Elliott turns its firepower on AT&T’s CEO and new COO

Elliott turns its firepower on AT&T’s CEO and new COO

24 September 2019 | Alan Burkitt-Gray

Cover

Elliott Management, the activist investor with a $3.2 billion stake in AT&T, wants to use its influence in the search for a replacement for CEO Randall Stephenson

But it is clear that it is also targeting John Stankey, president and COO, who is seen by many as the next in line for the top job.

US TV channel Fox Business quotes “a telecom executive with direct knowledge of the matter” saying Elliott “is discussing whether it should have some say in who occupies senior roles at the telecom giant”.

AT&T has already announced a number of new senior positions. A few weeks ago the company also named Jeff McElfresh as CEO of AT&T Communications, taking over on the retirement of John Donovan.

In addition Anne Chow was made CEO of AT&T Business, replacing Thaddeus Arroyo, who moved sideways to be CEO of AT&T’s consumer business. Both report to McElfresh.

Earlier this month Elliott wrote a damning letter to AT&T’s board, criticising the company’s “long-term underperformance” and the policy of Stephenson (pictured) himself. Elliott said AT&T “has not only failed to keep pace with the broader market, but has actually underperformed by over 150 percentage points” over a 10-year period. “AT&T has been a disappointing investment for its shareholders relative to nearly any benchmark.”

But now it appears to be turning up the heat on Stephenson himself, who has been chairman and CEO for 12 years, according to the Fox Business report. The channel – which is owned by Rupert Murdoch’s Fox group – said this “would possibly set the stage for a contentious battle in what has been, at least for now, a cooperative relationship between the telecom giant and the activist fund”.

In early September, faced with Elliott’s letter, AT&T said it “will review Elliott Management’s perspectives in the context of the company’s business strategy”, and added: “We look forward to engaging with Elliott. Indeed, many of the actions outlined are ones we are already executing today.”

However, heir apparent Stankey is the man behind AT&T’s acquisition of DirecTV in 2015 for $67 billion and Time Warner in 2018 for $108 billion. Both of those acquisitions are seen by Elliott as helping to dilute AT&T’s focus.

In the early-September letter, Elliott complained about “a series of deals totalling nearly $200 billion”, through with AT&T “transformed itself into a sprawling collection of businesses battling well-funded competitors, in new markets, with different regulations, and saddled with the financial repercussions of its choices”.

Elliott also complained about a failed attempt in 2011 to buy Deutsche Telekom’s T-Mobile US, “possibly the most damaging deal”. That was blocked by regulators and led to “the largest break-up fee of all time[that] provided T-Mobile with a seven-year roaming deal and the invaluable spectrum it needed to develop from a then-struggling competitor into the thriving force it is today”.

Elliott said: “These three transactions are not the only examples of AT&T’s recent questionable M&A – the push into the Mexican wireless market, for example, has also severely underperformed expectations – but they are the largest and most damaging.”