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AT&T Defuses Elliott’s Activist Push With Three-Year Plan

Scott Moritz

(Bloomberg) -- AT&T Inc. damped the fires of Elliott Management Corp.’s activist pressure campaign, unveiling a three-year plan under which the phone giant will add two board seats and separate its chairman and chief executive officer roles.

AT&T on Monday pledged to make no more major acquisitions soon, answering Elliott’s concern about the multibillion-dollar purchases of Time Warner and DirecTV. Randall Stephenson, 59, the architect of AT&T’s media acquisition strategy, will stay on as chairman and CEO through at least 2020, and the company will split the roles after he eventually leaves.

The resolution with Elliott, which now holds a $3.4 billion stake in the company, removes a distraction for AT&T before it introduces a splashy new streaming-video service to challenge Netflix Inc.’s dominance. The company plans to unveil more details about the spring launch of HBO Max at an event Tuesday.

“You’ve got to give credit to AT&T for quickly and proactively working with Elliott,” said Kevin Roe, an analyst with Roe Equity Research LLC. “It is reassuring to see Stephenson committing to the CEO role through at least 2020, and the long-term guidance is long overdue and extremely helpful to investors.”

As part of the three-year financial plan, AT&T said it will book annual revenue growth between 1% and 2%, increase its dividend as a percentage of cash flow, and pay off debt to reach a leverage ratio between 2 and 2.25 in 2022. It committed to reaching earnings of $4.50 to $4.80 a share by 2022, compared with analysts’ current estimate of $3.39 a share for that year.

“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott partner Jesse Cohn and portfolio manager Marc Steinberg said in a statement. “It is clear to us that AT&T is committed to and accountable for creating shareholder value over the near and long term.”

While Elliott said it’s supportive of AT&T’s strategy, there’s isn’t a standstill agreement that typically comes with a formal accord. That will allow Elliott to continue to agitate at the company if it doesn’t like the direction AT&T takes.

AT&T also said it expects its asset sales this year to total $14 billion by the end of December. The company agreed earlier this month to sell its operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America Ltd. for $1.95 billion in cash.

Seeking Reforms

Dallas-based AT&T and Elliott have been holding talks since the New York investor group announced about five weeks ago that it had acquired a $3.2 billion stake in AT&T and was seeking reforms aimed at getting the stock moving.

AT&T gained as much as 5.3% in New York trading Monday. The stock is now up 35% this year, compared with the S&P 500 Index’s 21% increase.

The company also reported third-quarter results Monday, missing analysts’ expectations for subscriber growth and revenue. With a net loss of 1.2 million TV subscribers in the third quarter, AT&T has now shed about 3.7 million video customers since the slide began five quarters ago.

AT&T lost 217,000 regular monthly wireless subscribers in the period. Analysts expected a loss of 60,000.

(Updates shares in 10th paragraph.)

--With assistance from Scott Deveau.

To contact the reporter on this story: Scott Moritz in New York at

To contact the editors responsible for this story: Nick Turner at, John J. Edwards III

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