Q4 2020 AT&T Inc Earnings Call

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Ladies and gentlemen, thank you for standing by welcome to the AT&T for Q 'twenty earnings call. At this time all participants are in a listen only mode. If you should require assistance during the call. Please press Star then zero and an operator will assist you offline.

Following the presentation of the call will be opened for questions. If you would like to ask a question. Please press one and then zero and you will be placed in the question queue. If you are in the question queue and would like to withdraw. Your question you can do so by pressing one and then zero and as a reminder, this conference is being recorded I would now like to turn the conference over to your host of me.

Your raws with dusky senior Vice President Finance and Investor Relations. Please go ahead.

Thank you and good morning, everyone welcome to our fourth quarter call on a mere rozman <unk> head of Investor Relations for AT&T and joining me on the call today are John Stankey, our CEO and John Stephens, Our Chief Financial Officer.

Before we begin I need to call your attention to our safe Harbor statement, which says that some of our comments today may be forward looking as such they're subject to risks and uncertainties results may differ materially and additional.

<unk> information is available on the Investor Relations website.

And as always our earnings materials are on our website.

I also want to remind you that we continue to be in the quiet period for the FCC spectrum auction 107. So unfortunately, we can't answer your questions about that today.

With that I'll turn the call over to John Stankey John.

Good morning, everyone happy new year to all of you and I Hope. This moment finds you all in good health with that let's go ahead and get started on slide three.

There are a lot of words to describe 2020, most of which would be nice to say in public but when I look at how we executed on our priorities in the midst of this pandemic.

Keep coming back to one word and that's resilient.

We added 1.5 million postpaid phones during the year, our most net adds in a decade and our highest value subscribers, we reduced churn streamlined operations and had the nations fastest wireless network.

For the second year in a row, we added more than 1 million fiber subscribers as customers move to our of higher speed services and perhaps most remarkable during this pandemic, we launched HBO Max and about seven months later, we had more than 41 million HBO, Max and H B O domestic.

Scriber too.

Two years ahead of the plan, we shared with you in October of 2019, a resilient portfolio of subscription businesses continued to generate strong cash flows more than 27 billion to support our ability to invest in our growth areas and sustain the dividend.

In fact, we finished the year with our total dividend payout ratio at a very comfortable level and on.

On debt management, we made material progress in 2020 by reducing debt maturities over the next five years by about 50% and lowering our weighted average interest rate on debt to about 4%. We continue to transform the business to drive efficiencies our cost cutting initiatives generated about 2 billion and save.

<unk> in $2020, we invested back into the business to drive subscriber growth and move our transformation initiatives forward.

In mobility, we streamline distribution shifted some stores to third party dealers and closed others.

Total calls into our call centers are down by $30 million as we saw a dramatic shift to online transactions by our customer base. We retired more than 30 products in our portfolio and consolidated operations to capitalized on reduced complexity we.

We took our first steps and reduced our real estate footprint by more than 9 million square feet with more work underway on our longer term operating model.

We also realigned and streamlined our Warner media operations to better deliver on HBO, Max and the future of how consumers want to view content.

Those are a few of our 2020 highlights let's talk about our 'twenty 'twenty one priorities on slide four.

We have three priorities this year.

Number one is straightforward.

Grow our direct customer relationships.

That begins with the vital connectivity services, we provide and the strength of our network.

We've had the overall fastest wireless network in the nation every quarter for the last two years according to <unk>.

And the fastest nationwide five G network in the second half of 'twenty 'twenty after our nationwide five G launch.

It shows the strength of our low band spectrum portfolio.

Our fiber net promoter scores continue to be materially better than cables and are helping drive strong subscriber trends and higher penetration rates.

There is strong demand for the reliability and speeds our fiber product provides.

Beyond our core connectivity services, we're focused on our goal to establish relationships with most U S households, and HBO Max is the key here.

Through our software based entertainment platforms, we can learn more about our customers and create long lasting emotional connections with our award winning storytelling capabilities. Our second priority is the same as last year and that's continuing to transform our operations to be more effective and efficient.

We're restructuring businesses sunsetting of legacy networks, reducing corporate staffing levels and overall benefit costs.

As a result.

We're positioned to enter the post pandemic world is a more agile and efficient company. Our third priority is about continuing to be deliberate and strategic with how we allocate capital.

We plan to use free cash flow after dividends for the next couple of years to pay down debt, we remain focused on monetizing noncore assets.

And using those funds for debt reduction as well, we're committed to sustaining our dividend at current levels and we will give top priority debt reduction at this time in summary, I'm pleased with the progress we've made the last two quarters. 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.

We have more work to do but I'm confident we're on the right path.

Before I hand, it over to John I want to acknowledge that I'm sensitive to the reality that there's much going on in on around the business.

I know inside AT&T, we're working hard to reposition the company. So I can imagine you're working equally hard to keep up with us to that end I want to let you know we plan to host of virtual investor event in the second half of the quarter, where our leadership team will provide more insight into our business plans and we'll have a lot of time for.

A discussion on your questions look for more to come on that soon.

With that I'll turn it over to John to discuss a more detailed results from the quarter.

John Thanks, John and good morning, everyone. Let me start on slide six with a quick look at our fourth quarter subscriber metrics.

Wireless subscriber growth was the best it's been in years.

We had $1 2 million postpaid net adds including 800000 postpaid phones.

Postpaid phone churn was the second lowest quarter on record coming in at 0.76%. Our fiber momentum also continues we added more than 270000 fiber subscribers in the quarter HBO Max subscriber growth continues to outpace original estimates.

We added nearly 7 million total subscribers for HBO, Max and H B O in 'twenty 'twenty alone.

<unk> of premium video declines continues to improve.

If you exclude the impact of keep America connected on third quarter. Net adds are premium video net adds improved sequentially for the fifth quarter in a row, let's now look at our consolidated and segment results starting with our financial summary on slide seven.

Adjusted EPS for the quarter was 75 cents that included Covid impacts to revenues from lower television licensing and production.

Changes to the theatrical release slate and lower international roaming.

Combined COVID-19 out of an estimated eight cents of EPS impact to fourth quarter, which we did include in our adjusted results. We've made the decision to operate our broadband and legacy voice operations separate from our video business unit and have recast our entertainment group.

Results Accordingly in conjunction with this change in operations, we have reassessed the book values of our video assets, including goodwill and other long lived assets.

As a result, we recorded a pretax non cash impairment of $15 5 billion. Additionally, we adjusted for Nash wary of loss to our benefit plans.

And a write off of production and other content inventory at Warner Media.

Stemming from the continued shutdown of heaters.

And film releases going on HBO Max.

We will provide more information in our SEC filings and on our website and in our annual report.

Revenues were down from a year ago with gains in mobility, partially offsetting pressure from Warner media and video, but revenues were up sequentially Foreign exchange had a negative impact of about $200 million in revenue primarily in our Latin America segment cash flows for the quarter and the year underscore our.

<unk> customer base and liquidity cash from operations came in at $10 1 billion for the quarter and.

And $43 1 billion for the year.

Free cash flow was $7 7 billion for the quarter and $27 5 billion for 2020.

For the full year, our total dividend payout ratio was just under 55% gross capital investment. So about 20 billion in 2020, and we continue to invest heavily in our growth areas even during a pandemic.

In addition, we invested about $800 million in HBO Max in the fourth quarter and about $2 1 billion for the full year.

Let's now look at our segment operating results starting with our communications segment on slide eight our communication business showed revenue growth this quarter. Thanks to a strong performance in mobility.

We told you we intended to give our best customers, our best prices and offers and you are seeing the benefits of that logic.

Strong subscriber gains and people moving to unlimited plans helped drive service revenue growth in the quarter.

Even with continuing pressure on international roaming.

More than 60% of our postpaid phone base is on on an unlimited plan churn has been impressive the last two quarters have been our lowest postpaid phone churn quarters on record.

And for the full year of remarkable 16 basis point improvement in postpaid phone churn of our successful retention of approach does require some upfront investment.

But the lower churn levels and an improved subscriber count make this the right economic trade.

As I mentioned, we have split the entertainment group into two reporting units broadband and video on a full reconciliation of the two units is in our support documents, but for comparative purposes here on the trends in Entertainment group. The way you have been used to seeing them, we had our best AT&T fiber.

Fourth quarter net adds even with more challenges associated with the pandemic.

And penetration continues to grow it's now at 34% in our video unit premium video losses were improved year over year, thanks to lower churn and our focus on high value customers. We continue to drive <unk> growth in both video and IP broadband in fact premium video ARP who was.

Up more than 5%.

Our business wireline team continues to effectively manage the transition of the business and deliver solid results amidst the pandemic.

Solid cost management has been key to delivering solid EBITDA all year long.

Let's move to Warner Media, Atlanta America results, which are on slide nine Warner.

Warner Media continues to be impacted by the pandemic as we've seen across that entire industry.

We did see sales gains in subscription revenues. Thanks to the rapid growth of HBO Max We now have 41 million domestic HBO, Max and HBO subscribers.

And about 61 million worldwide as we prepare for the international launch of HBO. Max later this year and.

And we now have more than 10 million customers, who combine one or more of our connectivity products with HBO, Max or H B O advertising revenues also grew driven by political advertising and C. N N, which was number one in all of cable viewership not just news in the fourth quarter because.

Of the pandemic, we introduced a unique one year plan and which Warner brothers will continue to exhibit films theatrically worldwide, while adding an exclusive one month access period on HBO Max sign.

Simultaneous with the film's domestic release.

Our goal is to make the best of a very challenging situation for all involved.

Includes filmmakers in town theater owners and most importantly, the movie going public our Latin America operations.

<unk> to work to recover from the pandemic, we added more than 500000 subscribers in Mexico, and almost 50000 subscribers and video helped in part by our over the top offering in Brazil.

Latin America revenues continued to be challenged by FX slow economies in Covid, even with this Mexico EBITDA improved year over year for the second quarter of ROE and Brio continues to generate positive EBITDA and cash flow on a constant currency basis.

Now, let's go to slide 11 for our 2021 guidance.

Last year was a difficult year for us to forecast for obvious reasons.

There remain uncertainties in 2021 with the rate and pace of recovery from the pandemic around the globe impacting media travel and employment against that backdrop. Our current outlook for 2021 is this files.

We expect consolidated revenue growth of about 1% with wireless service revenue growth of 2% and a gradual improvement in Warner media topline.

As noted previously we plan to reinvest all of our savings from our transformation efforts to support our customer count momentum in our growth businesses.

Bind with ongoing declines on our premium video segment. This could lead to adjusted EBITDA declining slightly in 2021 versus this year.

Adjusted EPS is expected to be stable with 2020, we expect gross capital investment in the $21 billion range and net capex of about $18 billion the.

Primary difference between the two is from vendor financing initiatives, we have in place and anticipated first net reimbursement free cash flow has been resilient for us even during the pandemic and we expect that resiliency to continue in 2021.

With a $26 billion range target for free cash flow.

We will also continue to focus on bringing down debt as John mentioned, we expect to use free cash flow dollars after dividends to pay down debt.

We continue to look for opportunities to monetize assets and apply those proceeds to paying down debt.

Including crunchy role.

Which we expect to close later this year, we do plan to provide an update on our leverage outlook and longer term debt ratio target. Once the auction quiet period ends as 2020 showed us things can change quickly. However, we are encouraged by our ability to adapt to those changes while driving.

Increased customer accounts generating strong cash flows.

Investing in areas of strategic focus on.

All while maintaining a disciplined approach to our capital allocation and shareholder return strategies as John mentioned, we played out of a virtual analyst event later in the quarter to talk about this more.

From here, that's a presentation, we're now ready for Q&A.

Operator, we're ready to take the first question.

Thank you, ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you of a question. Please press one zero at this time and one moment. Please for your first question.

Yes.

Your first question comes from the line of Simon Flannery from Morgan Stanley. Please go ahead.

Okay. Thank you very much good morning, so looking forward to the analyst day, and perhaps you could start with the macro environment. What are you assuming in terms of the backdrop is are you really assuming things continue to be not just they are or do you have a pick up in the second half on things like roaming on advertising any comments just about.

Trends with CIO sort of seeing etcetera that underscores that and then within the Capex budget of are there any material changes within your priorities. There for example, your fiber build out I know that's a big priority is there an opportunity to ramp that up or additional spend on <unk> rollout and any color there would be great. Thank you.

So some of those.

John Let me, let me take that on the macro side of the one thing we saw at the end of last year was of customers' willingness to pay our bad debts were really quite solid.

Quite positive trends on both on the consumer on the corporate side.

So while we're not getting overly excited but it was a positive sense.

What we have built into our plans are if you will more of the kind of current environment for the next six months with some second half of it really closer to the fourth quarter pickup in.

The pandemic relief activities.

We will see more theater going probably in the fourth quarter than we did this year, we'll see some more travel but in no way did we envision a hockey stick or any kind of dramatic increase it's really much more of a general staying the course there is some sign of improvement of standard of course.

With the one thing I would add though is the cash collections have been strong and has been resilient feel really good about that so it gives us some some comfort.

Secondly, whats your read of the Capex I would say at this slide.

If you look at the kind of the growth capital being put in the ground, it's up $1 billion.

There'll be some changes in what we spent last year I continue to expect a little bit lighter on the video satellite type side of the business because of the success of AT&T TV and our focus on churn reduction as opposed to gross add service more money. There I think youll see us continue to spend money on wire.

Of this but we're well into and well completed with the first that build.

So we'll have some ability to manage their the next piece, though is we will see an increase in the fiber build.

And on the opportunity to add.

More on sales opportunities to add inventory Hello, Jonathan I missed anything from your perspective, it will be more precise and John will be building somewhere around 2 million fiber.

Residential locations.

Net neighborhood of Thats kind of what we've got the team tested due to give you a sense of what day.

That increase will be and I think the only other thing I would comment on.

Relative to the wireless spend overall.

This shift that's occurring we put a tremendous amount of capacity out over the last several years in combination with a lot of the work we spoke to you first net upgrades.

There's a there's a kind of a shift in mix going on within the wireless build on.

Now moving away from what I would call of capacity that's on existing spectrum bands.

Starting to see ourselves prepped for.

Possibly using other spectrum that may come into service at some point in time et cetera. So we got a little bit of of dynamic going on on this shifted the overall wireless program.

Okay. So thanks for your question on Capex, Okay, It's capex second half loaded them.

We don't have anything that I would tell you is any different than what <unk> seen were actually.

We started doing engineering, if you're worried about fiber of Simon we started doing engineering on the fiber build this year I told you we were getting ready to go and it was my intent to get going and the teams are already turning things up we had the conversation last quarter I don't want to repeat myself.

We shared with you that this build is a little bit different than when we initially started because we have wire centers are already fiber capable of the infrastructures in place, we're going back in and picking up the next adjacent neighborhood or the next successive.

Area and as a result of that.

Speed to get up and moving is not the lift and it was the first time, we started ramping up on this so we've got a little bit smoother dynamic around it than what you might think because of the increase from the fiber dynamic.

Thanks very much for the question.

If we can get the next question. Your next question comes from the line of John Hodulik from UBS. Please go ahead.

Okay. Thanks, guys.

First of all of a related question.

And what's driving the 22% decline in the broadband segment, where there.

No additional costs associated with splitting it out from from.

From video and sort of.

How do you expect that to lots of progress through the year, especially with the with the increased fiber build you expect as we go on and then secondly, any update on the timing of that.

Launch or anything you can tell us on on new content on our reliance on on sports and news.

Yeah.

John Let me take the first one on with regard to the broadband piece.

Quite frankly, it's really the efforts we've had to do.

Increase our sales capabilities add new customers.

The amounts that we built out in the prior years. It's also has to do with it.

The recognition of that we are providing HBO Max.

For all of our good customers and so there is an intercompany charge there so within the umbrella of AT&T and the economics are there. So we feel good about it but that's also in there I would I would tell you.

As you all know the.

On the network infrastructure customer service like fiber is a long term game and we've gone through the process of any tenants feel very good about the long term returns and the average, but yeah, we're going to be spending some money as we did last year to invest in net customer growth you saw the 600000 plus 650000.

So net adds last six months.

We feel very good about that particularly when we look at the churn numbers, particularly when we look at the customer satisfaction of the NPS scores.

So.

Completely.

Complete support the fact, but yes, there is some investment there with regard to the Avon.

We are expecting to launch our international version of HBO. Max later, this year as well as the Avon.

I'm not ready to give any day of its John I don't know if you want to say anything more recently, we're still shooting for a second quarter launch on the bottom.

And I think I would point out equally as important as the Latin America launch.

HBO Max it we've been working really hard on and will be an important driver for us on <unk>.

Growth in getting ourselves embedded into the international front on <unk>.

A unified platform approach to things. So you should expect as we get into the second quarter, there's going to be a lot of activity and change going on here.

One of the reasons, we're kind of.

Turning to pinpoint the exact date on it as you know we've been working through pandemic related production issues.

In ramping that back up has been.

Significant task the team has done a remarkable job getting ourselves back into that business and working through the dynamics safely. It puts a little bit of overhead on things in terms of the speed of production and what we're able to do and there is a bit of rework that goes on with trying to work around the limitations of.

Of a pandemic based environment as a result of that.

Still fighting through getting the pipeline dropping the content at the right right of the pace that we wanted to in the first quarter. This year continues to be a bit of of stretch in that regard as we've cycled back into production.

On our expectations are that we start to hit our stride as we get into the second quarter and it's really important as we put these new iterations of the product.

We have ourselves on a good position in terms of the content of inventory and so as we're kind of go on hand to mouth on these right now John will be a little bit more discreet on when we announce once coming out on exactly what month simply because it's just that tough in that much of a battle.

Literally show by show to get this stepped on and get it into the funnel and we're working hard to do that and we're hope of past any of the unexpected dynamics like the California.

Closures that went on over the last several weeks.

I'll put a couple of twists and turns on the road and we've got the worst behind us but.

I'm, a little changed right now with everything on the pandemic, so I don't want to over promise anything.

Got it thanks, guys. Thanks John.

Your next question comes from the line of Phil Cusick from Jpmorgan. Please go ahead.

Hey, guys. So.

So much to ask thank you. So in wireless John you talked about growing customer relationships overall is a priority for the company should we assume that means the current level of promotion of upgrades that effort continues.

And then second follow up.

For John Stephens, just really quick you mentioned, an updated leverage target that you would talk about it on an analyst day I know you can't really talk about where leverage goes around an auction, but do you anticipate changing the target from the current two on a two five turns thanks very much.

Yeah.

So Phil.

Look we're we're on a dynamic market things change all the time, we're going to look at our promotion strategies and adjustment of accordingly.

And what we need to do to continue to be in a position.

Maintain and grow share and it's I think it's really important that we continue to have a growing business.

There is the management team is focused on two things we like the momentum I think we'd like to be a little bit more efficient with the momentum we've done some really good stuff and had some really good progress on self funding a lot of what we've been doing on the market, but we're not self funding all of it yet.

And so our continued work on trying to manage the efficiency and effectiveness of this business. So that we can be in a more aggressive posture on the market is something that this team is working on every quarter.

Tried to be diligent and reasonable on our guidance to you and make sure that we have high confidence in what we share, but what im turning back to the management team is a task that I'd say is is more aggressive.

To the extent that this management team delivers and they had been doing a remarkable job of doing that over the last several quarters.

Does that mean that that's going to give us more room to do more on the market and continue to maintain a posture that.

I think is totally appropriate bringing in high value customers of the right kind of customers, we want going down the swim lanes that we set out for ourselves and we think we have a unique place to be which is winning in the public sector with our first net abilities using our deep enterprise customer relationships to go deeper into their customer base.

With the affinity programs, ensuring that we're getting in the mass market with attractive offers like HBO, Max and what's associated with that that has brought in a really attractive gross adds and.

And trading on embedded base well.

That is you know that is the strategy and we're going to continue to do that I think youre seeing that to be the industry leader insurance this quarter.

I think we called it right. We said that we don't have customers that are upset about our network. They like it we don't have customers that are upset about our service. They are satisfied with our service we had customers who are interested in finding new devices. We shared with you that we had a little bit more agent population on device longevity.

The rest of the industry, we've been targeted on how we do that I think getting a new 30 year lease on life of 30 month lease on life with these customers of wish it was 30 years.

That's a very appropriate exchange for the franchise right now given everything we have in front of us.

Yes, Phil with regard to.

The update of the update at the Analyst Conference first and foremost.

What we've said and we'll continue to say is free cash flow of in excess of dividends is kind of go to pay down debt proceeds from the sale of assets is going to pay down debt.

All of the others.

We would prefer to be able to give you more information about a leverage target we can't do that at this time because of the status of the CVA at auction and our inability to comment on that's all we're trying to tell you that we understand that we would normally give that it would be appropriate but because of the FCC rules. We can't so we will commit that we will update you on.

One of its phosphate.

That's the story I think.

One thing that I'll just repeat those.

Seven 5 billion last year of 26, we're guiding for next year of $15 billion dividend of lot of money to use to pay down debt. That's the message we want to give you and the proceeds from things like cultural kind of used to pay down debt. So we feel good about what we've done over the last three years with regard to managing the debt and we feel really good about our ability going forward.

But the comment about leverage is just we feel its appropriate for us to give teeth, we can't because of the rules around the C band auction.

Okay. So thats, a maybe this year leverage target not a permanent changing the leverage target.

Thanks, Jeff will give you all of that Dan's comments, when we can when we can talk about it quite frankly, I just can be that'd be really careful.

We'll go from there.

And move forward, but our guidance on this the real pieces.

Cash flow in excess of dividends.

And proceeds from asset sales go to pay down debt and if you look at our net debt at the end of the year I think we've shown.

We've got a good record to prove that we are doing what we said we're going to do it.

Thanks, guys.

Okay.

Your next question comes from the line of Michael Rollins from Citi. Please go ahead.

Thanks, and good morning, I, just wanted to follow up on the wireless business.

Just because of couple of questions so with the cash.

<unk> to growth service revenues at about 2% can you frame the opportunity to improve <unk>.

Your wireless customers over the next 12 to 24 months.

And then also with that target and given where the fourth quarter service revenue growth like does that mean net AT&T may be exiting the fourth quarter of 'twenty one.

Service revenue growth above that 2% for the whole year.

Relative to maybe where youre starting earlier in the year from thanks.

Michael Let me, let me take a quick just.

Pointed out I think youre aware of but the first quarter.

2021 of this quarter, we're in now.

Last year, we still head of international roaming.

That compares the comparison of media comparator, if you will to an avalanche of international roaming so that'll be one set the next the next.

Three quarters will will presumably be without the international roaming so the numbers will be different.

One and I would just say that to you. So I don't want to get into quarterly analysis, because they just don't want to confuse things we talked about the full year secondly, the real story on the service revenue is customer growth and quite frankly, we talk about the 1 million two of postpaid net adds.

5% of.

$1 two postpaid adds last quarter EMEA five of voice net adds.

Mostly in the last six months all of that but the reality is to we had close to 16 million total wireless connection net adds during the quarter during the year. When you include.

All of the connections and we're seeing and we believe that our strategy is the ones John just talked about with three of our best customers one of the best offers.

And things like that have the opportunity to win for us the best network and so forth and so we're optimistic about the ability to continue to grow that customer base. That's what's driving the service revenue with regard to the ARPA growth. There continued opportunities go into the upscaling of these packages with the great out of <unk>.

Opportunity to offer HBO, Max which is certainly got a got a tailwind behind it of the success of it you saw the 7 million HVO adds best we've had in not only 10 years, but the best in the total 10 years better than the total last 10 years.

That is going to we believe that that kind of packaging with wireless is going to help.

And such that we're going to be able to grow it and then grow the ARPA from getting people to buy it just from the mobile share plans into unlimited, but the buy up from the basic unlimited all the way up to the elite that's the story, we're not giving specific.

Percentages dollars, but thats, what builds that confidence in wireless service revenue growth, which really drives the overall growth of the company's 1% guidance on revenue growth that in some of some tail winds from the comeback of Warner media.

Okay.

Okay.

Your next question comes from your next question comes from the line of David Barden from Bank of America. Please go ahead.

Hey, guys. Thanks for taking my question and John I guess this is going to be your last quarterly conference call. So we will see at the analyst day, but congrats on them on everything we've gotten done.

Thanks, Ed.

I just wanted to two questions one is separating.

Separating out the video business, taking the 15 5 billion write down is going to fan the flames of the conversation around divesting that satellite business could you kind of either John or not and could you.

Elaborate a little bit on on kind of what that might look like in <unk>.

In the 26 billion of free cash flow guidance is coming from the from the satellite video of business today.

And then the second conversation. We've just finished the first month of the HBO Max experience with Wonder woman.

Commensurate with the theatrical release and and this is obviously going to happen like 11 more times over the course of 'twenty 'twenty. One as you kind of do the day day thing with the movie slate.

If we multiply what happened with Wonder woman times 11 over the course of 2021, what does that look like from Warner brothers from a revenue and profit standpoint relative to what maybe 2019 would've looked like in a more normal year. Thank you.

So let me try to deal with the front end of that David and then John can give you a little bit of.

Context on the cash flow.

Obviously, what I'll say on that is we assume that.

We're running the business as we portrayed it to you.

We we have been debating how we wanted to set up our operations for video for some time.

And.

I think part of this when we step back and think about why we made this change.

As.

We figure we're out of lifecycle change in these products.

Net getting management teams focused in this way will be the best way to maximize value on the discrete product lines.

And so in the video of case.

We've seen a pretty dramatic change of what's occurring in the market and Theres a variety of things drive I mean, you all know about the declines in the pay TV lifecycle, but we also have the dynamic that's starting to occur which I think is a really important one to understand where we're starting to see pay TV disconnect a little bit from.

On broadband.

As virtual Mvpds start up of our own product itself in many respects has of virtual characteristic to it.

And of.

Fairly mature offering and so getting a management team really focus on what to do on the latter stages of the lifecycle of a mature product and ensuring that we manage it effectively.

I think it's a wise thing to do for that product on a standalone basis and Thats net.

It's one driver behind why we made that decision on.

The second driver behind why we made this decision as I believe we're at the front end of a dynamic of.

Customers wanting to ensure that they have connectivity and broadband access no matter, where they go and they want a simpler model around that and I think about our business being in a very unique position for both businesses and consumers to deliver on that promise.

And the innovation, that's going to be necessary from a product perspective.

Then pairing that with what are the new complementary products and services that customers might want to bundle or used with that connectivity.

<unk> is a new flow and that's a new growth for us and to give them. Another part of the management team really focused on that aspect of our business is how we simplify unified connectivity for our customer base, whether a consumer business.

There are fixed or mobile starting to think about what those virtual type of add ons are to that product that come with a very different delivery mechanism that what we've historically seen when we've been bundling what I would call. These high overhead.

Premise of intensive visit type services that we've traditionally had in the bundle.

And play into that is the strength of position for growth as the second part of why we want the management teams set up the way we have it right now and focused on that going forward and that just makes sense for how we're operating the business because of the time and place of where we are and we are absolutely comfortable that thats the right call for <unk>.

To operate our business moving forward.

And I will tell you I am not going to speculate on anything structural or M&A oriented we never do I'm not going to know, but I believe that what we're doing here is if the goal is to always run on asset for maximum value creation. This is the right strategy to run the asset for maximum value creation John.

Yes, both.

Yes, it's on a video of both the asset of broadband is so critical going forward.

Let me just quickly touch on the HBO, Max and theatrical piece, if I could so.

I think.

Where we are is that.

There is a difference between a.

<unk>.

What I'll call of tent pole release and of non tent pole release Wonder woman and the nature of that production value and what occurs if it is different than the <unk>.

Balance of many of the other movies on our slate we have other tentpole releases that occurred throughout the 2021 release schedules that are going to be equally as buzzworthy of wonder woman and we have in between those other of high quality offerings that fill that in that cater to maybe some time.

<unk>.

<unk> broad audience.

On the power of doing what we did and bringing the entire slid out of a tour of end user base. So we're going to see a little bit of a spiky. This in and what occurs and I don't think it's fair to say if we're if we're going to put you know call. It 17 18, whatever movies, we ultimately settle on in the release struck.

<unk> for the year.

We're not going to see the kind of subscribers spikes that maybe we saw in December and early January every time, we put a movie out but that really isn't the design and John of the plan we have.

We do have an opportunity to build marketing of promotion opportunities around those bigger releases that have broader buzz and broader application across the customer base and we're going to take every advantage of doing that and we're going to work filling on the niche between it.

I think I want to stress. This is a unique year and we did this as a unique year and probably appropriate to make a comment on some cases I'll say maybe of the.

The dynamic of the media and the press was a little oversold or a little intense on both ends of the spectrum around this from my point of view.

We told you.

When the team decided to make this move that we thought it was appropriate for this moment in time and the team made the call and I think it was of bold and aggressive Swain.

What was done with a lot of thought as to what needed to occur in the subscriber base and the balance of the value of the franchises between our theatrical on our streaming business was certainly nice to have of streaming business to present us. This option of how we use this content, but part of that call was just built on the day.

<unk> of what we thought the theatrical.

Movie going audience is we're going to look like in 2021.

And since we articulated that I would say the data points of come in that have been very consistent with the set of assumptions that we had at the front end of that I mean, just the last several weeks you've seen other studios continuing to snow plow releases moving them out of the first half of the year.

Moving them into the second half of the year, which further cements our point of view that we're going to see a very crowded.

<unk> field as we get into late 2021 in early 2022, and we don't believe that magically just because there's more content showing up in theaters. All at the same time that thats going to dramatically increase the size of the movie going population of at that time and so as we indicated.

Gated by making the write off.

We felt like we had a little bit of a spoiler on asset here that needed to be moved us more effectively and this was the right economic call of the balance of this across both sides and we think used.

Using it to balance out long live subscribers of Buildout of scaled platform.

Will allow us to have options on our distribution and using this this unfortunate set of circumstances around the pandemic for an opportunity make alignment eliminate out of lemons was the right call on this case.

Yeah.

I think we all have to understand we step back and think about the theatrical business I mean, nobody went to theaters in 2020 for the most of our there was a pandemic just like nobody got on airplanes, and nobody went to hotels and nobody goes to restaurants and all of those businesses had a little bit.

Dislocation because of that.

The theatrical business have a little bit of dislocation on I applaud the team for the move they made.

And trying to make the best of the circumstance for our circumstance around having a really strong theatrical slate that can help our streaming product.

Could we have maybe done some things a little bit differently on how we got through the front end of it anytime you're first and something there is no math sure Trailblazer Theres nothing perfect for you to read and I think that there is.

There were some things on the margin that maybe we'd do a little bit differently, but at the end of the day, it's going to get down to making sure people are fairly compensated and treated well on.

I think we know how to do that I think we've been good to the theater owners in the perspective that the exhibitors now have a planned and routine set of releases coming to them at a time when they really as we've talked about have other studio snow ploughing I think EMEA on this will ultimately shape up to be a good thing across the board.

Lord as we get through the emotional aspects that are that are bound to be there on a high anxiety environment like the pandemic and all things having been said with what we've seen in the front end of the numbers what our experience has been we are delivering on this in a way that we expected it's pretty consistent with the value shifts that we expect.

<unk>.

And feel pretty good about where we are in the early innings of this of John wanted to go ahead.

Couple of things one I would point out first of all of US from my perspective of 7 million net adds it's pretty pretty stout in this strategy.

And secondly, it's still early were 31 days out from Wonder Woman's release, I think and so we'll continue to pilot.

More importantly for everybody on the call I think at the Analyst day, we will get the team Jason and his team will get the App to talk to you about some of that further planned and go through that.

Your other question I think was with regard to.

On the planning process.

The guidance, we've given here today.

But for the exclusion of any commentary on CBS.

Is is what we have as assets in our portfolio as of January one and owning them for the full year other than crunchy role utterly already held for sale termination of Crenshaw.

And so yes, there is free cash flow in here from.

The video business.

I won't give you specific I will give you a specific number on that day, but you can assume based on the results of the business last year, it's probably going to be a lower number of inclusive next year than it is this year for the changes in customer base and so forth, but it is a business as usual of what I would call kind of business planning approach all of that being said feel really good.

About the.

Free cash flow.

Position and particularly as I mentioned.

Earlier question cash came in strong at the end of the year with regard of the fourth quarter with regard to customer activity. Both on the corporate business side as well as the consumer side and you guys can see on our bad debt.

Which are remarkably low team did a really great job of weeding out fraud and winning at.

Focusing on the best customers and it's showing up on our numbers.

I think hopefully that answers your question David Thanks for the earlier comment about my retirement on.

It will be a change that will be interesting.

Good luck.

Thank you.

Your next question comes from the line of Brett Feldman from Goldman Sachs. Please go ahead.

Yes. Thank you of taking the question if you don't mind like to follow up on some of the fiber commentary, obviously encouraging to see that you're gonna be picking up the pace of the build out this year.

Even after building out 2 million additional homes passed that would still be a small subset of the number of customer locations. In your total wireline footprint. How do you think about what portion of that footprint, which I think has 60 million of households, and it is potentially attractive in terms of being a great demo and having.

<unk> to reach them that generator and a compelling return for you in other words for how long can you keep adding 2 million homes a year on your footprint and NII, even asking his question correctly, because as you build out your <unk> footprint, which is really of national <unk> network using layers of spectrum across multiple bands. It would seem like wireless will increasingly be a V.

<unk> technology for reaching households beyond your traditional footprint, how do you think about the fixed wireless opportunity of Navy. How do you just think about the ability to be a provider of high speed residential broadband across the country ex.

So Brett.

On the I'm going to sound like a broken record, but it's really important on these long lived investments that we'd be pretty consistent internally so that the management team.

Get to a consistent level of execution year over year.

If I think about what has traditionally happened.

In outside plant access technology upgrades.

Been through a series of them over my career and I don't think this one is going to be a whole lot of different.

There is always the first third of the customer base.

Kind of of the low hanging fruit Slam dunk.

Is that part of the customer base that you cut your teeth on.

Get your processes squared away on get the vendor community up the first part of the cost curve.

It's like the no brainer of economically and you kind of make your decision, but thats, where youre going to start and I would say we went through that largely through that first third and the investment we've made over the last several years.

Then what happens is you get your up the learning curve.

The vendors start to scale and you start to get confidence in your economics, and your business processes start to improve.

And you start to see the marginal economics improve on our subscribers, which is what youre going to start to see happen on some of those broadband numbers on the fiber base that we've broken out for you as we move forward here over time. The next third becomes the opportunity and we're into that said the middle innings of the game if you want.

The next 30% to 60% of the customer base that we can work on our way through and you look at the economics around it makes sense.

Then you get into that last third of its always the hardest part I mean in many instances you are still sitting with the last third that in parts of the Rural America that.

So we really don't have effect of broadband options.

Oftentimes it's policy.

Sometimes it's a technology breakthrough that gets that last third and I would tell you right. Now if you wanted me to prognosticate on are you going to build fiber to that last third I don't think I'd want to prognosticate that that's a place that we're likely to go in the near term absent some kind of major subsidy.

The construct that comes into place I actually believe candidly, even if there was subsidy put in.

It would be a better use of taxpayer money to do something that was more hybrid oriented on the technology.

Acknowledges that are applied and not exclusively lean on fiber in that space, but we're we're several innings out from that actually coming to pass on.

A lot of time to work through it right now working in the middle innings of the game in the next.

30% of the customer base is where our focus has added as I shared with you on the previous call its $2 million. This year. The team executed well, we can do more than $2 million and start to ramp that up and when we demonstrate to the investor base. We're getting the kind of returns that you. All life. Then you should sure on to do that and be very.

Supportive of us moving down that path and it's my intent to characterize that and show that to you.

So how I think about the wireless and fixed base.

I've got I've got maybe a little different view on this on or maybe step back and think about it from a macro level.

If you go back and you look at consumption that's occurred in.

Customer basis.

Whether it be wireless centric.

Data use or fixed centric data use.

They've all been growing and they grow at a pretty consistent level and if you go and you talk to experts around consumer behavior over the next 10 years and you look at what's going on inside the household.

For example, just one major trend of people moving away from what used to be broadcast or multi cash streams efficiently delivered to unit cash streams discreet streams to one device and you just look at what's happening in consumer behavior over that there is a.

Stansell amount of video traffic to be moved of unit cash, it's going to driver of massive amount of consumption and this ratio between mobile and fixed consumption.

It has been at about 10 to one.

For many years this is not new.

And I got of I believe that that ratio of it may not be perfectly tens of one, but theres still going to be of pretty <unk>.

Consistent GAAP between mobile and fixed consumption or in other words, there is still a lot of traffic to be moved given consumer shifts and how they are using products and services.

And so.

I sit back and think about things.

I think about hybrid access technologies has been important.

But I don't know that the most ideal way to build a network is going to be to use fixed wireless to take on the bulk of what occurs in the four walls of a business or a home given the consumer behavior trends, we're going to see over the next 10 years.

Still having a very dense and rich fiber infrastructure is going to be necessary to be of an effective.

Network provider of overtime.

It doesn't mean, there won't be some segments of the population of my son, who lose on his own on an apartment.

And of Metro urban area that might actually be an individual that could work on on all wireless portion of his life in his twenties when he's he's independent.

Dependant single and in a single dwelling unit household and maybe thats a little bit different surrogate arrangement that has of wireless tail on it or is a robust one.

Wireless Lan inside of a managed dwelling unit, but I still think.

Reach and penetration of fiber is going to be important as we move forward John.

Brian I would add and youre, putting a fence around this issue as you kind of made this comment earlier on it's really important we have fiber to the neighborhood and many many locations and taking fiber to the home as of second step we havent done that yet. So you can think about our VTS al. If you think about our new Greenfield builds if you think about the.

On the neighborhood next to the V DSL or there is next to where we've got five of those of the opportunities and that DSL footprint is $35 million and when you add the five or two of its greater than that kind of <unk>.

Give you a kind of a framework for something that we could efficiently do just what John said about building out the 2 million. This year, that's where this rollout of the focus is going to be so I think of that as the way to think about the opportunity for us and yes, we have that ability we need to we need to continue the sales momentum that's going to be really critical and important to make it work, but in line with that.

So I think of focus of.

Easy capability for us.

Thank you.

Thanks.

Your next question comes from the line of Frank Lee from Raymond James. Please go ahead.

Great. Thank you can you comment on on any potential regulatory changes with title to potentially coming back.

Over the next 12 months.

And.

And can you give us a little bit more detail on as far as the fiber to the home sales.

On another 2 million homes this year to what extent of what can we expect.

That did you continue at that sort of pace or is that just sort of a year by year.

Kind of a decision.

So as I said in the neighborhood of 2 million homes.

Alright.

I would.

Tell you that as I just said Frank.

I want to be able to demonstrate to you that that 2 million pace as is a no brainer on a slam dunk on a great value driver for our business and of great subscriber count driver for our business.

I think this business can build more than $2 million of the year and are very profitable fashion.

But we're going to demonstrate to you. We can do that and then we'll come back to you and tell you about what that rate is so if we execute well when the management team execute will do I expect that he'll be back talking to you about <unk>.

<unk> to build that maybe leads in heavily to that that's.

What I'd like to see the management team stepped up to be able to work its way through.

Okay.

Where I think I'm sorry, the first part of your credit on two third of title II how.

How can I forget.

Look I think it's inevitable that we're now back into the web saw approach of the new administration of a new belief that despite four years of not a single data point to suggest that we have a problem to solve.

Nobody block of anybody nobody throttling anybody nobody bought doing anything inappropriate in terms of use of service and disclosing on how they're offering services to customers. We're going to go through another regulatory blood letting over this I expect it to happen.

And we're going to watch the cycle repeat itself in.

One would hope at some point that there is a.

A reason discussion around of policy that gets us away from this website and allows everybody to kind of kind of.

A more consistent and stable approach.

I don't know that thats going to happen, but we're certainly going to try and push and discuss it.

Where I think the third rail is on this issue as is the dynamic around what happens to the freedom of people, who invest in competitive markets to price their products and services appropriately.

And if we stay away from that third rail if the kind of latitude is in there to be able to price and do the right things in the market we're competitive markets exist.

I think everything will probably at the end of the day would be okay, but if for some reason the policy goes down a path of that isn't the case.

It hasn't in the past even when entitled to is in place we have the latitude.

To do what I felt like we needed to do but if for some reason policy went further to try to solve a problem that doesn't exist.

I'd have to step back and ask ourselves, how we're allocating capital around that and evaluate where that comes out.

I ask if it's the right place for us to go for our shareholders based on that dynamic and that very important lever for us being.

Taken away.

In order of variable I'd say in the market not lever.

So that's that's how I think about it right now.

I actually step back in.

From a policy perspective, Ironically think about what's happened over the course of the last year or two.

And the dynamics that are going on right now where the issue is.

Looking at metering and monitoring speech and what's occurring for People's access to platforms.

That there are more real and significant data points on how thats affecting society than anything to do with how internet service providers or delivery of bandwidth.

Homes, but I'll leave it to smarter people than media and figure that one out Brian I think when the industry is real proud of what's happening in the of course of the pandemic and the way we've allowed people to continue to work from home I'm sure. Many of you taking this call from loans and the industry as the investments they've made under the existing under the prior regime is working.

We are as a company more focused on broadband.

That's just the availability because it's out there but people is actually taking advantage of it for the homework situation for.

Others, and we're working on those aspects of it as well as filing all of the other aspects of our.

Yes infrastructure Bill another stimulus bill tax legislation, we're filing all of those things Frank So we will continue to pile of as close as you can imagine.

Hey, Jamie or types of one more question, yes, we've got time for one last question operator, Okay that question comes from the line of Tim Horan from Oppenheimer. Please go ahead.

Thanks, guys. John I know you said the move to virtualization of content is kind of accelerating and that seems to be happening with gaming compute and communications of Microsoft teams and zoom.

How are you positioned to take advantage of that are you better positioned the company that owns the pipes and some of the content or do you think it makes more sense for us.

Separate these assets or youre going to really unique seat.

How do you really take advantage of this accelerating move at this point.

Tim our biggest single most important bet in that regard is.

HBO Max.

I think about that broadly is.

Well today, we talk about it as in as part of evolving to enable on offer.

I've mentioned this before I view it as a really important foundation.

For broader customer relationships I mean this is this is the first big four rate of maybe legacy AT&T of thinking about having broader relationships with the customer base at a relatively low price points skew that.

That isn't exclusively dependent on infrastructure.

And to the extent, we are successful at having that relationship of most U S households.

We don't if we don't use that as an opportunity as a springboard for us to start thinking about how we extend those customer relationships across other opportunities either to own and operate content or engagement with a customer or to use the platform as a means for others to distribute.

We'd be losing a huge opportunity.

And so I think there's all kinds of things we wanted to do around the edge of making sure that we work with the right hyper scalar is to <unk>.

To virtualized and give our customers the opportunity to gain access into infrastructure. So that they can run their compute environments in their application environments of effectively that's all important and that's all meat and potato stuff, we need to do on our network, but I think about owning some degree of engagement with the customer our relationship amine.

The bill with them, having them interact with your service. So that you have insights as to who they are what they like what they do what their proclivities are being able to emotionally attached with them having a software platform that allows you to build the next building block of of product that extends into engagement that talks about.

Dynamics of changing consumption and social and interactive I think this is a really important dynamic for the health of our business and I know, it's longer term in nature, and I'm well aware of that folks who have maybe of tighter orientation of the financial return question why would you be pushing as hard as you are on this area.

It's because I feel pretty strongly about that and I think building large subscription bases of customers that pay us every month for something has been kind of of the hallmark of this business we have.

Really attractive dynamic on that in our overall revenues profitability today, we need to evolve that into what the next step is on this is just one of those steps in making that happen.

Thanks, very much Tim that's all the time for questions that we have.

With that one of turn it over to John Thank you for final comments.

One last order of business before I, let you go and Dave kind of hinted at it with us complement to John.

I do want to point out.

With very mixed emotions that we recognize that this is I believe John's 40, <unk> and last earnings call that it will be doing with all of us and.

He has been a very valued and longtime coworker of mine.

If you think about the fact that he's sat in this role as CFO of this company for nine years at speaks volumes in and of itself about his character and abilities.

Tremendous level of longevity for somebody who occupies a roll of significant as pressured as dynamic as the one of these had.

I've worked with John for 23 years of his career, which has been a long time and it's been a pleasure all along the way.

I could see a lot of things obviously of high integrity high impact high functioning and incredibly high regard as a person.

We're going to miss them at AT&T, I know youre going to Miss him in support of all of you.

Delighted about what lies ahead for him and his family of Michelle on his next chapter.

As you would expect the professionalism of navigating the handoff to what's going to be a very capable successor I'm just delighted to have passed all coming on and look forward to all of you getting to know them. It's gone incredibly smoothly. It's been first rate and I think as we join you of <unk>.

From now and passed all takes the reins you'll see what a nice smooth and even keeled transition thats been when we reconvene in so I hope you join me in giving best wishes to John in his next chapter and thank him for everything Union of course, thanks, John Thanks.

Thanks, John and thanks for the kind words, thanks to all of the other members of the management team here.

Family from me.

Specifically, thanks to my team the finance team just remarkable people across the board.

Pascal is kind of do a great job and you guys are going to be thrilled we're upgrading.

And I would tell you I just want to wish everybody on the call.

Good luck godspeed stays safe and remember on text and drive.

Thank you all.

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference. You may now disconnect.

[music].

[music].

Yeah.

Ladies and gentlemen, thank you for standing by welcome to the AT&T for Q 'twenty earnings call. At this time all participants are in a listen only mode. If you should require assistance during the call. Please press Star then zero and an operator will assist you offline. Following the presentation of the call will be opened for questions. If you would like to ask a question.

Please press, one and then zero and you will be placed in the question queue. If you are in the question queue and would like to withdraw. Your question you can do so by pressing one and then zero and as a reminder, this conference is being recorded I would now like to turn the conference over to your host Amir of Raws with dusky Senior Vice President Finance and Investor Relations. Please go.

[noise] ahead.

Thank you and good morning, everyone welcome to our fourth quarter call on of mirrors, what else he head of Investor Relations for AT&T John.

Joining me on the call today are John Stankey, our CEO and John Stephens, Our Chief Financial Officer.

Before we begin I need to call your attention to our safe Harbor statement.

It says that some of our comments today may be forward looking.

As such they are subject to risks and uncertainties results may differ materially.

And additional information is available on the Investor Relations website.

And as always our earnings materials are on our website.

I also want to remind you that we continue to be in the quiet period for the FCC spectrum auction 107. So unfortunately, we can't answer your questions about that today.

With that I'll turn the call over to John Stankey John.

Good morning, everyone happy new year to all of you and I Hope. This moment finds you all in good health with that let's go ahead and get started on slide three.

There are a lot of words to describe 2020, most of which wouldn't be nice to say in public but when I look at how we execute on on our priorities in the midst of this pandemic.

Keep coming back to one word and that's resilient.

We added one 5 million postpaid phones during the year, our most net adds in a decade and our highest value subscribers.

We reduced churn streamlined operations and had the nations fastest wireless network for.

For the second year in a row, we added more than 1 million fiber subscribers as customers move to our of higher speed services and perhaps most remarkable during this pandemic, we launched HBO Max and about seven months later.

We had more than 41 million HBO, Max and H B O domestic subscribers. Two years ahead of the plan. We shared with you in October of 2019, a resilient portfolio of subscription businesses continued to generate strong cash flows more than 27 billion to support our ability to invest.

In our growth areas and sustain the dividend and.

In fact, we finished the year with our total dividend payout ratio at a very comfortable level and on debt management, we made material progress in 2020 by reducing debt maturities over the next five years by about 50% and lowering our weighted average interest rate on debt to about 4% we continue to.

Transformed the business to drive efficiencies.

Our cost cutting initiatives generated about 2 billion of savings in $2020, we invested back into the business to drive subscriber growth and move our transformation initiatives forward.

And mobility, we streamline distribution shifted some stores to third party dealers and closed the others.

Total calls into our call centers are down by $30 million as we saw a dramatic shift to online transactions by our customer base. We retired more than 30 products in our portfolio.

Consolidated operations to capitalized on reduced complexity we.

We took our first steps and reduced our real estate footprint by more than 9 million square feet with more work underway on our longer term operating model.

We also realigned and streamlined our Warner media operations to better deliver on HBO, Max and the future of how consumers want to view content.

Those are a few of our 2020 of highlights let's talk about our 'twenty 'twenty one priorities on slide four.

We have three priorities this year.

Number one is straightforward.

Grow our direct customer relationships.

That begins with the vital connectivity services, we provide and the strength of our network.

We've had the overall fastest wireless network in the nation every quarter for the last two years according to <unk>.

And the fastest nationwide five G network in the second half of 2020 after our nationwide five G launch.

It shows the strength of our low band spectrum portfolio.

Our fiber net promoter scores continue to be materially better than cables and are helping drive strong subscriber trends and higher penetration rates.

There is strong demand for the reliability and speeds our fiber product provides.

Beyond our core connectivity services with.

Focused on our goal to establish relationships with most U S households, and HBO Max is the key here.

Through our software based entertainment platforms, we can learn more about our customers and create long lasting emotional connections with our award winning storytelling capabilities. Our second priority is the same as last year and that's continuing to transform our operations to be more effective and efficient.

We're restructuring businesses sunsetting of legacy networks, reducing corporate staffing levels and overall benefit costs.

As a result.

We're positioned to enter the post pandemic world is a more agile and efficient company. Our third priority is about continuing to be deliberate and strategic with how we allocate capital.

We plan to use free cash flow after dividends for the next couple of years to pay down debt. We remain focused on monetizing noncore assets and using those funds for debt reduction as well we're committed to sustaining our dividend at current levels and we will give top priority debt reduction at this time in summary I'm.

Pleased with the progress we've made the last two quarters. Despite COVID-19 challenges, we're seeing growth, where we want to see growth.

We're successfully redirecting our investments to support those areas.

We have more work to do but I'm confident we're on the right path.

Before I hand, it over to John I want to acknowledge that I'm sensitive to the reality that there's much going on in on around the business.

I know inside AT&T, we're working hard to reposition the company. So I can imagine you're working equally hard to keep up with us to that end I want to let you know we plan to host of virtual investor event in the second half of the quarter, where our leadership team will provide more insight into our business plans and we'll have a lot of time.

For a discussion on your questions look for more to come on that soon.

With that I'll turn it over to John to discuss some more detailed results from the quarter.

John Thanks, John and good morning, everyone. Let me start on slide six with a quick look at our fourth quarter subscriber metrics.

Wireless subscriber growth was the best it's been in years.

We had $1 2 million postpaid net adds including 800000 postpaid phones.

Postpaid phone churn was the second lowest quarter on record.

In its 0.76%.

Our fiber momentum also continues we added more than 270000 of fiber subscribers on a quarter HBO Max subscriber growth continues to outpace original estimates we added nearly 7 billion total subscribers for HBO, Max and H B O in 'twenty 'twenty alone.

On the trend of premium video declines continues to improve.

If you exclude the impact of keep America connected on third quarter. Net adds are premium video net adds improved sequentially for the fifth quarter in a row, let's now look on a consolidated and segment results starting with our financial summary on slide seven.

Adjusted EPS for the quarter was 75 cents.

That included Covid impacts to revenues from lower television licensing and production.

Changes to the theatrical release slate and lower international roaming.

Combined COVID-19 out of an estimated eight cents of EPS impact to fourth quarter, which we did include in our adjusted results. We've made the decision to operate our broadband and legacy voice operations separate from our video business unit and have recast our entertainment.

Results Accordingly in conjunction with this change in operations, we have reassessed the book values of our video assets, including goodwill and other long lived assets.

As a result, we recorded a pretax non cash impairment of $15 5 billion. Additionally, we adjusted for Nash way of loss to our benefit plans.

And a write off of production and other content inventory at Warner Media.

Stemming from the continued shutdown of theaters.

And film releases going on HBO Max.

We will provide more information in our SEC filings and on our website and in our annual report.

Revenues were down from a year ago with gains in mobility, partially offsetting pressure from Warner media and video, but revenues were up sequentially Foreign exchange had a negative impact of about $200 million in revenue primarily in our Latin America segment cash flows for the quarter end of year underscore our.

Customer base and liquidity cash from operations came in at $10 1 billion for the quarter.

And $43 1 billion for the year.

Free cash flow was $7 7 billion for the quarter and $27 5 billion for 2020.

For the full year, our total dividend payout ratio was just under 55% gross capital investment of about 20 billion in 2020, and we continue to invest heavily in our growth areas even during a pandemic.

In addition, we invested about 800 million in HBO Max in the fourth quarter and about $2 1 billion for the full year.

Now look at our segment operating results starting with our communications segment on slide eight.

Communication business showed revenue growth this quarter, thanks to a strong performance in mobility.

We told you we intended to give our best customers, our best prices and offers and you are seeing the benefits of that logic.

Strong subscriber gains and people moving to unlimited plans helped drive service revenue growth in the quarter.

Even with continuing pressure on international roaming.

More than 60% of our postpaid phone base is on on an unlimited plan churn. It's been impressive the last two quarters have been our lowest postpaid phone churn quarters on record.

And for the full year of remarkable 16 basis point improvement in postpaid phone churn of our successful retention of approach.

Does require some upfront investment.

But the lower churn levels and an improved subscriber count make this the right economic trade.

As I mentioned, we have split the entertainment group into two reporting units broadband and video and AR.

A full reconciliation of the two units is in our support documents, but for comparative purposes here on the trends in Entertainment group. The way you had been used to seeing them.

We had our best AT&T fiber of fourth quarter net adds even with more challenges associated with the pandemic.

<unk> penetration continues to grow it's now with 34% of.

Video unit premium video losses were improved year over year, thanks to lower churn and our focus on high value customers. We continue to drive <unk> growth in both video and IP broadband in fact premium video ARPA was up more than 5%.

Our business wireline team continues to effectively manage the transition of the business and deliver solid results amidst the pandemic.

Solid cost management has been key to delivering solid EBITDA all year long.

Let's move to Warner Media, Atlanta America results, which are on slide nine.

Warner Media continues to be impacted by the pandemic as we've seen across that entire industry.

We did see solid gains in subscription revenues. Thanks to the rapid growth of HBO. Max We now have 41 million domestic HBO, Max and HBO subscribers and about 16 1 million worldwide as we prepare for the international launch of HBO. Max later this year.

We now have more than 10 million customers, who combine one or more of our connectivity products with HBO, Max or H B O advertising revenues also grew driven by political advertising and C. N N, which was number one in all of cable viewership not just news in the fourth quarter.

Because of the pandemic, we introduced a unique one year plan and which Warner brothers will continue to exhibit films theatrically worldwide, while adding an exclusive one month access period on HBO Max silo.

Simultaneous with the film's domestic release.

Our goal is to make the best of a very challenging situation for all involved.

Includes filmmakers and talent theater owners and most importantly, the movie going public on.

Our Latin America operations.

Turning to work to recover from the pandemic, we added more than 500000 subscribers in Mexico, and almost 50000 subscribers and video helped in part by our over the top offering in Brazil.

Latin America revenues continued to be challenged by FX slow economies in Covid, even with this Mexico EBITDA improved year over year for the second quarter in a row and brio continues to generate positive EBITDA and cash flow on a constant currency basis.

Now, let's go to slide 11, four of 'twenty 'twenty one guidance.

Last year was a difficult year for us to forecast for obvious reasons.

There remain uncertainties in 2021 with the rate and pace of recovery from the pandemic around the globe impacting media travel and employment against that backdrop. Our current outlook for 2021 is as follows.

We expect consolidated revenue growth of about 1% with wireless service revenue growth of 2% and a gradual improvement in Warner media topline is.

As noted previously we plan to reinvest all of our savings from our transformation efforts to support our customer count momentum in our growth businesses.

Combined with ongoing declines on our premium video segment. This could lead to adjusted EBITDA declining slightly in 2021 versus this year adjust.

Adjusted EPS is expected to be stable with 2020, we expect gross capital investment in the $21 billion range and net capex of about $18 billion.

Primary difference between the two is from vendor financing initiatives, we have in place and anticipated first net reimbursement free cash flow has been resilient for us even during the pandemic and we expect that resiliency to continue in 2021.

With a $26 billion range target for free cash flow.

We will also continue to focus on bringing down debt.

John mentioned, we expect to use free cash flow dollars after dividends to pay down debt.

We continue to look for opportunities to monetize assets and apply those proceeds to pay down debt.

Including crunchy role.

Which we expect to close later this year, we do plan to provide an update on our leverage outlook longer term debt ratio target. Once the auction quiet period ends as 2020 showed us things can change quickly. However, we are encouraged by our ability to adapt to those changes while driving.

Increased customer accounts generating strong cash flows.

Investing in areas of strategic focus on.

All while maintaining a disciplined approach to our capital allocation and shareholder return strategies as John mentioned the plant out of a virtual analyst event later in the quarter to talk about this more.

From here, that's a presentation, we're now ready for Q&A.

Operator, we're ready to take the first question.

Thank you, ladies and gentlemen, if you'd like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero command if youre using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question. Please press one zero at this time and one moment. Please for your first question.

Your first question comes from the line of Simon Flannery from Morgan Stanley. Please go ahead.

Okay. Thank you very much good morning, so looking forward to the analyst day, and perhaps you could start with the macro environment. What are you assuming in terms of the backdrop is are you really assuming things continue to be much just they are or do you have a pick up in the second half on things like roaming on advertising any comments just about.

Trends with what CIO sort of seeing et cetera that underscores that and then within the Capex budget of are there any material changes within your priorities. There for example, your fiber build out I know that's a big priority is there an opportunity to ramp that up or additional spend on <unk> rollout any color there would be great. Thank you.

So some of those.

John Let me, let me take that on the macro side. The one thing we saw at the end of last year was of customers' willingness to pay our bad debt is really quite solid.

Quite positive trends on both on the consumer on the corporate side.

So while were not good.

Overly excited.

A positive sense.

What we have built into our plans are.

You will more of the kind of current environment for the next six months with some second half of it really close to the fourth quarter pick up and.

The pandemic relief activities.

So well see more theater going probably in the fourth quarter than we did this year, we'll see some more travel but in no way did we envision a hockey stick or any kind of dramatic increase it's really much more of a general staying the course there is some slight improvements on standard of course.

Secondly withdrew the one thing I would add though is the cash collections have been strong and resilient feel really good about that so it gives us some some comfort.

Secondly, whats your read of the Capex I would say it this way.

If you look at the kind of the growth capital being put in the ground, it's up $1 billion.

There'll be some changes in what we spent last year I continue to expect a.

A little bit lighter on the video satellite type side of the business because of the success of AT&T TV and our focus on churn reduction as opposed to growth. So there's.

More money, there I think youll see us.

Continuing to spend money on wireless, but we're well into and well completed with the first set build so.

So we'll have some ability to manage their the net.

So as we will see an increase in the fiber build and.

And the opportunity to add.

Some more on sales opportunities to that inventory Hello, John I missed anything from your perspective, it will be more precise and John will be building somewhere around 2 million fiber.

Residential locations.

Net neighborhood of Thats kind of what we've got the team tested do give you senses.

That increase will be and I think the only other thing I would comment on.

Relative to the wireless spend overall.

This shift that's occurring we put on this amount of capacity out over the last several years in combination with a lot of the work we spoke to balance the first net upgrades.

There's a there's a kind of a shift in mix going on within the wireless build on.

Now moving away from what I would call capacity, that's on existing spectrum bands.

Starting to see ourselves prepped for.

Possibly using other spectrum that may come into service at some point in time et cetera. So we got a little bit of of dynamic going on of those shifts in the overall wireless program.

Okay. So thanks for your question on Capex, Okay, It's capex second half loaded them.

We don't have anything that I would tell you is any different than what you've seen we're actually.

We started doing engineering, if you're worried about fiber Simon we started doing engineering on the fiber build this year I told you we were getting ready to go and it was my intent to get going and the teams are already out turning things up we had the conversation last quarter I don't want to repeat myself.

As shared with you that this build is a little bit different than when we initially started.

As we have wire centers are already fiber capable of the infrastructures in place, we're going back in and picking up the next adjacent neighborhood or the next successive area and as a result of that.

To get up and moving is not the lift and it was the first time, we started ramping up on this so we've got a little bit of smoother dynamic around it and what you might think because of the increase from the fiber dynamic.

Thanks very much for the question.

If we can get the next question. Your next question comes from the line of John Hodulik from UBS. Please go ahead.

Great. Thanks, guys.

First of all of a related question.

And what's driving the 22% decline in the.

<unk> segment, where there.

No additional costs associated with splitting it out from from.

From video and sort of.

How do you expect that to lots of progress through the year, especially with the with the increased fiber build you expect as we go on and then secondly, any update on the timing of that.

Launch or anything you can tell.

All of us on.

On new content of our reliance on on sports and news.

John Let me take the first one on with regard to the broadband piece.

Quite frankly, it's really the efforts we've had to do.

Increase our sales capabilities add new customers the amounts that we built out in the prior years. It's also has to do with it.

Of the recognition of that we are providing HBO Max.

For all of our good customers and so there is an intercompany charge there so within the umbrella of AT&T and the economics of there. So we feel good about it but that's also in there I would I would tell you.

As you all know the.

The network infrastructure customer service like fiber is a long term day and we've gone through the process of spending times feel very good about the long term returns and the average, but yeah, we're going to be spending some money as we did last year to invest in net customer growth you saw the 600000 plus 650000.

So net adds last six months.

We feel very good about that particularly when we look at the churn numbers, particularly when we look at the customer satisfaction of the NPS scores.

So.

Ed.

Lately.

Police support the fact, but yes, there is some investment there with regard to the Avon.

We are expecting to launch our international version of HBO. Max later, this year as well as the <unk> I.

I'm not ready to give any day its John I don't know if you want to say I think what we're seeing we're still shooting for a second quarter launch on a lot and I think I would point out equally as important as the Latin America launch.

HBO Max of it we've been working really hard on and will be an important driver for us on future growth and getting ourselves embedded into the international front on.

On a unified platform approach to things. So you should expect as we get into the second quarter, there's going to be a lot of activity and change going on here.

One of the reasons, we're kind of.

Trying to pinpoint the exact date on it as you know we've been working through pandemic related production issues.

Ramping that back up has been.

Pretty significant task the team has done a remarkable job getting ourselves back into that business and working through the dynamics safely. It puts a little bit of overhead on things in terms of speed of production and what we're able to do and there is a bit of rework that goes on with trying to work around the limitations.

Of a pandemic based environment as a result of that we're still fighting through getting the pipeline dropping the content at the right rate of the pace that we wanted to in the first quarter. This year continues to be a bit of of stretch in that regard as we cycled back into production.

Our expectations are that we start to hit our stride as we get into the second quarter and it's really important as we put these new iterations of the product.

We have ourselves on a good position in terms of the content of inventory and so as we're kind of go on hand to mouth on these right now John will be a little bit more discreet on when we announce whats coming out of exactly what month simply because it's just that tough in that much of a battle.

Literally show by show to get this stepped on and get it into the funnel and we're working hard to do that and we're hope of past any of the unexpected dynamics like the California.

Closures that went on over the last several weeks.

I'll put a couple of twists and turns on the road and we've got the worst behind us but.

I'm, a little chase right now with everything on the pandemic, so I don't want to over promise anything.

Thanks, guys. Thanks, John.

Your next question comes from the line of Phil Cusick from Jpmorgan. Please go ahead.

Hey, guys. So.

So much to ask thank you. So in wireless John you talked about growing customer relationships overall is a priority for the company should we assume that means the current level of promotion of upgrades that effort continues.

Then second follow up.

For John Stephens, just really quick you mentioned, an updated leverage target that you would talk about it on an analyst day I know you can't really talk about where leverage goes around an auction.

Do you anticipate changing the target from the current two on a two five turns thanks very much.

So Phil.

Look we're we're on a dynamic market and things change all the time, we're going to look at our promotion strategies of adjustment accordingly.

And determine what we need to do to continue to the end of positioned.

Maintain and grow share I think it's really important that we continue to have a growing business.

There is the management team is focused on two things we like the momentum I think we'd like to be a little bit more efficient with the momentum we've done some really good stuff.

And had some really good progress on.

On self funding a lot of what we've been doing on the market, but we're not self funding all of it yet.

And so our continued work on trying to manage the efficiency and effectiveness of this business. So that we can be in a more aggressive posture on the market is something that this team is working on every quarter.

Tried to be diligent and reasonable on our guidance to you and make sure that we have high confidence in what we share.

What I am turning back to the management team is a task that I'd say is as more aggressively.

To the extent that this management team delivers and they had been doing a remarkable job of doing that over the last several quarters.

Does that mean that that's going to give us more room to do more on the market continue to maintain a posture that.

I think is totally appropriate bringing in high value customers of the right kind of customers, we want going down on the swim lanes that we set out for ourselves that we think we have a unique place to be which is winning in the public sector with our first net abilities using our deep enterprise customer relationships to go deeper into their customer base.

With the affinity programs, ensuring that we're getting in the mass market with attractive offers like HBO, Max and what's associated with that that has brought in a really attractive gross adds.

And treating our embedded base well.

That is that is the strategy and we're going to continue to do that I think youre seeing that to be the industry leader ensuring this quarter.

I think we called it right. We said that we don't have customers that are upset about our network. They like it we don't have customers that are upset about our service. They are satisfied with our service we had customers who are interested in finding new devices. We shared with you that we had a little bit more agent population on device longevity.

On the rest of the industry, we've been targeted on how we do that I think getting a new 30 year lease on life of the 30 month lease on life with these customers of wish it was 30 years.

That's a very appropriate exchange from the franchise right now given everything we have in front of us.

Yes, Phil with regard to.

The update of the update at the Analyst Conference first and foremost.

What we've said and we'll continue to say is free cash flow of in excess of dividends is kind of go to pay down debt proceeds from the sale of assets is going to pay down debt.

All of the others.

We would prefer to be able to give you more information about a leverage target we can't do that at this time because of the status of the C band auction and our inability to kind of on that's all we're trying to tell you that we understand that we would normally give that too that would be appropriate, but because of the SEC rules. We can't so we will commit that we will update you on.

And thats part of that.

That's the story I think.

One thing that piece of it.

Seven 5 billion last year of 26, we're guiding for next year of $15 billion of dividend a lot of money to use to pay down debt. That's the message. We wanted to give you and the proceeds from things like cultural kind of used to pay down debt. So we feel good about what we've done over the last three years with regard to managing the debt and we feel really good about our ability going forward.

But the comment about Leverages, just we feel its appropriate for us to give teeth, we can't because of the rules around the C band auction.

Okay. So thats a maybe this year leverage target not a permanent changing the trend of cost leverage start.

Thanks, Jeff will give you all of that day.

As Kevin said, we can we can talk about it quite frankly, I just can be that'd be really careful.

We'll go from there.

And move forward, but our guidance on this the real pieces.

Cash flow in excess of the dividend.

And proceeds from asset sales go to pay down debt and if you look at our net debt at the end of the year I think we've shown.

We've got a good record to prove that we are doing what we said we're going on.

Thanks, guys.

Yeah.

Your next question comes from the line of Michael Rollins from Citi. Please go ahead.

Thanks, and good morning, I, just wanted to follow up on the wireless business.

Just because of couple of questions. So with the guidance to growth service revenue at about 2% can you frame the opportunity to improve <unk> for your wireless customers over the next 12 to 24 months and then also with that target and given where the fourth quarter service revenue growth like.

That mean net AT&T may be exiting the fourth quarter of 'twenty one.

Service revenue growth above that 2% for the whole year.

Relative to maybe where you are starting earlier in the year from thanks.

Michael Let me, let me take a quick just on Matt pointed out I think youre aware of but the first quarter.

2021 of this quarter, we are now.

Last year, we still head of international roaming.

That compares the compares get a need of comparator. If you will to an avalanche of international roaming so that'll be one set the next the next.

Three quarters will presumably be without the international roaming so the numbers will be different that's one and I would just say that to you. So I don't want to get into the quarterly analysis, because I just don't want to confuse things we talked about the full year secondly, the real story on the service revenue is customer growth and quite frankly, we talk about.

The 1 million two of postpaid net adds.

Inside of.

$1 two postpaid adds last quarter EMEA five of voice net adds.

Mostly in the last six months all of that but the reality is to we have close to 16 million total wireless connection net adds during the quarter during the year. When you include.

All of the connections and we're seeing and we believe that our strategy is the ones John just talked about with treating our best customers one of the best offers.

And things like that have the opportunity to win for us the best network and so forth and so we're optimistic about the ability to continue to grow that customer base. That's what's driving the service revenue with regard to the ARPA growth. There continued opportunities go into the upscaling of these packages with the great out of.

<unk> opportunity to offer HBO, Max which is certainly got a got a tailwind behind it of the success of it you saw the 7 million HVO adds best we've added not only 10 years, but the best in the total of 10 years better than the total last 10 years.

That is going to we believe that that kind of packaging with wireless is going to help.

And such that we're going to be able to grow it and then grow the RFP from getting people to buy up at just from the global share plans and John limited, but the buy up from the basic unlimited all of the way up to the elite. That's the story, we're not giving specific.

Percentages dollars, but thats, what bill said confidence in wireless service revenue growth, which really drives the overall growth of the company's 1% guidance on revenue growth that in some or some tail winds from the comeback of Warner media.

Okay.

Your next question comes from your next question comes from the line of David Barden from Bank of America. Please go ahead.

Hey, guys. Thanks for taking my question and John I guess this is going to be your last quarterly conference call. So we will see at the analyst day, but congrats on then on everything we've gotten done.

Thanks, Ed.

I just wanted to two questions one is <unk>.

Separating out the video business, taking the 15 5 billion write down is going to fan the flames of the conversation around divesting that satellite business could you kind of either John or not and could you.

Elaborate a little bit on on kind of what that might look like.

In the 26 billion of free cash flow guidance is coming from the from the satellite video of business today.

And then the second conversation. We've just finished the first month of the HBO Max experience with Wonder woman.

Commensurate with the theatrical release and and this is obviously going to happen like 11 more times over the course of 'twenty 'twenty. One as you kind of do the day day thing with the movie slate.

If we multiply what happened with Wonder woman times 11 over the course of 2021, what does that look like from Warner brothers from a revenue and profit standpoint relative to what maybe 2019 would've looked like in a more normal year. Thank you.

So let me try to deal with the front end of that David and then John can give you a little bit of.

Context on the.

Net of cash flow obviously.

I'll say on that is we assume that.

We're running the business as we've portrayed it to you.

We we have been debating how we wanted to set up our operations for video for some time.

And I think part of this when we step back and think about why we made this change.

As.

We figure were out of lifecycle change in these products.

Getting management teams focused in this way will be the best way to maximize value on the discrete product lines.

In the video case.

We've seen a pretty dramatic change of what's occurring in the market and Theres a variety of things right. I mean, you all know about the declines in the pay TV lifecycle, but we also have the dynamic that's starting to occur which I think is a really important one to understand where we're starting to see ptv disconnect a little bit from.

Broadband is <unk>.

Virtual mvpds start up of our own product itself in many respects has of virtual characteristic to it.

It's a fairly mature offering and so getting a management team really focused on what to do on the latter stages of the lifecycle of a mature product and ensuring that we manage it effectively I think is a wise thing to do for that product on a standalone basis and thats.

That's one driver behind why we made that decision.

The second driver behind why we made this decision as I believe we're at the front end of a dynamic of.

Customers wanting to ensure that they have connectivity and broadband access no matter, where they go and they want a simple or model around that and I think about our business being in a very unique position for both businesses and consumers to deliver on that promise.

And the innovation, that's going to be necessary from a product perspective, and then pairing that with what are the new complementary products and services that customers might want to bundle or used with that connectivity I think is a new flow and that's a new growth for us and to give them. Another part of the management team.

Really focused on that aspect of our business is how we simplify unified connectivity for our customer base, whether consumer business, whether fixed or mobile starting to think about what those virtual type of add ons are to that product did come with a very different delivery mechanism that what we've historically.

Quickly seen when we've been bundling what I would call these high overhead press.

Premise intensive visit type services that we've traditionally had in the bundle.

And play into that is the strength of position for growth as the second part of why we want the management teams set up the way we have it right now and focused on that going forward.

That just makes sense for how we're operating the business because of the time and place of where we are and we are absolutely comfortable that thats the right call for how to operate our business moving forward.

I will tell you I'm not going to speculate on anything structural or M&A oriented we never do I'm not going to know, but I believe that what we're doing here is if the goal is to always run on asset for maximum value creation. This is the right strategy to run the asset for maximum value creation John.

Yes, both.

Yes, it's on a video of both the asset of broadband is so critical going forward.

Let me just quickly touch on the HBO, Max and theatrical piece of if I could so.

I think.

Where we are is that.

There is a difference between a.

What I'll call a tent pole release and of non tent pole release Wonder woman and the nature of that production value and what occurs and it is different than the <unk>.

Balance of many of the other movies on our slate we have other tentpole releases that occurred throughout the 2021 release schedules, they're going to be equally as buzzworthy of wonder woman and we have in between those other of high quality.

Offerings of fill that in that cater to maybe some times.

Less broad audience.

That's the power of doing what we did and bringing the entire slid out of a tour of end user base. So we're going to see a little bit of a spiky. This in.

And what occurs.

I don't think its fair to say if we're.

We're going to put.

Call. It 17 18, whatever movies, we ultimately settle on in the release structure for the year.

We're not going to see the kind of subscribers spikes that maybe we saw in December and early January every time, we put a movie up but that really isn't the design intent of the plan we have.

We do have an opportunity to build marketing of promotion opportunities around those bigger releases that have broader buzz and broader application across the customer base and we're going to take every advantage of doing that and we're going to work filling on the niche between it.

I think I want to stress. This is a unique year and we did this as a unique year and probably appropriate to make a comment.

On some cases of I'll say maybe of the.

The dynamic of the media and the press was a little oversold or a little of intense on both.

Both ends of the spectrum around this from my point of view.

We told you.

When the team decided to make this move.

We thought it was appropriate for this moment in time and the team made the call and I think it was of bold and aggressive Swain.

We was done with a lot of thought as to what needed to occur on the subscriber base and the balance of the value of the franchises between our theatrical on our streaming business was certainly nice to have of streaming business to present us. This option of how we use this content, but part of that call was just built on the day.

<unk> of what we thought the <unk>.

That's our goal.

Movie going audience is we're going to look like in 2021.

And since we articulated that I would say the data points of come in that have been very consistent with the set of assumptions that we had at the front end of that I mean, just the last several weeks you've seen other studios continuing to snow plow releases moving them out of the first half of the year.

Moving them into the second half of the year, which further cements our point of view that we're going to see a very crowded.

Trickle field as we get into late 2021 in early 2022, and we don't believe that magically just because there's more content showing up in theaters. All at the same time that thats going to dramatically increase the size of the movie going population of at that time.

As we indicated by making the write off.

We felt like we had a little bit of a spoiler on asset here that needed to be moved us more effectively and this was the right economic call of the balance of this across both sides and we think used.

Are you using it to balance out long live subscribers of Buildout of scaled platform.

Allow us to have options on our distribution and using this this unfortunate set of circumstances around the pandemic for an opportunity make alignment lemonade out of lemons was the right call on this case.

And.

I think we all have to understand we step back and think about the theatrical business I mean, nobody went to theaters in 2020 for the most part there was a pandemic just like nobody got on airplanes, and nobody went to hotels and nobody goes to restaurants and all of those businesses had a little bit of.

Dislocation because of that.

<unk> business had a little bit of dislocation of and I applaud the team for the moves they've made.

And trying to make the best of the circumstance for our circumstance around having a really strong theatrical slate that can help our streaming of products could we of maybe some things a little bit differently on how we got through the front end of it any time of your first and something there is no matter of Trailblazer Theres nothing perfect.

For you to read and I think that there is.

There were some things on the margin, maybe we do a little bit differently, but at the end of the day, it's going to get down to making sure people are fairly compensated and treated well on.

I think we know how to do that I think we've been good to the theater owners in the perspective that the exhibitors now have a planned and routine set of releases coming to them at a time when they really as we've talked about have other studios snow ploughing I think in the end this will ultimately shape up to be a good thing across the board.

<unk> as we get through the emotional aspects that are that are bound to be there on a high anxiety environment like the pandemic and all things having been said with what we've seen in the front end of the numbers what our experience has been we are delivering on this in a way that we expected it's pretty consistent with the value shifts that we expect.

Good.

And feel pretty good about where we are in the early innings of this with John Why don't you go ahead and say a couple of things one went on.

First of all of US from my perspective, 7 million net adds it's pretty pretty stout and strategy.

And secondly, it's still early.

31 days up from Wonder Woman's release, I think and so we'll continue to pilot.

More importantly.

On the call I think at the Analyst day, we will get the team Jason and his team will get the opportunity to talk to you about sort of the further planned and go through that.

The other question I think was with regard to.

On the planning process.

The guidance, we've given here today.

But for the exclusion of any commentary on CBS.

What we have as assets in our portfolio as of January one and owning them for the full year other than crunchy role other than the already held for sales termination of Crenshaw.

And so yes, there is free cash flow in here from.

The video business.

I won't give you specific I will give you a specific number on that day, but you can assume based on the results of the business last year, it's probably going to be a lower number of inclusive next year than it is this year for the changes in customer base and so forth, but it is a business as usual on what I would call kind of business planning approach all of that being said feel really good.

<unk>.

The free cash flow.

Position and particularly as I mentioned earlier question cash came in strong at the end of the year with regard of the fourth quarter with regard to customer activity. Both on the corporate business side as well as the consumer side and you guys can see on our bad debt.

Remarkably low team did a really great job of.

Im getting at.

Focusing on the best customers and it's showing up on our numbers.

I think hopefully that answers your question David Thanks for the earlier comment about my retirement on it will be a change there will be interesting.

Good luck thank.

Thank you.

Your next question comes from the line of Brett Feldman from Goldman Sachs. Please go ahead.

Yes. Thank you for taking the question if you don't mind like to follow up on some of the fiber commentary, obviously encouraging to see that you're gonna be picking up the pace of the build out this year.

Even after building out 2 million additional homes passed that would still be a small subset of the number of customer locations. In your total wireline footprint. How do you think about what portion of that footprint, which I think of 60 million households, and it is potentially attractive in terms of being a great demo and having.

<unk> to reach them that generate a compelling return for you in other words for how long can you keep adding 2 million homes a year on your footprint and NII, even asking his question correctly, because as you build out your <unk> footprint, which is really of national <unk> network using layers of spectrum across multiple bands. It would seem like wireless will increasingly be a V.

<unk> technology for reaching households beyond your traditional footprint, how do you think about the fixed wireless opportunity and maybe how do you just think about the ability to be a provider of high speed residential broadband across the country ex.

So Brett.

I'm going to sound like a broken record, but it is really important on these long lived investments that we'd probably be pretty consistent internally. So that the management team can.

To get to a consistent level of execution year over year.

If I think about what has traditionally happened.

And outside of the plant access technology upgrades.

I've been through a series of them over my career and I don't think this one is going to be a whole lot of different.

There is always the first third of the customer base.

And of the low hanging fruit Slam dunk.

That is the heart of the customer base that you cut your teeth on.

Get your processes squared away on get the vendor community up the first part of the cost curve and it's like a no brainer of economically.

You kind of make your decision, but thats, where youre going to start and I would say we went through that largely through that first third and the investment we've made over the last several years.

Then what happens is you get your up the learning curve and the vendors start to scale and you start to get confidence in your economics and your business processes start to improve and you start to see the marginal economics improve on our subscribers, which is what youre going to start to see happen on some of those broadband numbers on the.

Fiber base that we've broken out for you as we move forward here over time. The next third becomes the opportunity and we're into that section of the middle innings of the game if you want.

The next 30% to 60% of the customer base that we can work on our way through and you look at the economics around it makes sense.

Then you get into that last third and it's always the hardest part I mean in many instances you are still sitting with the last third that in parts of the Rural America that.

Still really don't have effect of broadband options.

Oftentimes it's policy, sometimes it's a technology breakthrough that gets that last third and I would tell you right. Now if you wanted me to prognosticate on are you going to build fiber to that last third I don't think I'd want to prognosticate that that's a place that we're likely to go in the near.

In term of absent some kind of major subsidy construct that comes into place I actually believe candidly if even if there was subsidy put in.

It would be a better use of taxpayer money to do something that was more hybrid oriented of the technology.

Technologies that are applied and not exclusively lean on fiber in that space, but we're we're several innings out from that actually coming to pass on.

A lot of time to work through it right now working in the middle innings of the game in the next <unk>.

30% of the customer base is where our focus has added as I shared with you on the previous call its $2 million. This year. The team executes well, we can do more than $2 million and start to ramp that up and when we demonstrate to the investor base. We're getting the kind of returns that you. All life. Then you should sure so on to do that and be very <unk>.

Part of of US moving down that path and it is my intent to Jeff.

<unk> that ensure that too in terms of how I think about the wireless and fixed space.

I've got I've got maybe a little different view on this and I'll, maybe step back and think about it from a macro level.

If you go back and you look at consumption that's occurred.

And customer basis.

Whether it be wireless centric.

Data use or fixed centric data use.

They've all been growing and they grow at a pretty consistent level and if you go and you talk to experts around <unk>.

Consumer behavior over the next 10 years and you look at what's going on inside the household.

For example, just one major trend of people moving away from what used to be broadcast or multi cash streams efficiently delivered to unit cash streams discreet streams to one device and you just look at what's happening in consumer behavior over that there was a substantial amount of video traffic to be moved to unit cash.

Yes.

Moving to drive a massive amount of consumption and this ratio between mobile and fixed consumption.

He has been at about 10 to one for for many years. This is not new.

I got it I believe that that ratio of it may not be perfectly tens of one, but theres still going to be of pretty consistent GAAP between mobile and fixed consumption in other words theres still a lot of traffic to be moved given consumer shifts and how they are using products and services.

And so.

As I sit back and think about things.

I think about hybrid access technologies has been important.

But I don't know that the most ideal way to build a network.

Going to be to use fixed wireless to take on the bulk of what occurs in the four walls of a business or a home given the consumer behavior trends, we're going to see over the next 10 years.

I think still having a very dense and rich fiber infrastructure is going to be necessary to be of an effective.

Network provider over time no it.

It doesn't mean, there won't be some segments of the population of my son, who lose on his own on an apartment.

And of Metro urban area that might actually be an individual that could work on on all wireless portion of his life in his twenties when he's he's independent.

The single and in a single dwelling unit household.

Maybe that's a little bit different surgeon arrangement that has of wireless tail on it or is a robust wireless lan inside of a managed dwelling unit, but I still think.

Reach and penetration of fiber is going to be important as we move forward.

The other thing I'd add and Youre, putting a fence around the tissue. John made this comment earlier on it's really important we have fiber to the neighborhood and many many locations and taking fiber to the home as of second step. We havent done typically think about our VTS al. If you think about our new Greenfield builds if you think about the neighborhood next to.

<unk>.

The DSL or there is next to where we've got five of that Brian.

Those of the opportunities and then Bds South footprint is 35 million and then when you add the five or two of its greater than that and I'll give you a kind of a framework for something that we could efficiently do just what John said about building out the 2 million. This year, that's where that's where a lot of the focus is going to be I think of that as the way to think about the opportunity for us and yes, we have that ability we need.

We need to continue the sales momentum that's going to be really critical and important to make it work, but in line with net debt. So I think of focus of it.

Easy capability for us.

Thank you.

Yes.

Your next question comes from the line of Frank Lee from Raymond James. Please go ahead.

Great. Thank you can you comment on on.

Any potential regulatory changes with title to potentially coming back.

Over the next 12 months.

And.

And can you give us a little bit more detail on as far as the fiber to the home sales.

And another 2 million homes this year to what extent do we can we expect.

Do you continue at that sort of pace or is that just sort of a year by year.

Kind of a decision.

So as I said in the neighborhood of 2 million homes.

Alright.

I would.

So you that as I just said Frank.

I want to be able to demonstrate to you that that 2 million pace.

No, Brian or on a slam dunk on a great value driver for our business and of great subscriber count driver for our business.

I think this business can build more than $2 million of the year and are very profitable fashion.

But we're going to demonstrate to you. We can do that and then we'll come back to you and tell you about what that rate is so if we execute well when the management team execute will do.

Do I expect that I'll be back talking to you about 'twenty two build that maybe leads in heavily to that.

That's what I would like to see the management team stepped up to be able to work its way through.

The.

Where I think I'm sorry, the first part of your credit IL two third of title II.

How can I forget.

Look I think it's inevitable that we're now back into the web saw approach of the new administration of a new belief that despite four years of.

Not a single data point that suggests that we have a problem to solve.

Nobody blocking anybody nobody throttling anybody nobody bought doing anything inappropriate in terms of use of service and disclosing on how they're offering services to customers. We're going to go through another regulatory of love letting over this I expect it to happen.

We're going to watch the cycle repeat itself in <unk>.

One would hope at some point that there is.

A reason discussion around of policy that gives us away from this website that allows everybody to kind of have.

On a more consistent stable approach.

I don't know that thats going to happen, but we're certainly going to try and push and discuss it.

I think the third rail is on this issue as is the dynamic around what happens to the freedom of people, who invest in competitive markets to price their products and services appropriately.

And if we stay away from that third rail if the kind of latitude is in there to be able to price and do the right things in the market we're competitive markets exist.

Then I think everything will probably at the end of the day be okay, but.

If for some reason policy goes down a path of that isn't the case.

It hasn't in the past even when entitled to is in place we have the latitude.

To do what I felt like we needed to do but if for some reason policy went further to try to solve a problem that doesn't exist.

I would have to step back and ask ourselves, how we're allocating capital around that and evaluate where that comes out in <unk>.

Ask if it's the right place for us to go for our shareholders based on that dynamic and that very important lever for us.

<unk>.

Taken away.

Our variable I would say in the market not lever.

So that's how I think about it right now.

I actually step back in.

From a policy perspective, Ironically to think about what's happened over the course of the last year or two.

And the dynamics that are going on right now where the issue is.

Looking at moderate of monitoring speech, and what's occurring for People's access to platforms.

There are more real and significant data points on how thats affecting society than anything to do with how internet service providers or delivery of bandwidth.

Homes, but I'll leave it to smarter people to meet and figure that one out Brian.

On the industry's real proud of what's happening in the of course of the pandemic and the way we've allowed people to continue to work from home I'm sure. Many of you are taking this call from loan and the industry as the investments they've made under the exist under the prior regime is working.

We are as a company more focused on broadband.

Thats just the availability because of its out there, but people is actually taking advantage of it for the homework situation for.

Others, and we're working on those aspects of it as well as filing all of the other aspects of our.

Yeah, an infrastructure bill another stimulus bill tax legislation. We are following all of those things Frank So we'll we'll continue to follow as closely as you can imagine.

Hey, Jamie or types of one more question, yes, we've got time for one last question operator, Okay that question comes from the line of Tim Horan from Oppenheimer. Please go ahead.

Thanks, guys. John I know you said the move to virtualization of content is kind of accelerating and that seems to be happening with gaming compute communications of Microsoft teams and zoom.

How are you positioned to take advantage of that are you better positioned the company that owns the pipes and some of the content or do you think it makes more sense for us.

Separate these assets or youre going to really unique seat I mean, how do you really take advantage of this accelerating move at this point.

Tim our biggest single most important bet in that regard is H.

HBO Max.

I think about that broadly is.

While today, we talk about it as in as part of evolving to enable on offer.

I've mentioned this before I view it as a really important foundation.

For broader customer relationships I mean this is this is the first big four rate, maybe legacy AT&T thinking about having broader relationships with the customer base at a relatively low price point SKU that isn't exclusively dependent on infrastructure.

And to the extent, we are successful at having that relationship of most U S households.

If we don't if we don't use that as an opportunity as a springboard for us to start thinking about how we extend those customer relationships across other opportunities either to own and operate content or engagement with a customer or to use the platform as a means for others to distribute.

We would be losing the huge opportunity.

And so I think there's all kinds of things we want to do around the edge of making sure that we work with the right hyper scaler.

So of Virtualized and give our customers the opportunity to gain access into infrastructure. So that they can run their compute environments in their application environments of effectively that's all important and that's all meat potato stuff, we need to do on our network, but I think about owning some degree of engagement with a customer a relationship.

Means to bill with them, having them interact with your service. So that you have insights as to who they are what they like what they do what their proclivities are being able to emotionally attached with them having a software platform that allows you to build the next building block of of product that extends in the engagement the talks about.

The dynamics of changing consumption and social and interactive I think this is a really important dynamic for the health of our business and I know, it's longer term in nature, and I'm, well aware that folks who have maybe of tighter orientation of the financial return question why would you be pushing as hard as you are on this area.

It's because I feel pretty strongly about that and I think building large subscription bases of customers that pay us every month for something has been kind of of the hallmark of this business we have.

Really attractive dynamic on that in our overall revenues profitability today, we would.

Need to evolve that into what the next step is on this is just one of those steps of making that happen.

Thanks, very much Tim that's all the time for questions that we have.

With that one of turn it over to John. Thank you for final comments. So I have one last order of business before I, let you go and do kind of hinted at it as a complement to John.

I do want to point out.

With very mixed emotions that we recognize that this is I believe John 40th and Lee.

Last earnings call that it will be doing with all of us.

He has been a very valued and longtime coworker of mine I think if you think about the fact that he's set in this role as CFO of this company for nine years that speaks volumes in and of itself about his character and abilities.

Tremendous level of longevity for somebody who occupies a roll of significant as pressured as dynamic as the one of these had.

I've worked with John for 23 years of his career, which has been a long time and it's been a pleasure all along the way.

I could see a lot of things obviously of high integrity high impact high functioning and incredibly high regard as a person.

We're going to Miss him at AT&T, I know youre going to Miss him in support of all of you.

Delighted about what lies ahead for him and his family of Michelle on his next chapter and as you would expect the professionalism of navigating the handoffs to what's going to be a very capable successor I'm just delighted to have passed all coming in and look forward to all of you getting.

It has gone incredibly smoothly, it's been first rate and I think as we join you of quarter from now and passed on takes the reins youll see what a nice smooth and even keeled transition thats been when we reconvene in so I hope you join me in giving best wishes to John in his next chapter.

And thank him for everything you're doing of course, thank you John.

Thanks, John and thanks for the kind words, thanks to all of the other members of the management team here.

Family from me.

Specifically, thanks to my team the finance team just remarkable people across the board.

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