AT&T ended 2020 in the most 2020 way, posting a dramatic drop in financial performance that nearly drove its recently installed CEO to cursing. 

The telecom and entertainment giant reported a net loss of $13.89 billion in the final quarter of 2020. Total revenues were down 2.4% year over year to almost $45.7 billion and those net losses marked a 680% decline from net income of $2.39 billion in the fourth quarter of 2019.

“There are a lot of words to describe 2020, most of which wouldn’t be nice to say in public,” CEO John Stankey said at the outset of today’s earnings call. “Despite COVID-19 challenges we’re seeing growth where we want to see growth, and we’re successfully redirecting our investments to support those areas.”

AT&T’s years-long push to reduce the mountain of debt it accumulated following a series of astronomically expensive acquisitions that completely reshaped the business hasn’t allayed analyst concern. Neither has its massive cost-cutting effort to sell non-core assets and shrink its workforce. 

AT&T’s Growing Debt Burden

AT&T shed 17,040 employees last year, cutting its total workforce by 6.9%. It’s debt-to-income ratio also increased from 44.7% to 46.7% during the year, and AT&T reported a total net loss of $5.17 billion in 2020.

“After a Herculean effort to reduce debt by selling assets … [AT&T’s] leverage ratio is even higher now than it was” in mid-2019, analysts at MoffettNathanson wrote. “Faced with that daunting reality, AT&T has seemingly reversed course. They are now once again emphasizing growth over profitability.”

AT&T earlier this month began approaching a group of banks to borrow $14 billion to pay for spectrum licenses it acquired in the recently closed C-Band auction, Bloomberg reported. The winning bidders and results of that auction won’t be released until next month, but total bids reached almost $81 billion and analysts expect the capital call for AT&T and Verizon to be particularly painful. 

“Despite a balance sheet layered to something like its limit, and a portfolio stocked with nothing to sell, it is almost certainly the case that they’ve spent handsomely in the auction anyway,” analysts at MoffettNathanson wrote. 

Stankey, who took over as CEO in the middle of last year, told analysts that AT&T will reduce debt maturities over the next five years by about 50%. “Our cost cutting initiatives generated about $2 billion in savings in 2020,” he added.

AT&T’s Asset Sales Come Up Short

The company also retired more than 30 products and reduced its real estate footprint by more than 9 million square feet, Stankey said. “We’re restructuring business, sunsetting legacy networks, reducing corporate staffing levels, and overall benefit costs,” the executive boasted.

AT&T booked a $15.5 billion write down on its pay-TV business, reflecting continued declines in that business and a widespread expectation that AT&T will sell or otherwise attempt to inoculate itself from further losses in its DirecTV business.

Debt reduction remains a top priority for 2021, in addition to efforts to grow and improve direct relationships with customers, and a more deliberate approach to capital investments, especially in 5G, fiber, and HBO Max, Stankey said. AT&T said its gross capital investment in 2021 will near $21 billion with capex coming in around $18 billion.

Mobility revenues, which accounted for 44% of AT&T’s total revenue during the quarter, jumped 7.6% year over year to $20.12 billion and wireless service revenue increased 0.5% to $14 billion. AT&T pinned the impacts of COVID-19 on its mobility business during the quarter at $250 million, and $2.48 billion for the entire company.

“There’s a shift and mix going on within the wireless build, and we’re now moving away from what I would call capacity that’s on existing spectrum bands and starting to see ourselves prep for possibly using other spectrum that may come into service at some point in time,” Stankey said, being careful not to divulge details about AT&T’s haul from the C-Band auction during the ongoing quiet period.

AT&T Targets 2 Million Homes With Fiber

AT&T is also continuing with its fiber buildout, targeting an additional 2 million residences in 2021. Reflecting on that effort, Stankey said that hybrid access technologies are important but that he doesn’t think fixed wireless can take on the bulk of traffic that will occur inside businesses or homes over the next decade.

“Reach and penetration of fiber is going to be important as we move forward,” he said. “I think this business can build more than 2 million in a year in a very profitable fashion.”

Stankey also shared thoughts about AT&T’s vision for cloud and edge computing, noting that while the company wants to give enterprises and developers access into its infrastructure, maintaining direct and broadening relationships with customers remains a “really important dynamic for the health of our business.”

Building large subscription bases of customers that pay AT&T every month has been a hallmark of the business, he said. “We need to evolve that into what the next step is.”

CFO John Stephens, who will retire from the company in late March after serving in that role for nine years, noted that AT&T expects the currently challenging economic environment to continue through much of 2021, but it remains hopeful there will be some improvements in the final quarter of this year.

“In no way did we envision a hockey stick or any kind of dramatic increase,” he said. “It’s really much more of a general staying the course, there is some slight improvement, but staying the course.”

AT&T earlier this month announced that former CEO Randall Stephenson retired as chairman of the board on Jan, 21, and that he will remain with the company in a consulting role for the next year at the cost of $1 million.