Marek’s Take: Can Clearwire’s former CEO save AT&T?

AT&T
AT&T has been under fire lately after activist investor Elliott Management conducted an exhaustive review. (AT&T)
Marek's take

AT&T CEO Randall Stephenson provided an interesting tidbit during the company’s third quarter earnings call earlier this week when he mentioned that the company had hired Bill Morrow to be its special adviser and managing director of process service and cost optimization. In other words, Morrow is being hired by AT&T to be the company’s chief downsizer. During the call, Stephenson said that he expects Morrow to “examine and change our cost structure across the entire company.”

AT&T has been under fire lately after activist investor Elliott Management conducted an exhaustive review of the company’s management and said the operator failed to execute on a number of opportunities, hasn’t been able to recruit and retain talent, and suffers from being a bureaucratic organization.

If the name Bill Morrow rings a bell to you, it might be because he has a long history in the telecom industry. Most recently he was the CEO of Australia’s National Broadband Network, where he resigned at the end of 2018 after facing problems rolling out the network. He also was the former head of Vodafone Australia, where he was credited with turning around the telco. In the U.S., however, you might remember him best for his time as CEO of Clearwire, the failed WiMAX operator that was purchased by Sprint in 2013.

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Morrow was in charge of Clearwire from 2009 until 2011 during the company’s heyday when it was adding subscribers at a record pace. In fact, in 2010 Clearwire ended the year with close to 4 million customers, nearly double what was originally expected.

But Morrow’s tenure at Clearwire didn’t last long. The company struggled and had trouble getting funding particularly after majority owner Sprint indicated it would deploy LTE to supplant Clearwire’s WiMAX network. Today all that remains of Clearwire’s legacy is its treasure trove of valuable 2.5 GHz spectrum that Sprint now owns.

Will Morrow be able to deliver the results AT&T’s investors are hoping for? “I hope he does a better job at AT&T than he did at Clearwire,” said Roger Entner, analyst with Recon Analytics. However, he added that he believes Morrow will be the “sacrificial lamb” for AT&T. In other words, he will be the man behind the job cuts so that if anything doesn’t work out the company can point to him.

As part of AT&T’s response to Elliott’s criticism’s, the company outlined a three-year financial and strategic plan that includes Stephenson staying on through at least 2020. In addition, the company says it will deliver 1% to 2% revenue growth annually and pay down its Time Warner acquisition debt by the end of 2022.

AT&T also recently announced plans to sell some assets. Earlier this month it said it was going to sell its wireless and wireline operations in Puerto Rico and the U.S. Virgin Islands to Liberty Latin America for $1.95 billion in cash. And last week it said it was selling 1,000 AT&T towers to Peppertree Capital Management for $680 million.

Entner said that AT&T’s strategy for streamlining its business and reducing head count could backfire when it comes to selling off any assets. “You don’t want to remove duplicate functions if you are going to sell off businesses. If you want to sell an asset you need support, you need marketing, otherwise why would another company buy it?”

Is a voluntary leave package coming?

Some have speculated that AT&T will mimic Verizon and announce a voluntary severance program. Verizon announced a year ago that more than 10,000 employees accepted the severance package which it offered to around 44,000 employees. This program was part of a plan by Verizon to slash about $10 billion in operational costs.

However, industry watchers say that although AT&T hasn’t announced a formal severance program like Verizon, it has been steadily cutting employees. The Communications Workers of America (CWA) did an analysis of AT&T’s annual reports last May and found that the company had eliminated more than 23,000 jobs since late 2017. And approximately 6,000 jobs were cut in just the first quarter of 2019. 

CWA’s analysis was conducted to determine whether the company had made good on its promise to add 7,000 jobs after benefiting from the Tax Cut and Jobs Act passed in late 2017.

During the third quarter call with investors, Stephenson indicated that when it comes to reducing costs Morrow will be looking at all aspects of the business and he expects changes to occur quickly—some will even start before year-end. “We expect him to hit the ground running,” Stephenson said.

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