AT&T is a terrible gambler, among the worst in the history of American business. So bad that its meddling in media and entertainment has stunted its core business during the all important early stages of a once-in-a-decade network upgrade cycle.

It could have lost it all if not for a leadership change at the top last summer. 

AT&T is a phone company —  it always has been, but it’s executive team lost sight of that about six years ago and absorbed a mountain of debt in a bid to become a media-telecommunications juggernaut.

It was a bad plan from the start. Bad ideas became a habit for AT&T and then a full-on addiction. 

DirecTV, a satellite TV company, for $67.1 billion in 2015? Time Warner, a bloated media conglomerate, for $108.7 billion in 2018? Both companies were and remain saddled with debt (included in those figures), and arguably done growing as a business in their form at the time or anytime since. 

These might have been good ideas around the turn of the millennium, but probably not. Indeed, in a cruel twist of irony, Time Warner was also party to a deal, again the effective acquiree, so bad that it’s commonly referred to as the worst business deal in history.

AOL was too early when it came calling for Time Warner in 2000, and AT&T was too late 18 years later. Both were the wrong companies and a bad cultural fit. 

Last summer, amid an increasingly worsening global pandemic, AT&T was still referring to itself as a connectivity, media, and entertainment business. A conglomerate that owned and operated multiple linear pay-TV services, TV and film studios, and mediums of connectivity spanning wireless, fixed broadband, and telephone landlines. It controlled modes of distribution and the content filling those airwaves, it argued. 

Today, AT&T is starting to look more like the company it was before this whole mess started: a mobile network operator with aspirations to expand its fiber broadband footprint, and a legacy telephone network that will eventually go dark. 

AT&T spun off its satellite-TV and other paid-TV services into a separate, standalone company that will be partially owned and controlled by private equity firm TPG. The new company is valued at $16.25 billion, including about $6 billion in debt, according to AT&T. That’s a 75% loss in six years.

That decision allowed AT&T to put more focus, energy, and resources on its mobile business, which generates about three-quarters of its profit, Roger Entner, founder and lead analyst at Recon Analytics, said at the time. “I think they’re correcting a pretty much epic mistake” and “it clears up focus” for AT&T’s better performing businesses, he added. “The bread-and-butter telecom needs attention, and this will provide it.”

The other shoe dropped less than three months later. AT&T struck a deal earlier this month to combine its WarnerMedia business with Discovery, making it clear to the world that it wants out of the media and entertainment business in a big way.

When that transaction closes in mid-2022, AT&T is set to receive $43 billion in a combination of cash, debt securities, and retention of debt. That’s a 60% loss in three years. 

When all is said and done, AT&T will have lost a combined $121.4 billion on its ill-advised foray into the media business. That includes $55.7 billion lost on DirecTV, based on the current valuation of its stake in the new company, and $65.7 billion lost on the former Time Warner business based on the purchase and sale prices of that company.

AT&T CEO John Stankey, who replaced Randall Stephensen, the architect of AT&T’s misguided pursuits in entertainment, effectively stopped the bleeding and put an end to that strategy in less than 11 months on the job. 

The pair of deals brought AT&T’s total debt to a record high of $166 billion in 2018, a liability that hindered investments in its wireless, fiber, and entertainment business units. 

It’s no wonder AT&T entered the 5G era as the third-place player in the U.S. wireless market. It won’t catch up to market leader T-Mobile US any time soon, but a dramatic increase in mid-band 5G deployment activity could push its 5G footprint ahead of Verizon by the end of 2023.

“AT&T will have the flexibility to invest and address the growing long-term demand for connectivity and be the leading, best capitalized broadband connectivity provider in the country through 5G and fiber,” Stankey said on a call with financial analysts about the Discovery deal.

The company plans to increase investments in its wireless network and double the reach of its mid-band 5G network by the end of 2023. AT&T as recently as March said it would reach 100 million people covered by 2024, and now it’s targeting 200 million people covered under the same timeline.

The rejuvenating effort also engendered a refined strategy that brings AT&T back to its roots. “Connectivity is intrinsic to everything we do,” Stankey said. Those words have meaning without caveat.

If Stankey and AT&T’s remaining employees are successful, the operator could catch up to Verizon on 5G in a couple years. That would go a long way toward ending this entertainment nightmare that AT&T had no business venturing into in the first place.

Content is king, just ask anyone in Hollywood. But connectivity is like water. Much of the world’s economy and our modern way of life would die without it. The notion that both are better served under the same ruler never had any merit.