Good morning. An American legacy company that’s nearly 150 years old is working to modernize itself for the next 150 years.
Embracing its telecommunication roots, AT&T over the last three years has spun off DirecTV and WarnerMedia, with the firm setting its sights on building out higher-margin areas such as 5G and fiber. With the nation’s largest wireless network, and a fast-growing fiber network, there are opportunities to upsell fiber to wireless customers—both residential and business customers—and vice versa, which is why the company has invested some $145 billion in those networks over the last five years.
Transforming a legacy company comes with growing pains. What’s been essential for AT&T (No. 30 in the Fortune 500) is a growth plan that’s strategically synchronized investments with cost savings.
“We needed to invest significantly,” CFO Pascal Desroches said during the Deutsche Bank Media, Internet, and Telecom Conference on March 12. “We understood that we had legacy systems that were going to decline, so we leaned into our transformation program understanding we had a challenge ahead of us.”
So far, AT&T has garnered $6 billion in cost-savings—with the goal of trimming another $2 billion in annual expenses by 2026, according to Desroches. How is the company cutting costs?
AT&T has shuttered some retail locations, reallocated staffing resources pertaining to real estate and administrative tasks, and improved customer service. In just one example, using an AI chatbot has resulted in a 50% decrease in the number of customer calls escalated to live agents.
In January, the company reported Q4 revenue of $32 billion, up 2.2% year over year, and full-year free cash flow of $16.8 billion, exceeding guidance and $2.6 billion higher than a year earlier. Full-year mobility service revenue and consumer broadband revenue also exceeded prior guidance.
The company said it expects capital investment in the $21 billion to $22 billion range in 2024 and that it’s on track to reduce net debt and reach net-debt-to-adjusted EBITDA in the 2.5x range in the first half of 2025.
“We’re seeing growth in IoT relationships…and I would expect that to continue, and our mobility relationships in business are very attractive,” Desroches said during the conference. “We are in the middle innings of legacy declines. We think we can manage that and still grow the overall company.”
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.
Big deal
The 2024 CFO Outlook for Healthcare report by Strata Decision Technology features survey results of more than 100 finance professionals at hospitals, health systems, and other health care organizations across the country. More than half (52%) ranked their optimism about financial health throughout 2024 at 4 or 5 on a 5-point scale. Just 1% of respondents said they were not optimistic about their organization’s financial performance.
However, high costs remain a concern for many. Survey respondents cited contract labor and employed labor as their biggest unforeseen costs for 2023, according to the report. This year, reining in costs is a top priority for 55% of health care leaders, followed by managing strategic and performance improvement initiatives (51%), and managing service line financial performance (45%).
Leaderboard
Some notable moves this week:
Ashish Agarwal was appointed CFO of the web-tracking software company New Relic. Agarwal succeeds David Barter, who was the CFO when the company transitioned from publicly listed to its acquisition by the private equity firm Francisco Partners. CEO Ashan Willy highlighted Agarwal’s experience in mergers and acquisitions, especially taking McAfee to IPO.
Sami Siddiqui was promoted to CFO at Restaurant Brands International Inc. "RBI" (NYSE: QSR), owner of brands including Burger King and Popeyes. He is succeeding Matt Dunnigan who is leaving the company. Jeff Klein has been appointed as president of Popeyes U.S. and Canada, succeeding Siddiqui who has led the brand for nearly four years. In total, Siddiqui has been at RBI for 11 years in leadership roles at Popeyes and Tim Hortons.
Andrew Fullam has returned to the banking and financial services institution HSBC (NYSE: HSBC) as the CFO for the U.S. and Americas. Before his stint at Wells Fargo, he held several roles at HSBC at the New York, London, and Dubai offices, including interim CFO for the Americas.
Katja Garcia won’t seek an extension to her contract as CFO for Continental, a manufacturer of tires and other vehicle parts. Garcia has been at Continental for almost three decades and became CFO in 2021. Garcia's contract is set to expire in December, but she will stay on until a replacement is found.
Kevin Price was named CFO of Provi, a marketplace for the beverage alcohol industry. Price comes from the health food and organic beverages sector—previously working as CFO of Guayaki Yerba Mate and Farmer’s Fridge—but began his career at Deloitte.
Garry Lowenthal was appointed CFO of PetVivo Holdings, Inc. (Nasdaq: PETV), a veterinary biotech and biomedical company. Lowenthal has over 25 years of experience, including acting chief financial officer and director of Elate Group, Inc., and taking on the responsibilities of a director, EVP, and CFO of Fision Corporation.
Patrice Launay returns as CFO of ShiftPixy (Nasdaq: PIXY), a hiring platform for the gig economy, after the removal of Douglas Beck, who was appointed CFO in January 2023, according to a regulatory filing. Launay previously served as CFO for ShiftPixy from January 2018 to July 2019, and also has work experience in auditing and as a financial consultant.
Andrew Flynn was named CFO of Turning Point Brands (NYSE: TPB), a tobacco- and smoking-related products manufacturer. Flynn will take over on April 1, when current CFO Louie Reformina’s resignation becomes effective. Before joining Turning Point Brands, Flynn served as the CFO of Connected Cannabis Co.
J. Mark Hastings was promoted to CFO of Phoenix Motors (Nasdaq: PEV), a manufacturer of heavy-duty transit buses. Hastings has served as the company's chief investment officer since December 2023 and previously served as SVP of corporate development and strategy and head of investor relations. His over 20 years of experience also includes the companies Meryll Lynch, Geosphere Capital Management, and Rodo Inc.
Going deeper
Here are a few Fortune weekend reads:
"The great dividend payout: Investors raked in a record $1.66 trillion last year—and 2024 is shaping up to be another blowout" by Will Daniel
"The U.S. spent $179 million in 2023 minting pennies and nickels, and $100 bills are going out of style. Why do we still need cash?" by María Soledad Davila Calero
"Repay Holdings looks to private equity for a buyer, while GTCR is selling RevSpring" by Luisa Beltran
Overheard
“These companies and businesses face squeezing from both sides as they struggle to survive. While the U.S. and other Western countries have imposed sanctions or restrictions on these companies, China itself has moved to favor state-owned enterprises in recent years, leaving little room for Chinese tech and private businesses to operate.”
—Zhiqun Zhu, professor of political science and international relations at Bucknell University, told Fortune in reaction to the House passing a bill that would force TikTok’s parent company ByteDance to sell the app or face a ban in the U.S. Zhu explained that private Chinese tech companies are finding it difficult to maneuver tensions between the West and China.
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