T reported lower earnings as it lost TV subscribers and costs at its WarnerMedia unit rose as it invested in its HBO Max streaming product.

Net income fell 24% to $2.8 billion, or 39 cents a share,  from $3.7 billion, or 50 cents a share, a year ago.

Revenues fell 5% to $42.3 billion. The company estimated that COVID-19 and foreign currency shifts cost it $2.8 billion in revenue.

AT&T said the combination of traditional HBO and the new HBO Max service grew their combined domestic subscriber base to 38 million, topping the company’s year-end target of 36 million. Worldwide, the HBO brands have 57 million subscribers.

Last quarter, AT&T said it had 36.3 million U.S. subscribers to HBO Max and HBO as of June 30. It said  and that HBO Max had about 3 million retail subscribers and 4.1 million subscribers had activated Max accounts.

The company added that HBO Max activations doubled from second-quarter levels and that the ad-supported version of HBO Max was “on track” to launch in 2021. 

The company said it lost 590,000 TV subscribers, despite gains with its AT&T TV product.

“We delivered a solid quarter with good subscriber momentum in our market focus areas of connectivity and software-based entertainment,” said CEO John Stankey, 

“Wireless postpaid growth was the strongest that it’s been in years with one million net additions, including 645,000 phones. We added more than 350,000 fiber broadband customers and are on track to grow our fiber base by more than 25% this year. And we continue to grow and scale HBO Max, with total domestic HBO and HBO Max subscribers topping 38 million — well ahead of our expectations for the full year,” Stankey said. “Our strong cash flow in the quarter positions us to continue investing in our growth areas and pay down debt. We now expect 2020 free cash flow of $26 billion or higher with a full-year dividend payout ratio in the high 50s%.”

Operating income at AT&T WarnerMedia unit fell 38.4% to $1.759 billion, with costs up at Turner and HBO and revenues dropping 10% to $7.514 billion.  The company said it lost $1.6 billion in revenue in the quarter because of COVID-19.

Turner operating income fell 31.1% to $1.019 billion as revenues rose 5.6% to $3.176 billion. Subscription revenue was down 4.5% to $1.84 billion and advertising revenue rose 18% to $1.077 billion.

HBO operating income dove 91.6% to $60 million, driven by a $600 million investment in HBO Max  as revenues fell 2.1% to $1.781 billion. Subscription revenues rose 5.9% while content revenue were down 45.1%

Warner Bros. operating income plunged 32.8% to $395 million as revenue plummeted 27.7% to $2.411 billion. Revenue from television product was down 34.4%

Advertising revenue at Xandr, now part of WarnerMedia, fell $1.4% to $497 million. Advertising for AT&T’s Entertainment group was down 3.1% to $408 million.

AT&T Entertainment group, which provides video, broadband and voice services, reported that operating income fell 28.1% to $779 million as revenues dropped 10.2% to $10.053 billion.

Revenue from video--including DirecTV and AT&T TV Now --was down 12.2% to $6.964 billion. Video connection fell 17.5 to 17.783 million.

AT&T’s wireless unit’s operating income fell 0.9% to $5.691 billion as revenue rose 1.1% to $17.894 billion, reflecting a 31.8% margin. Total mobility subscribers rose 8.9% to 176 million.

AT&T chairman and CEO Randall Stephenson told an audience of analysts and investors Tuesday that multichannel video programming distributors (MVPDs) will be partners, not competitors, to its latest WarnerMedia streaming video offering, slated to launch in Q4. 

At the J.P. Morgan Global Technology, Media & Communications conference in Boston, Stephenson said the product will become its “key video product,” centered around its HBO premium channel and surrounded by the content libraries of Warner Bros. studios and Turner.

Stephenson emphasized AT&T’s reach -- he pointed to 170 million points of distribution via its mobile and landline businesses.

“This is going to be a significant opportunity for us to drive video penetration and consumption,” Stephenson said at the conference. “That product, distributed through 170 million points of distribution, this will become a significant driver of our growth over the next few years. We think it is in the tens of millions of subscribers that we will have on this. We think that the portfolio is that compelling.”

And he added that the newest streaming offering -- which will launch a beta version in Q4 and be widely available by Q1 2020 -- will not compete with existing MVPDs. Stephenson said he sees MVPDs like Comcast, with their robust broadband offerings, as partners in this new service.

“If you are a Comcast subscriber and you acquire HBO, you will get this capability with your HBO subscription on Comcast,” Stephenson said. “Then we would want to continue to push digital distribution on top of that as well.”

Related: AT&T’s Change Agent 

The WarnerMedia service is the third streaming offering from the company -- DirecTVNow and AT&T Watch TV were first -- and comes at around the time The Walt Disney Co. and Apple are scheduled to launch their own streaming entertainment products. Disney + is expected to launch in November, chock full of original and library content at a $7 monthly price point. Apple TV + is also expected to launch around that time, priced at about $9.99 per month and offering a mix of original and library content.

Disney has estimated it could have between 60 million and 90 million Disney + customers worldwide by 2024. Stephenson didn’t give a time frame for his subscriber prediction.

WarnerMedia hasn’t said how much it will charge for the new streaming offering, but HBO has traditionally been priced at around $15 per month. 

AT&T chair and CEO Randall Stephenson, a day after the U.S. Dept. of Justice said it would appeal a federal court decision that helped clear the path to its merger with Time Warner Inc., told CNBC Friday morning that the DOJ’s action could affect another potential mega-media merger: Comcast’s pursuit of 21 Century Fox assets.

Related: DOJ to Appeal AT&T-Time Warner Merger 

Comcast was expected to raise the ante again for certain Fox programming and studio assets pledged to The Walt Disney Co. Comcast had outbid Disney’s original $52.4 billion equity offer for the assets in June with a $65 billion all-cash proposal, only to be bested by another cash and stock offer from Disney worth $71.3 billion. The DOJ approved the Disney deal on June 27. 

Speaking to CNBC’s Squawk Box on Friday from the Allen & Co. conference in Sun Valley, Idaho, Stephenson said the DOJ’s plans to appeal the Time Warner purchase came as little surprise, adding that it probably isn’t great news for Comcast’s pursuit of Fox.

“[It] probably can’t help it,” Stephenson told CNBC, according to a transcript. Stephenson said he didn’t want to speculate on the government’s motives for appealing his merger, but said it could affect the Comcast-Fox “process.”

Related: AT&T, Time Warner Cleared to Merge 

“You’re in a situation where two entities are bidding for an asset, and this kind of action can obviously influence the outcome of those actions,” Stephenson said. “But who knows whether that’s behind us.”

The AT&T chief stressed that the appeal process – which he speculated could take five-to-six months to complete -- will have no effect on the way AT&T and Warner Media run their businesses.

“This changes nothing,” Stephenson said. “This changes nothing we’ll be doing over the next 30 days or the next 12 months. We’re about executing our plan. We think the likelihood of this thing being reversed and overturned is really remote. It’s a very narrow path that would have to be traveled to get this thing reversed in any way. So we’re about executing our plan. The merger is closed. We own Time Warner.”

Related: AT&T Completes Time Warner Purchase 

Stephenson said as part of the original agreement, AT&T would run Warner Media separately and independently, and the company has no intention of changing that.

“I mean, when you have content players who are both suppliers and customers, you just have an obligation to treat them that way anyway,” Stephenson said. “So this changes nothing about how we operate the business. It changes nothing about products we will launch. It changes nothing about other M&A we need to do like Appnexus.”

Related: AT&T to Acquire AppNexus as Start of TV Ad Marketplace

And while the AT&T chief said the appeal could pose some problems for Comcast-Fox, he doesn’t see the same chilling effect on other potential mergers.

“If [I] were a CEO looking at media acquisitions and deals, I don’t think I would be looking at them today any differently than I did yesterday,” Stephenson said. “I think this is a process that will play itself out. But I think there is such a slim chance of this thing being altered in some way that it wouldn’t affect my thinking much at all.

But he added that most other companies shouldn’t have been looking to the AT&T-Time Warner ruling as a regulatory template in the first place, because Judge Leon’s ruling was so specific to that transaction.

AT&T has come under fire lately over how it would run Warner Media, specifically a Town Hall meeting with HBO employees where Warner Media chief John Stankey appeared to want the premium network to be more like Netflix. Stephenson said that Stankey’s message of increasing engagement is a strong one. 

“At the end of the day that’s what this is all about, engaging the consumer,” Stephenson said. “Because the more engagement you have, the more opportunity you have to create value.”

More engagement could mean “pumping more content into HBO,” but it also means spreading it across AT&T’s other digital properties like DirecTV Now, WatchTV and online sites like CNN.com.

Still, the AT&T chief said the company is aware of the potential for culture clashes between Warner and other AT&T units, but added he wasn’t concerned about it.

“I’m conscious of it and we’re being very, very careful and mindful of that.” Stephenson said. “The way we’ve organized the business, it will be run separately, very independently. It’s important that we preserve the culture.”