Biggest surprise in AT&T/Discovery is the 30M FTTH & $24B capex

Bill Kennard is one of the sharpest in telecom and got an excellent deal from Discovery. It also gives him cover for the dividend cut Craig Moffett has been projecting for three years. Probably a big write-off as well; January’s $15 billion was only about half what was necessary.

  • FT, BT, DT, Telefonica, and Telus have been demonstrating that FTTH is a good investment. For $1500-2500, you win a customer that pays off in about three years. Stankey has been saying that for 2 years and now has the free cash. The ~11 million to pass in 2022-2025 will cost $21 billion, +- $5 billion.
  • 5G midband upgrades are cheap because you can do most of it on existing towers. The 200M pops for 2023 will only require $7 billion or less to upgrade 40,000 sites. 200M 2023 is two years later than TMO. I’m surprised they are taking so long but components are short.
     I’d bet they are underpromising and a huge team is going to work today on how to speed it up.
  • The $24B capex is a big jump and more than enough to pay for what they announced. Highly likely Stankey plans to bury some Opex in capex to boost earning the next few years and make him look good. But their accounting is so opaque you can never prove it.
  • The Biden $100 billion broadband plan was already in trouble. With this, 70 million of the ~116 million US homes will soon have a choice of cable or fiber. Cable will soon be > 100 Mbps upstream. None of that requires a subsidy. In addition, T will be using so much of the US capacity to deploy fiber at least through 2023 any new entrant will pay an exorbitant price. Most politicians don’t get it yet but the real broadband experts are spreading the word.

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