Excerpt of a Letter to AT&T.

We are writing to you on behalf of Elliott Associates. Elliott owns $3.2 billion of the common stock of AT&T Inc. The purpose of [this] letter is to share our thoughts on how AT&T can improve its business.

In 2014, AT&T announced the $67 billion acquisition of DirecTV. Notwithstanding AT&T leadership's assertions that "Pay TV is a very good, durable business," when the transaction was announced, the pay TV ecosystem has been under pressure since the deal closed.

In 2016, AT&T announced the $109 billion acquisition of Time Warner. Time Warner is a spectacular company, however, despite nearly 600 days passing between signing and closing, AT&T has yet to articulate a clear strategic rationale for why AT&T needs to own Time Warner. While it is too soon to tell whether AT&T can create value with Time Warner, we remain cautious on the benefits of this combination. We aren't alone in our cautious outlook Jeff Bewkes, the CEO who sold Time Warner to AT&T, recently referred to the vertical integration of content and distribution as a "fairly suspect premise."

When Bewkes took over Time Warner as CEO, he inherited a sprawling company with numerous related but non-core assets. He then spent the following decade divesting the non-core assets in order to focus on Time Warner's leading content franchises. This strategy paid off: Time Warner became both a flourishing media enterprise and a strong investment.

AT&T has been an outlier in terms of its M&A strategy: Most companies today no longer seek to assemble conglomerates. This approach is more characteristic of a prior era, calling to mind the Conglomerate Boom of the 1960s.

DirecTV NOW (renamed AT&T TV Now), has been poorly executed with delays, technical mishaps, weak customer service and usability issues. Despite describing DirecTV NOW as a replacement for DirecTV, the natural-substitution narrative has not played out. While unsustainably low prices and aggressive promotion did initially help the product scale, the benefits turned out to be very short term in nature. As AT&T raised prices to normalized levels, results rapidly deteriorated. After just two years of existence amidst an otherwise-booming OTT market, DirecTV NOW's subscriber count is now declining.

WarnerMedia possesses a leading library of content, and the potential for...

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