AT&T aims to generate billions of dollars in savings over the next three years through a new cost-cutting initiative that focuses on 10 areas of the business, according to COO John Stankey.
Speaking at a Morgan Stanley investor conference Tuesday, Stankey indicated that more details will be provided during the next quarter’s earnings report, saying “the management team, and with Bill (Morrow)’s leadership has looked at effectively 10 broad initiatives that we believe can generate double digits of billions over a 3-year planning cycle.”
About a third of the categories each span short-, mid-, and long-term targets. Stankey said short-term opportunities within this year include “headcount rationalization” and “benefit restructuring” that’s already happening, though he noted “we have some additional work we can do in that area.”
Other near-term targets include third-party and supplier costs, and changes to call center structure.
A bit further out, in the 12-24 month range, Stankey pointed to work around finding cost efficiencies in the company’s broad infrastructure and opportunities to take advantage of different architectures to lower energy costs. He added there is a “a lot of work around portfolio rationalization” and some related to billing and credit collections.
“The management team is now putting the detailed plans around it. Governance structure is in place on each of those plans around the 10 major initiatives that shape up over the 36-month period,” Stankey said. “There’s objectives in place, and I think we’re in really good shape to do what we said we were going to do.”
As the company looks to cut costs, AT&T announced Wednesday a new $4 billion accelerated share buyback agreement starting in the second quarter.
That’s in addition to a similar $4 billion share buyback plan in the current quarter. AT&T said it plans to use 50-70% of free cash flow after dividends to retire about 70% of shares it issued to fund its Time Warner acquisition by the end of 2022.
The company has committed to spend $30 billion on stock buybacks.
AT&T’s moves to cut costs and use free cash flow to repurchase shares have raised concerns from the likes of the Communications Workers of America (CWA) union. CWA had claimed AT&T is catering to the demands of activist investor Elliot Management, previously accusing the fund of “pushing AT&T to extract profits from the company by eliminating jobs, outsourcing work, and divesting critical assets.”
The latest stock buyback announcement comes as contract negotiations began last week for more than 13,000 AT&T West workers represented by CWA.
“AT&T’s announcement of more stock buybacks is an affront to the thousands of workers going through contract negotiations because it shows the company’s primary concern is pandering to wealthy hedge fund managers,” said CWA District 9 Vice President Frank Arce in a statement. “To remain competitive, AT&T needs to be building next-generation networks everywhere people need service, not jacking up the stock price through stock buybacks. Workers are ready to lead AT&T into the future, and the company needs to invest in our communities and us for that to happen.”
Job cuts are another issue for the union, with AT&T chopping roughly 4,000 jobs in the fourth quarter and about 38,000 since the Tax Cuts and Jobs Act (TCJA) went into effect in 2018, according to CWA.
Earlier this year Stankey reiterated AT&T was looking to lower labor costs while improving operational efficiency. At the end of the fourth quarter he said AT&T was targeting an additional 4% reduction in labor-related costs in 2020 and expected the work to deliver an additional $1.5 billion in cost savings.
Updated to include statement on stock buybacks from CWA.