AT&T’s Scary 300% Hurdle Model

AT&T is cutting capex, usually a mistake in telecom. Chief Data Officer Andy Markus told WSJ “AT&T aims for at least a ‘3x return on any AI investment,’ ideally within the first year of deployment. …“Every dollar you invest with us to create an AI solution … should return three or more back.”

A while back a friend at AT&T complained that he was required to get his money back in a year. This is much worse. Even spread over 2 years, this is a higher hurdle rate than I recall seeing.

If Markus didn’t misspeak, AT&T is screwing shareholders who don’t sell very quickly.

AT&T stock hit the lowest point in 30 years recently, so it would be no surprise if CEO Stankey is goosing the stock.

Stankey’s predecessor resigned at 60. Stankey is older than that and likely to retire soon. Besides tens of millions in salary probably related to the stock price, his pension may be affected by the stock price. With a life expectancy of 20+years, Stankey’s pension could be $100 million higher or lower. (AT&T does not release enough information to calculate his pension etc. I have no way to get a reliable figure.)

“Every dollar you invest with us to create an AI solution … should return three or more back,” Markus said, referring to business counterparts within the company.

Markus works closely with those counterparts in other areas of the business to determine where to invest. One effort that got the green light: a generative AI tool for employees called Ask AT&T that has uses including helping software developers code and helping translate documents from English into other languages. Markus said the tool is on track to achieve AT&T’s one-year target for return.

Said Markus: “We’re prioritizing based off of return to the business: those use cases that either have high visibility or have really high return to the business. That’s where we’re putting our focus, and that’s where we’re putting our investment.”

AT&T has drastically cut spending on fiber expansion & mid-band wireless buildout. The latter is particularly interesting because AT&T is significantly behind T-Mobile & Verizon.

Stankey is betting that people don’t care about the quality of the wireless network.

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