Following is the unofficial transcript of a CNBC interview with AT&T Inc. (NYSE:T) CEO John Stankey on CNBC’s “Squawk Box” (M-F 6AM – 9AM ET) today, Friday, February 3rd for AT&T Pebble Beach Pro-Am in Pebble Beach, California.
AT&T CEO: Societal Trends For Networking Companies Paint A Rosy Future Picture
JOE KERNEN: Let’s get right to our first guest of the hour to talk telecom and much more probably not Bitcoin, AT&T CEO John Stankey. AT&T has sponsored the Pebble Beach Pro-Am since 1986 and thank you for doing that and I guess we should start out what, how much has the charity in Monterey area accumulate to—
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JOHN STANKEY: This charity actually has a record for the PGA Tour. It's over $200 million throughout the longevity of the tournament and they just do a fantastic job. We really like working with them on it.
KERNEN: I wanted to make that birdie on 17 so badly.
STANKEY: I heard you choked.
KERNEN: I didn’t choke.
BECKY QUICK: Did you make it?
STANKEY: You choked. You missed it.
KERNEN: Yeah but it was about 12 foot putt. Did, it was the best—
STANKEY: How many times have you played that green Joe? I mean you think you’d know it by now.
KERNEN: I mean it’s all green at least. Yeah, I wanted to because if I did, it would have been 2,500 to, for someone to get—
STANKEY: There’s some poor child in Monterey County now that doesn't have a laptop because your—
KERNEN: Because of my crappy— because of my. You have a much more focused company—
STANKEY: We do.
KERNEN: As we know, but then I when I look at what you're going to try to do in the future, I, it's really not any easier in terms of how smart you need to be, how expensive it's going to be, and decisions you're gonna have to make just connecting everyone so that we can do everything, we have the giga data to do what we want to do, and it's going to be an unbelievable future, but it's up to you to to make it happen again so you can't relax.
STANKEY: Yeah, I think you're, you're making the case why it's so encouraging what the future holds, the skilled infrastructure and a high-performance network that is going to be really critical. And there aren't just a lot of companies around who can do this kind of thing. And I think we're one of the unique companies that have the scale and the wherewithal and the experience in doing the hard work to actually get the right amount of infrastructure out in this country.
And when you start talking about the applications and what's to come, it's needed. It's going to be required. And so I actually think it's a really rosy future given it's going to be customer applications, and just what I would call societal trends that can be really good for networking companies like ours.
KERNEN: But it's still going to take, what, what do you think you'll average in terms of capital expenditures over the next—
STANKEY: You know, we'll probably settle in somewhere around the 15% of revenues range, you know, maybe a little bit more one year, a little bit less the next, but it will be probably right around that range.
But we also have a dynamic coming on where there's nearly $50 billion of government subsidy that's about ready to be released into the system later this year. I think we can be a really competitive force in deploying that, so there'll be some government subsidy that comes in and acts as a private capital. That may take the industry up a bit over the next three, call it three, four years.
QUICK: Hey John on that call, your CFO just pointed out that for this year, you're anticipating about 24 billion in capex, thinks that it will come down after 2023. Is that because you don't need to spend as much when it comes to 5G or other issues or is that because you're bringing in partners like Blackstone with what you're doing?
STANKEY: It's a combination of all those things, Becky. What you look at right now is we are at a unique time where we are deploying a new area interface in the wireless business 5G that comes about once every 10 years and when it comes, it drives a bit of an uptick in capital deployment. And so, we're going to be through that cycle largely this year.
And then we're largely at that point left with more fiber capillaries. So that allows us to take it down because we're through that cycle and you know, it's just a normal trend we typically see and look, when you see what we're trying to do right now with alternate partnerships to bring other investors into the business, our you know, our BlackRock discussion is a really important one because we can go try some different things that we haven't done before.
We're moving outside of our traditional operating footprint. The capital that they're going to bring in allows us to try some different deployment constructs and different business models. We think it's going to be really, really helpful and it's going to give us a little more scale.
KERNEN: Where the payout is now in the dividend coverage, it's not, you're not concerned with it. You're not up at night, at all.
STANKEY: We made a lot of hard decisions, you know, probably starting a year and a half two years ago prior to the divestiture of WarnerMedia, and one of it was resizing our capital structure and thinking about what we wanted to be over the next several years and we set the dividend at a level that we thought was sustainable for the business we have now.
And I think you look at last year's performance and you look at the cash flow dynamics and we've got to do this year, you know, we got to do a $16 billion cash flow number, our dividend obligation and the years about 8 billion gives us a lot of latitude on top of that and we expect, you know, over the next three years or so, we have a great opportunity to manage our business more efficiently.
We've done a really nice job taking cost out, about $5 billion over the last three years. We're going to do even more as we move forward and that gives us the flexibility we need especially with the growth we have.
KERNEN: Can I keep my landline for how much longer?
STANKEY: You know, I don't think copper-based landlines are long for this world. There's a lot of states that—
KERNEN: So that’s a no. That’s what you told me.
STANKEY: But you've got a lot of other great replacements that work better than it and do a lot more than that. I think you'll be able to talk to somebody on the telephone forever Joe so you can still call.
KERNEN: The way you just described what you need to do and I think maybe you are on to something, you don't need dealing with producers and directors and you don't need to create that content that's going to be on all these connected networks that you're building. If you had to do both, there's just no way and there's just no way you could have—
STANKEY: Somebody made that choice, I guess. That's correct. And look there, I do believe we have a lot to do as you started out with. We are very focused on doing that and doing it well. I think in the future
KERNEN: Stock’s starting to work too John so—
STANKEY: I like it a lot better where we are right now than where we were this time last year.
KERNEN: I like where we are right here at a place called Pebble Beach too so thank you, but good to have you on.
STANKEY: Absolutely.
