AT&T Sees Tax Lobbying Paying Off With $3.4 Billion More Cash

• January 31 2018
• Scott Moritz

AT&T Inc.’s sunny outlook for 2018 revealed why Chief Executive Officer Randall Stephenson was rooting so hard for a tax cut.

AT&T Inc.’s sunny outlook for 2018 revealed why Chief Executive Officer Randall Stephenson was rooting so hard for a tax cut.

With the benefit of a lower corporate tax rate, AT&T expects free cash flow this year to rise by $3.4 billion to $21 billion, providing the phone giant some financial flexibility while it works to keep wireless and TV subscribers. AT&T shares surged 4.1 percent to $39 in late trading.

The forecast added to an upbeat end to the year for the second-biggest wireless carrier, which reported a surprise gain of 329,000 U.S. phone subscribers in the fourth quarter. Analysts had projected a loss of 31,000 on average. Instead of cutting prices, AT&T has kept customers by bundling services like unlimited mobile data and DirecTV service for a discount.

Stephenson plans to add $1 billion to AT&T’s capital investments this year thanks to the lower tax rate, helping AT&T prepare for the transition to a new fifth-generation mobile-phone network. He’s seeking a judge’s backing to acquire Time Warner Inc. over the opposition of the U.S. Justice Department, an $85.4 billion deal to get the rights to programming from “Game of Thrones” to “Harry Potter.”

Read a QuickTake Q&A here on the fight over the AT&T-Time Warner deal.

Stephenson has been one of the most outspoken proponents of tax cuts as a member of the Business Roundtable lobbying group, which quadrupled spending in the last three months of the year as it threw its support behind President Donald Trump’s tax bill. He commemorated its passage by awarding a $1,000 bonus to 200,000 employees, a gesture that was followed by more than 70 other companies.

TV subscriptions also rose thanks to DirecTV Now, an online streaming version of the traditional satellite service, which added 368,000 customers. That helped boost AT&T’s total video customers by 161,000 in the fourth quarter, the first gain of the year, despite losses of traditional satellite and cable subscribers.