AT&T Inc. (T) Earnings Call Transcript & Summary

Disclosures are available at the registration desk. And for those of you joining via the webcast, I'm Mike Rollins, covering the communication, services and infrastructure categories for Citi Research. I'd like to welcome back to the conference John Stephens, CFO of AT&T. John, thanks for being here.

Thanks for having me, Mike.

To kick us off, New Year.

Yes.

Could you talk about your priorities, operating and strategic, for the year to come?

Sure. Let's -- let me start off by, first of all, thank you for being here. Thanks for everybody here in the room and then on the web for listening in. We appreciate your interest in AT&T. Today, we'll make comments that will include forward-looking statements that are subject to risks, and actual results may differ. So I'd ask you that you refer to our SEC filings, refer to our earnings reports and refer to any of our website information. And hopefully, I've completed the safe harbor discussion in that way. Secondly, we have an active auction going on at the FCC for some newly released spectrum, so I'll be unable to discuss those. And then lastly, we are -- we will -- I will strive to limit my comments to the third quarter actual results as we are -- have not yet announced any fourth quarter activity. So with regard to that, Mike, and I apologize for having to go through all that, but I want to make sure we get -- kind of get it checkmarked. With regard to our strategic priorities, and when you think about 2019, it is a situation where we believe we've got a checkmark, we've got a show-me. We've done what we said we were going to do. I'll start with the capital side and where we made some representations, some expectations out there on the capital side. We're a company that has tremendous cash flows. And as we've said before, we continue to expect free cash flow this year in the $28 billion -- for 2019, the $28 billion range. We, as has been announced, we've done significant asset monetizations. What that's allowed us to do is continue to not only pay a great dividend, but increase it as we did last month, but then also to pay down debt and bring down our total level of debt, all the while now starting to retire some of the shares that we issued in the Time Warner transaction. So if you think about what we've wrapped on kind of our capital allocation last year, I think you can check that box on we've achieved it. What that cash -- free cash flow then also allowed was a tremendous investment. We spent in the $23 billion range as we've talked about. You've seen the tremendous progress we've made on FirstNet and our overall wireless network, 75% coverage. We've been voted the fastest network 4 quarters in a row by Ookla, the best network 2 years in a row by GSW. So we are continuing it. It's working. It's making sense. When you look at the fiber buildout, we've hit 14 million, great capabilities, great joint utilization between not only broadband-to-the-home, but also network backbone for our wireless network and so forth, great opportunities to sell on that. You've seen the progress we've made in Mexico with the 100 million LTE and so forth. So we've had tremendous amounts of capital that we've continued to invest for the long term. So while we check the box on bringing down our total debt level, check the box on returning great cash and dividends and now in shares to our owners, we're also continuing to invest for long term. We feel really good about that. Through the third quarter, we were stable, actually slightly up on EG margins. We were growing service revenues in Mobility like we said we were. We are continuing to make improvements, and we expect to make improvements in Mexico's EBITDA. So when you think of -- and we continue to be on track to make our merger synergies at WarnerMedia. And we did all of this while we're continuing to invest in AT&T TV, in HBO Max and the future. So I guess what I'd say is, when we think back on 2019 and what our strategic imperatives were and how we've come at it, in a short sense, we've done a really good job, I think, of accomplishing and doing what we said we're going to do and setting us -- ourselves up and taking advantage of the investments we've made and setting ourselves up for the future. So that's kind of how we're thinking about step 2. We got to -- we still have to publish final results. We still have to get the books closed and all those sorts of things, but we believe we've made really good progress.

So we'll take an opportunity maybe to start with one of our live survey questions, which is something that we asked last year as well. And the question is how do you view AT&T's vertically integrated assets for future revenue and cash flow growth? Net positive, neutral or net negative? And you can -- we'll open the voting. John, you are more than welcome to vote. [Voting]

Is there any doubt? So...

So 35%, net positive; 22%, neutral; 43%, net negative. Can you take an opportunity to talk to the paradigm? If you think about 5 years that AT&T is migrating for, how customers are going to consume broadband, consume services and content and media, what's the paradigm that AT&T is pushing towards?

So I think customers are going to want to consume it in a bundle. They're going to have the freedom to consume it any place they want when they want to. So I would suggest to you, first, on kind of the capabilities and distribution to them, whether it be over wireless and the tremendous 5G-enabled wireless network, heck, we're going to be national -- we're going to have a national footprint on 5G this year in our core network. We already have 35 cities up and running for the 5G-plus and about 20 cities up and running for 5G in our core network. But -- so they will be able to consume wireless services, but also data, also entertainment. They will use it as their -- not only their wireless, but their broadband, wireless broadband. And we'll be the provider who can have the ability to do that, not only from a traditional postpaid account, but a prepaid account or with our capacity, even resellers. Secondly, on the fiber side or on the whole broadband side, the ability to bundle that with video, the ability to bundle that with wireless services. The ability to bundle that with a full TV package clearly have that advantage, whether it be AT&T TV, whether it be our wireless services, whether it be our fiber-to-the-home. So from our perspective, we think of the consumer being able to make choices. I would suggest to you today, there's a lot of our customers, particularly in our value space, in our prepaid space, who consume their broadband on our wireless devices today. That's nothing new. It's been around. Customers make their choice. In some cases, it's an economic choice. In some cases, it's a convenience choice. But we provide that opportunity, and we'll continue to provide that. That's the strength of Cricket and what we've seen there. By the same token, there's going to be customers, probably like me who have fiber to their home and love it and gives them the ability to bundle television, to bundle -- will be able to bundle HBO Max and any other streaming services that someone might have. And you'll be able to bundle wireless. And so as we see it, we're going to be in the best position for the future to provide those services. I kind of look at my competitors in the wireless side and see one of them bundling Netflix and you see another one bundling Disney, and I get that. And I think actually, when I think about it, I actually smile because it reinforces our thought processes on HBO Max. The difference is, is I have owner's economics, and I have the umbrella of ownership of both. And so from that standpoint, I think, as we all know, owner's economics on these matters in our industry and in the business, in general, is really important. And so we feel really good. Lastly, I'll tell you is, as new 5G comes out, we're going to have just, quite frankly, a really unique intersection. We have a network that's, quite frankly, ahead of devices, which is the first time that's really happened. And so we're going to have a national footprint. By the middle of the year, we'll have great speeds, great -- and it will continue to improve and grow throughout the end of the year. In the middle of this year, we'll have HBO Max coming out, and we'll have tremendous packages for our wireless customers to bundle with those. And then we're going to have new 5G phones come out throughout the year. We have some out today, but they will be coming out throughout the year. And when you put that grouping in place as an offer for customers who are looking throughout the year and certainly in the second half of the year, that's a tremendous magnet for those customers, a really attractive situation. So we feel really good about where we're at. But I would -- in short order, I would think, people are going to consume broadband data in much the same way they do today, but it's going to be higher demands for speed, more continuing demands for bundling, continuing demands, growing demands for video, and we feel like we're going to be really extremely well positioned to play in that market.

And you mentioned a few things already about why it was important for you to bring all these assets together. As you've operated these assets together now for some time, are there other components that might just be, that you've learned in the last year plus, that may be underappreciated by the investment community?

Well, I'm not sure -- I'd leave that to you to point out what you think. You may not agree with us on our views now, but quite frankly, we really do believe HBO Max is going to be significant. We believe AT&T TV and the ability to compete on the national footprint, whether we have our broadband there or not, is going to be very important, not only from a cost per unit structure, but also from bundling with wireless and bundling with other services. So I feel really strongly about where we're at in the capabilities. We've got continuing efforts and continuing work to do. This is an ongoing process, but we feel really good about where we're at. I can -- I guess the one thing I would mention because I'm not really sure the industry understands, that everybody understands the dramatic lead we have in spectrum capabilities and the fact that over the last 5 years, we've really focused on getting our spectrum alignment. So in the sub-6 in those low- and mid-band spectrums, a tremendous lead we have over our competition as well as the millimeter wave strength. I'm going to be careful saying anything more than that, but the millimeter wave position we have. And so I think if I was going to go to one thing, it's like, well, 1.5x your nearest competitor and you're hot-wiring it all with the FirstNet buildout, pretty impressive.

So there's a few things that I'd like to drill in on that. Maybe first, with HBO Max, you've had some time since you've made the announcements and the descriptions of what this is going to look like. How has this been received by the distribution partners? And is there any expectation for the participation of the traditional cable distributors to participate in this?

Yes. So first and foremost, I think the reception at the HBO Max Day that we had was extremely positive. I think a couple of people wrote things like it's a no-brainer, so to speak, those kinds of terms with regard to the depth, the quality, whether it's the full-length movies that are well over 1,500, whether it's the piece of those movies that are top 50 box office, whether it's the historic HBO titles; whether it's things like Friends and Big Bang and a collection of other titles, I think the quality is there. I think secondly, when we came out and said we were willing to make an investment of $1.5 billion to $2 billion in this and giving people the confidence that this is real quality over and above what WarnerMedia was already investing, I would tell you that I think that was really positively received. I'd also tell you, the one aspect that we'll tell you about fourth quarter is we've already made those and started making that investment. We've made about a $500 million investment from our operating income perspective in the quarter. We've made that investment in HBO Max by holding back some really, really high-quality content so that we can use it. And so you'll see that. We're working hard to find other ways to cover that. But we've already started that process that we already talked about. So all of that's been really positive and feel really good about it. We're going to have about 10 million-or-so AT&T-billed customers who we're setting this up so their identification, their sign-in logs will -- we're working to get it so they can sign right into HBO Max. So we're very hopeful. We have a significant number of our own customers, and we're working to make that available to our partners in the cable distribution. We think it's very attractive. We -- the pricing is the same as our HBO. We've got the greatest market study out there. We've got 30 million-plus customers paying us -- paying about $15. So we know what the price is, what our price point is, and this is a much higher quality. I don't have anything to announce on any of the distributors on their cable partners, but we certainly want to work closely with them because we think this provides a great stickiness to all the products that are out there. And it is really high quality. I have seen a lot of the content. I have seen the setup, the navigation tools that are there. It's really impressive.

As investors try to understand the stickiness of the HBO platform, are there some observations you've had over the last number of months as you've been getting ready for HBO Max, when you came off of a very high-rated season of Game of Thrones and so on?

So I'll give you 2 things. One, on HBO, our wireless customers that have HBO, who buy into the highest-level package wireless and get HBO with it, those are some of our lower-churn customers. Some of our best are higher-service revenue customers and lowest churn. So we've seen that for a good period of time. That's not HBO Max. Expect, if anything, it could get better with that because HBO Max has deeper content. But we are seeing that. What we did see in this past year, I think we've talked about in the third quarter was, after Game of Thrones ended, we continued to come out with really high-quality content, made some investment in and some shows that went to a different demographic, a collection of female leads and other demographics that we wouldn't touch. And we did a great job of holding on to those customers. And so we have confidence that the quality of the content that can be developed by our team is there and can retain customers and interest customers and recruit customers. And so now we just need to make that a key part, and we're striving and have, I think, clearly done that. Bob Greenblatt and the team have clearly done that to make that a part of HBO Max. But I think we've learned that we can do that. It's not just a one-show -- one-trick pony. The depth of the content and the capabilities of our people are just probably more than I really had full appreciation for before.

When you -- we'll take a step back and maybe talk a bit about the 1- and 3-year plan that you outlined off the third quarter call. What are the key opportunities for AT&T to improve revenue in 2020?

Okay. So directly on that, first one is Mobility. We're growing service revenues now. We've got this great network that's getting better. We've got this transition to 5G that's going on, and we're in the lead. We've got this HBO Max quality product and AT&T TV quality product to bundle with our wireless. So not only are the -- as we told you in the third quarter, we were growing service revenues, and we're growing postpaid customers. We said we expect to grow service revenues next year. So that's a really strong positive thing, especially since Mobility is such a big piece of our business. Secondly, as we've talked just -- we expect 5G equipment sales to be up. If you think about it over the last few years, 3 or 4 years, the upgrade rates have been historically low. And depending upon the quarter, they might be 4%, might be something like this. The phones in people's hands now are getting old. It's just the way it is. And we've got this tremendous technology upgrade. And we've got something to bundle with it, something called HBO NOW and other things that we think will lead to a significant sales of phones, and so that zone. I think we'll see higher IP broadband, fiber-based broadband revenues. We will continue to see higher wireless revenues out of IoT and business sales of Mobility, continued strategic services growth in business. We expect high standards. We have high standards and high expectations for Warner. And if you look at Mexico and what we've added in customers, you can see why we would be optimistic there. So those are where the revenue stories are.

And in terms of then just the overall financial picture, how important is the cost-cutting? And how quickly could that come through?

Yes. I think what we've talked about is having about -- for the last 4, 5 years, we've been running at about a 6% cost reduction rate for the big iron for the network operations. We're getting that from software-defined network and network function virtualization. And we believe we can step that up about 4%. And we would expect to get that done in various ways this year. That will include -- certainly, the focus of it is going to be force costs, will be contractors, will be other force-related costs, but we would expect to get those costs done. What we'll do is we'll streamline, for example, the capital build process. We'll go through and analyze and streamline the customer care process, the customer sales process. We've done the software-based and virtualization base of the network. Let's take that to the next steps throughout our organization. Got a guy named Bill Morrow, who many people in the room they know, high-caliber, high-quality individual who's leading a team. He's got the team established. They're fully engaged. They're doing the data analysis. They're doing the comparisons. They're analyzing those -- all aspects of our operations. All aspects are going to get looked at. And you'll see us come back with a list of products that we decide we'll no longer pursue. I would expect that. That will be the next step. Product rationalization will be the next step of our strategic portfolio analysis. And then you'll see us doing things differently and more efficiently. I expect we're moving quickly on those. We'll have -- as soon as we have detailed plans, we'll provide those, but we have -- I'm feeling very good about the progress we've made. We need to, if you will, finish it. I feel good about that. So cost is really important. Yes, it's something we've been doing for a long time. If you look at our Business Solutions, it's the best example. Business Solutions revenues, particularly with legacy services, have had a story, but business margins have been very, very strong and stable. That's pretty remarkable. We've been pretty good at this.

I thought we would take an opportunity and just get a sense of how our audience is thinking about all the different facets of the 3-year plan. And so if we turn up the next survey, please. So as you consider AT&T's 3-year financial plan, which area of focus or segment offers the greatest opportunity to meet its financial objectives? So I'll just read these off for those who are on the webcast: asset monetization, cost-cutting, aggregate revenue growth goal, HBO Max, wireless and 5G, Entertainment Group? [Voting]

Can I vote for more than one?

It's just for one, but you could tell us after -- once we get the poll.

I just -- I would vote for more than one.

Should we have done an all of the above? Should we have done an all of the above at the bottom?

Yes. Let's kind of put 7 down and then call it all of the above.

So 25%, asset monetization; 25%, cost cuts; 3%, revenue growth goals; 7%, HBO Max; 38%, wireless and 5G; Entertainment Group, 3%. So as you think about this list, you mentioned you wanted to vote for more than one. What has you the most excited?

Well, I'll say it this way. We feel very good about -- half of our business today is wireless. And it's going quite well. It's doing quite well. And you know that by your survey here, people feel good about our wireless business and to then have the best opportunity to meet or beat. We feel very good about that. And it's -- and quite frankly, that's the finance guy a little bit talking because it's half the business. So we feel very good about that. But quite frankly, I'm really excited about HBO Max and what it can do for the wireless side. I'm quite frankly excited about -- for Mexico, and we're striving to have it EBITDA positive in the fourth quarter and what that would do if we could continually show an EBITDA improvement and get a long-range EBITDA growth there, what it would do for the overall company, even though it's a smaller piece of the total revenue. So I have a lot of comfort with what we're doing. We're going to need to do many things, and we're confident we can. Most of those things that are on your list are parts of it.

So I thought we'd also flip the question now. So if you can bring up the next one. So instead of greatest opportunity, greatest risk to meet the financial objectives on the same list... [Voting]

Can we put none of the above?

So we'll get the poll in, in a moment. And I will just run through these for those on the webcast: 5%, assets; 5%, cost cuts; 21%, revenue growth; 18%, HBO Max; 14%, wireless and 5G; and 37%, Entertainment Group. So this -- you've talked even last year about the amount of time that you're spending talking about Entertainment Group relative to the size it is of the asset mix. What have you learned over the last 12 months that informs your view of how Entertainment Group should move within this 3-year plan?

Well, I mean, a lot of things. One, we expressed we had the ability to, for the overall Entertainment Group, the ability to get it to be EBITDA-stable this past year and to look at that. Secondly, to understand the speed with which the video piece of the business is changing. Third, it's realizing the ability and quite frankly, being able to communicate to everybody the depth of our fiber business and quite frankly, the change in our legacy business, that it's really become a much smaller piece of the Entertainment Group. So the traditional impacts from the changes in that business are, quite frankly, not as significant. So those are the things we look at. And as you know, we have shifted our sales activity to be much more modest promotionals, still promotional, but much more -- we'll go to much more AT&T TV-focused, much more efficient focus on the establishment of the customer and the customer acquisition costs and try to target the delivery of the products to much more what customers want. And so we'll go through that process. And as I say, we continue to work at -- I think the other item that was there was a revenue aspect, and there's different views on equipment revenues and whether equipment revenue is going to sell heavily or very high level like we believe they will because of 5G, because of the opportunity, or whether they won't. And I understand that, and that could be a difference of opinion. I feel good about our positioning. But in that aspect of it, it's one of those ones where when it comes to the bottom line because the sale of a handset is not a profitable enterprise for a business like ours, we don't really make a -- it's not significant in the profitability side. It doesn't change our overall results. So that one is a discussion point that we can just have, but it doesn't necessarily change my overall view of our overall economic health.

And so maybe unpacking the wireless side a little bit more. As you look at the opportunity to grow service revenue in 2020 amidst the cable footprint is more fully marketed than it's been before. Verizon has gotten a little more aggressive since the summer on its promotional tactics. T-Mobile remains very active in the marketplace. Obviously, we're waiting to see what happens in the court. But how do you look at the industry structure and regardless of how it ends up, the opportunity for AT&T, you mentioned some things earlier, but the -- some of the things that might be underappreciated about where AT&T can grab share and growth in 2020?

Yes. So a couple of things. One, 150 -- almost 160 megahertz of sub-6, medium- and low-band spectrum and getting it all into service or -- I should never say all. I should say the vast majority into service is a tremendous advantage. Having the FirstNet contract and those capabilities and that responsibility as well as authority is a great partner to get that done. So that is underappreciated, but yet a tremendous opportunity for us. It not only gives us higher quality speeds and higher geographic coverage for new customers, but it gives it for our existing customers. And so they get a better experience, and that's really important. But it does give us greater geographic coverage. And so we'll be able to sell into new markets that we geographically have, maybe not a lot, but it will improve that. It will help us to sell in the geographies where our service has gotten much better. And then it's also, particularly in the FirstNet example, we're going to be able to sell into a whole lot of customers that we weren't really registered to sell into. We've sold -- signed up 10,000 agencies now, fire departments, police departments, so on and so forth. We've got 1 million first responders, customers, but we're growing that. We're having push-to-talk. It will come out this year, and that will grow our base. And we'll get this opportunity to really grow as body cams, as tablets for the cars, all of those grows. These are multiple choices. And quite frankly, as the first responder community grows from just firefighters and police officers -- I shouldn't say just. These highly respected firefighters and police officers, EMTs, it goes to hospital personnel and power company personnel and other people who have -- it gives us a greater opportunity to sell into it. So we feel really good about it. We feel really good about the last few quarters. We've been growing our postpaid base already. So that's great. It's understated, I think, many times, but our Cricket brand is over 10 million customers. It's done tremendously, and that's going to continue to be a real opportunity for us. IoT, with the tens and tens of millions we have out there with 5G, it's going to lead the way. All of that, but it's really based on -- built on this great network and this great distribution system. And then the final thing is, as I said, if you can bundle it with something called HBO Max and a really great entertainment product or AT&T TV, you really have a differentiator, particularly when you have it under your umbrella of economic ownership.

And maybe turning to capital allocation, you announced the accelerated share repurchase program.

That's right.

In the fourth quarter for, I believe, the first quarter. Is this the only program for 2020? Or is this the first component of what could be a larger opportunity to repurchase shares in 2020?

So let me give you a couple of things. First, as of today, we've brought back in mostly the -- we've brought back in about 140 million shares of what we issued for the Time Warner transaction, we brought back into the company as of today. About 60 million of those were last year, and the remaining part of it were the first week of this year through the ASR. So that's something that we have done. And it will have an impact, really not on -- won't change EPS in 2019 just because of -- it was spread throughout the -- mainly spread throughout the fourth quarter, and it doesn't really have much of an impact. But it will certainly help us achieve our goals in 2020 and certainly gives a way to have an offset, so to speak, in the EPS calculation to the investments we're making in 2020. So that's actually already done to the tune of 140 million shares. Secondly, we will look at doing other and continue to do other share retirement from the issuance of Time Warner throughout the year and throughout the next 3 years. And we've talked about returning to shareholders about $75 billion over the next 3 years. Most people think of that as $45 billion in dividends, $15 billion a year and $10 billion a year of share retirement. So 140 million shares, you can do the math, is not that full $10 billion. So just by what we've said publicly, there certainly is an implication and expectation that we're going to do more this year. But I don't have any specific announcement to make, but I certainly do expect us to do more. Secondly, I would tell you that when you do something on the first day of the year and you pay for it on the first day of the year, we had -- we were fortunate that we had the -- or virtually the first in the year, and we have plenty of cash to pay for and so on and so forth. For the first quarter, you'll see a little bit of a change in our net debt to EBITDA. And by the end of the year, we'll expect that to go right back to what our expectations are of continuing to pay down debt. But there will be lumpiness with regard to this process. I feel really good about what we've done. And we would expect to do more, but we haven't announced any specific plans.

And on the future net debt leverage target of 2.0 to 2.25, how do you consider within that range other strategic initiatives, investments, spectrum purchases?

Yes. So spectrum purchases, really simply by, I got to go -- I got to find some assets to monetize, whether it's selling out some yards or selling who or whether it's finding these tower company receivables that we signed up for these tower transactions years ago, and we have these receivables from them that will get paid over the next 10, 15 years and go out and figure out a way to monetize those, things that people didn't pay much attention to. That was a significant part of what we did in the fourth quarter. So I'd just say, on buying spectrum and even buying some of these tuck-in business transactions where we're buying some products or services, we're adding to our capabilities in advertising or in the Business Solutions and security or whatever the case may be, like we did with AlienVault a year or so ago, we've got to find ways to pay for those and self-fund them through asset sales. That's what I'd expect. And don't expect -- and we've wrapped that we're not -- we don't expect any material M&A transaction. And we may have some tuck-ins, but nothing significant. That's what we've committed to, and we're going to live by it.

And people ask the question if mid-band spectrum has some higher price tags attached to it, does it still fit into that bucket of finding assets to pay for it? Or is that more of a unique episodic situation that might have different characteristics or considerations to it?

Yes. And I don't know when any mid-band spectrum is going to come to market or what's the timing or what the payment terms and all that. So I don't mean to be making any suggestions. There's a lot of change going on. It's certainly -- there's certainly a lot of educated people who have differing views about whether it's 2021, 2022 or even later. But with that being said, I -- the simple response is we better go find a way to fund it by selling assets and by doing so, making sure we meet that 2.0 to 2.25. That's with today's historically low interest rates. That 2.0 at today's rates gives you an interest expense level compared to your EBITDA that is, quite frankly, historically lower than we were with a 1.5% or 1.6% net debt-to-EBITDA with a 6% interest rate. And that's even before you take into account that taxes are 40% cheaper. Tax rates are low. So we feel really good about that, but we just need to self-fund things, and that's what you'll -- that's what we think about it.

And we have some time for some questions in the room. While mics are getting circulated, are you seeing any change in customer behavior around the macroeconomic conditions or any signals of what might be evolving in the macro economy?

Yes. I wouldn't say that. I think what -- so if you think about the macro economy, you think about the consumer, I think about it this way, and this may be a nonexplanation, but energy prices, gas, other than the last 2 days, oil has been really inexpensive. That is a dividend to consumers who drive. Interest rates have been really low. So the cost of housing has been really moderate. I mean I know it's going up, but it's been moderate for those who are refinancing and so forth. And so that's been a dividend to consumers. We've seen unemployment be at record lows and participation rates going up. So for the group of consumers as a whole, that's been really healthy. And we've seen real wage increase. Additionally, we've seen real wage increase, not necessarily, which in prior years, it may have been at the top quintile, but the stuff -- the information I see, the real wage increases are in the third and fourth and fifth quintiles. And those are the folks who tend to, when the additional money, have the money, they spend it because they have things to spend it on. So we're seeing it in our consumer-driven businesses, whether it be entertainment, whether it be television, movies, whether it be wireless, broadband, we continue to see a reasonably healthy consumer. We're not seeing a rocket ship of the economy. We're not seeing the economy take off. I don't mean to imply that. But we are seeing an economy that has much less risk. Housing is a smaller piece of the economy than it was 10 years ago. Energy is much lower prices. We're seeing participation. Unemployment rates are lower. And business-fixed investment, while it hasn't been a shining star lately, it's at a modest level, such that there's less risk of any change, and it really impacted the economy. So we see a fairly stable, reasonable economic picture. And we're -- and specifically, we're a U.S. domestic revenue and profitability company. We finance our business across the globe. But we are -- 90% of our revenues or 95% plus of our profits are right here. So we feel good about our situation and our standing and quite frankly, feel even much better than we did a year ago because we have that going on with great progress on our networks, great progress in our customer base. And then, quite frankly, our balance sheet is in really good shape. So we feel good about it.

And how does that spill into the business segment and just at a high level, business segment and media segment as you look out over the next 12 months? With the economy the way that you described it, is that a net opportunity?

Well, we're certainly hoping that on the media segment, it's going to help with movie ticket sales, it's going to help with the purchase. The demand for HBO Max is going to help for the demand for AT&T TV, all of those. I mean we continue to see video consumption grow, hours of viewing grow. So we feel like that's a good sign, a good harbinger for them. On the business side, the one thing that's going on is, is that there is more employees. There's more people working, and that usually drives maybe not the big telecom pipe you think of when you think of business-fixed investment, but maybe the cell phones, which we are seeing solid business. Our Business Solutions group is doing a really good job of selling Mobility. And so we are seeing that. So as -- the more important thing on our business side is we're over 60% of our revenue on Business Wireline. The strategic services is next generation. So we're getting through that maturity process. We're getting through that transformation process pretty well and holding on to margins. And so as that continues to grow, we'll continue to be healthier and healthier, and that's along with wireless IoT, tablets, voice and so forth. So feel good about it.

John, thanks for your time today.

Thank you. I appreciate it. Thanks, everybody, for your time.

Thank you.