By Andy Serwer

Is AT&T really back?

With its stock soaring 60.5% to $26.55 over the past 12 months, versus the S&P 500's 17.4% gain in the same span, Wall Street certainly seems to think so.

Yup, that's right, we're talking about 'Telephone," "Ma Bell," "Mr. T," "One-Ringy-Dingy," or whatever nickname you have for this iconic American company, which has been disappointing investors for decades -- or at least since July 16, 1999, when its stock closed at an all-time high of $44.70.

I recently sat down with AT&T CEO John Stankey as part of our At Barron's interview series to discuss the company's turnaround. Stankey, who's worked at the company for forty years and has been CEO since July 2020, has often appeared to have the weight of the world on his shoulders during interviews with the media.

It makes sense. Stankey has had to deal with his company's massive debt load: Earlier in the decade, AT&T had the most leverage of any non-financial U.S. company. Stankey also contended with AT&T's ill-fated foray into media, including when it owned DirecTV and WarnerMedia. Now the media business is gone, debt is down, and shares are up -- all of which appeared to have Stankey in a more upbeat state when I spoke to him.

Below are some highlights from our conversation, which have been edited and condensed for clarity.

Barron's: Your stock has really been on a tear, John. What's been going on?

John Stankey: I think we hit a five-ear high yesterday, or something like that. What's been going on is we set out an objective about four years ago where we said we wanted to focus on being the nation's best communications company, and we wanted to line that up with strong investment, getting our folks focused on that objective, and becoming a better company every year. And we've done that.

It's quite a different business today than it was four years ago. It demonstrates that we can execute consistently, and drive improvements in cash flow, improvements in margins, improvements in customer satisfaction, improvements in share performance, leading in bringing converged services together. And when you do that consistently, I think the market starts to take notice.

Switching over to always a favorite topic for a CEO, is anything going on in Washington right now impacting your business?

There's a lot going on in Washington, and yes, it does impact our business. I'm pleased with what I see happening on spectrum policy. After coming out of four years of a previous [Biden] administration that was contemplating a lot of things, I've already noticed early on in the current [Trump] administration that they're not contemplating. There are meetings at the highest levels to make some decisions about what they want to do moving forward.

I think this is really important for the United States. We've dropped from being number one, two, or three in spectrum allocated into our wireless networks in developed countries to like number 14. That means our infrastructure isn't as competitive. And more importantly, for the consumer, as demand and usage continues to increase every year -- and we all are using our phones more -- we're not adding capacity. The way you keep pricing affordable is you add capacity, and spectrum is the best way to do that.

I also think having less government, a more efficient government, with spending under control, is good for the debt markets. It's good to not have the government crowding out private enterprise. And I think if we do that right, that could be really good for economic stimulus in this country. And the direction on tax policy seems to be pro-investment. If I am able to take advantage of that, I can invest more in fiber faster. We've had to moderate some things as taxes have gone up.

Finally, I'm watching what's occurring right now geopolitically. A lot of our customers are in Europe and Asia. We're trusted to operate and carry people's data and manage those networks for companies, U.S. companies, as well as non-U.S. companies. Our foreign policy and how we're perceived broadly, in particular in Europe, is really important to our business and to being a trusted provider. There's clearly a little bit of jockeying as to what our traditional relationships have been and how they should be crafted moving forward. They have to be done in a mindset of, is it driving good economic growth for the United States as well? Tariffs are included in that equation.

John, can we finally put to rest that marrying telecommunications and media is not an optimal business model?

At this moment, it's not the right business model. At the time we made the decision to divest our media assets, one of the things I shared was it was real clear that there was a robust investment cycle required to build world-class communications infrastructure, and there was a robust investment cycle required to reposition media for the future, and I didn't know how to stretch our balance sheet to do both.

Getting focused back on having the best communications products in the market was the right strategy for AT&T. At this juncture, I'm pleased to say it looks like that's been panning out and I'm sitting on the sidelines watching media a little bit as a hobby.

It's clear that they're having to invest pretty dramatically to reposition their products and services for the next generation as well, and better to have people who are dedicated to doing that full time, not having to worry about splitting their time between both. And I think that's probably been the right thing for our company.

That's a diplomatic answer.

I'm ever the diplomat.

So where do you stand with your broadband rollout?

We've been deploying fiber faster than anybody else in the United States, just near 30 million passings right now. [Ed note: A passing is an industry term for a business or household near enough to be hooked up to a network which is not necessarily a customer.] Fiber is, by far and away, the most durable, the most capable technology.

It's a little bit harder to put in, takes a little bit longer to get the paybacks on it, but we're at that point where we're now starting to see that it's a really strong and durable business. It's growing double digits. Margins are improving as we're getting scale in each metropolitan area where we've been deploying it. Customer satisfaction is off the charts.

What inning are you in with broadband?

I think we're probably in the mid-innings of the game. We have a proven business model, and we've proven that we can go into any metropolitan area in the United States and get to scale. But for the last two decades, we've been the underperformer on share. Typically cable is the dominant share provider. I think that game is going to switch now, because we have better technology and a better service model.

We're leading in converged services, meaning we offer a customer both wireless and broadband. I think we become a market share leader. And when you become a share leader, which we'll achieve that probably around 2029, that's when you get really strong margin performance, and you start driving the cash flows in a really differentiated fashion.

We price under cable, and yet we're providing a better product. We're about 40% penetrated right now in our properties that are open at least three years. When you move over 50%, you start getting in a situation where your profitability is really strong and your returns are really good.

What about Verizon and T-Mobile?

I don't take them for granted. I think they're still incredibly aggressive and leaning in every day to try to find new places that they can grow and pick up customers. I've made a commitment on a bet that customers are going to want to go to one place to get all their services. They're going to want to have a simple relationship to get on the internet, and they're going to want to do that on world class, scalable infrastructure.

So we chose to invest heavily into fiber, and we've chosen to invest in a very capable wireless network and I think over the long haul, that'll put us in a very unique position. So they'll keep doing what they're doing. I'm going to keep doing what I'm doing and I think ultimately I prevail in that equation if we do that well.

We've talked over the years about you investing in the business and paying down debt. And I said that's a tall order. You seem to have been able to execute on that, though.

It was a tall order. It took a lot of great work by our employee body. We've managed to keep our cost structure in an improving position year over year, while we've been growing revenues. And because we've been able to drive cash flows up, we've been able to invest -- the last couple years, close to $24 billion a year of reinvestment in our business -- and at the same time pay down debt.

We're down probably over $45 billion of debt since I took over in this [CEO] job, and that was a narrow path to walk, but we're going to be at two and a half times adjusted net debt to [earnings before interest, taxes, depreciation, and amortization.] That's a really comfortable place for a capital intensive business like ours.

We announced, over the next three years or so, we'll be returning $40 billion to shareholders, through a combination of about $20 billion of dividends and a $20 billion share buyback, instead of working on the balance sheet. I feel really proud to be at this moment and to be able to lean in play offense and use that discretionary cash flow to reward our investors that stayed with us.

First time you've been doing buybacks in a long time, right?

Yeah, I don't remember the last time we did. It certainly wasn't during my tenure.

You did cut the dividend, though. People complained and screamed about that.

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February 27, 2025 04:00 ET (09:00 GMT)

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