AT&T undoubtedly will announce higher earnings per share, year over year, for the first quarter of 2013.
But there is trouble brewing. In 2012, AT&T dividend payments were nearly $4 billion more than its free cash flow. And AT&T sees free cash flow being some $5 billion lower in 2013. Something has to give.
The problems largely are attributable to the fixed network segment, which accounts for roughly 47 percent of the company's total revenues. From 2008 to 2012, the fixed network segment's revenues declined from $67.9 billion to $63.5 billion to $61.2 billion to $60.1 billion to $59.6 billion in past years.
Free cash flow also might have peaked in 2012, when AT&T reported $19.4 billion of FCF. In 2013, AT&T forecasts free cash flow of a bit over $14 billion, a level more consistent with 2010 and 2011 when FCF was $15.7 billion and $14.6 billion, respectively.
In 2012, AT&T spent $12.8 billion to buy back shares, and another $10 billion to pay dividends. Company-wide, AT&T increased long-term debt by $5 billion in 2012. You do the math.
Tuesday, April 23, 2013
AT&T has a Problem: Dividends Exceed Cash Flow
Gary Kim has been a digital infra analyst and journalist for more than 30 years, covering the business impact of technology, pre- and post-internet. He sees a similar evolution coming with AI. General-purpose technologies do not come along very often, but when they do, they change life, economies and industries.
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