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

Thanks, everyone, for joining us. I'm Bryan Kraft. I'm the telecom, cable, media analyst at Deutsche Bank. And I'm pleased to be here with John Stephens, the CFO of AT&T. John, welcome. And I know, John, you want to start off with some safe harbor language so I'll hand it over to you.

Great. Thanks, Bryan. And thanks for everyone to be on the call today. Thanks for your interest in AT&T. Before we begin, I want to call your attention to our safe harbor statement, which is some of the comments I may be making today will be forward-looking and are subject to risk and uncertainties. Actual results may differ materially. And we'd suggest you look at our SEC filings and the information on our AT&T website for further information. With that, I'll add one more thing folks. I usually give this at the end, but please, on your way home tonight, don't text and drive. As much as I'm interested in revenue for our company, we don't need to make money that way so please be careful. It's a serious matter for all of us, and we take it seriously around here. With that, Bryan, let me hand it back to you. Let's start asking questions.

Okay. Great. And John, why don't we start with the topic that's on everyone's mind which is, how is the coronavirus impacting the company, your supply chain, your business overall?

Yes. So first and foremost, for us, it's a focus on our people, on the people, our employees and our customers, trying to make sure we keep them safe and take all the precautions necessary, whether it's giving them new guidance on travel, whether it's allowing them to work from home, whether it's doing some of the deep cleaning of our retail stores and making sure that there's the appropriate cleansing materials out there for all of our stores. Quite frankly, that's the first focus. We're spending a lot of time working with authorities. We're used to doing that in the sense of being a network operator who deals with storms and acts of mother nature. We are dealing with them in that same type of way with the same processes. From a supply chain perspective, I don't want to suggest we've seen anything significant at this time. We continue to talk to our suppliers. Of course, when you think about the situation, we're about handsets and tablets and watches and those kinds of things and other computer equipment, routers and so forth. But so far, we've been in very good shape with that. We'll see how long or if there's an impact going forward and we'll leave it to our suppliers to kind of give their guidance on those kinds of things. But so far, we've been working closely with them and working through the entire corona situation. And quite frankly, lastly, our thoughts go out to everybody. This is something that we need to treat carefully and be careful with, and we're trying to do that in our piece of the world here at AT&T.

Okay. And why don't we talk a bit about your 3-year plan. What are the key strategic priorities that management is focused on this year, maybe to start off?

Yes. So the 3-year plan is to get our EPS up to the $4.50 to $4.80 range. It's a big range out there because of our ability to retire common equity and the impacts of that. That range includes our HBO Max investment. Secondly, we expect to grow revenue on a CAGR basis in the 1% to 2% through 2022. We expect adjusted EBITDA margins to grow 200 basis points higher than in 2019, which will give us incremental EBITDA when you put all that together of close to $6 billion. Free cash flow, we'll start off with $28 billion. We expect this year, growing to the $30 billion or more by 2022. And then we'll expect to get net debt to adjusted EBITDA down by -- in 2022 down to the 2.0 to 2.5x range. So those are kind of the guidelines we're sticking with. That's what we've announced. That's consistent with what we announced back in January. We expect that would be what we accomplish going forward. Kind of key strategies or key priorities. Got to grow wireless revenue and specifically, wireless service growth of 2-plus percentage points. We think our network coverage, our FirstNet coverage, the 5G network, all the other aspects of what we're doing and the upside we have with our unlimited plans as well as some of the other things like insurance and so forth give us the opportunity to achieve that goal. We really believe at HBO Max. We're excited about the launch that's coming in the second quarter. And that launch and carrying that forward throughout the 3-year plan will be very important priority for us. For the current year, as you've seen, there's been a lot of political advertising. And that will impact our business in a very positive way as we go through this election cycle. We're expecting to grow our fiber base. As you know, we have about 4 million fiber-to-the-prem customers. We have built about 14 million so we've got a lot of space to sell into, and we're excited about that. The success of that will be important to us. Improvements in our Mexico operations. I think you saw we probably had a $200 million improvement year-over-year in the fourth quarter, over $300 million for the full year last year EBITDA improvement in Mexico. We got it positive and it's going to be critical for us to not only keep it positive, but to grow it, and we expect to do that. We just launched AT&T TV and it's early. I don't have a lot of comments on that, but that's going to be -- that ability to be successful with that product is going to be important. WarnerMedia synergies are going to continue to be important. And then lastly I'd say, the share repurchases, the capital structure as well as not only the equity side of that, but also paying that debt are going to be critical factors. So that's a quick overview of that, Bryan. Let me stop and let you ask me the questions you want on anything else or any details.

Yes. When I look at those 3-year plan numbers and then I compare it to sell-side consensus estimates, the consensus numbers are well below that 2022 guidance, which indicates some healthy skepticism in the market. What gives you the confidence that the company will achieve these targets and what do you think the market is missing here?

Yes. I think the issue is -- I'm confident we can execute on our cost initiatives. So I think that is a significant item. I think that is what we need to do. We've got a good track record on merger integration synergies and the kind of taking out cost. If you look back at our Business Wireline segment for the last 5 years, you see we've been holding on to margins in a revenue challenged business. And we're doing that through, whether it's network virtualization or whether it's replacing hardware with software and automating processes, but we've done a really good job. We need to continue to do that. Secondly, I think we believe we've got a real opportunity with restructuring our capital stack, not only retiring almost 10% of the shares of the company or 70% of the shares we issued with Time Warner, but also in addition to that, shifting some of our capital stack from common to preferred because there seems to be a great appetite out there. That's another item that gives me great confidence. Third, I really believe in our wireless position. I think it's really strong and I think we're going to be able to compete very, very well. In the short run, I think those 3 things really give me confidence, and I think those are the things that we need to execute on, we need to prove by our actions and to build further support and build further momentum, but I believe we can do that.

Okay. So we'll get into some of those things. You targeted -- I guess, first, on capital structure, you've targeted retiring about 250 million shares in 2020 through the repurchase plan with 100 million in the first quarter. Does the recent stock price decline cause you to consider being more aggressive or does it make you more cautious now given the increased macro uncertainty?

Yes. So I would tell you that as you're going through these situations you consider both. You see the ability to get more shares per dollar and that has its attractiveness. By the same token, you always want to be prudent and careful and prepare for all uncertainty that's out there. I feel like we can have a real good balance with that. And we've taken that into account in all the announced decisions certainly that we've made. With regard to that, I mean, we believe that with this plan, we're going to continue to generate strong cash from operations, which is going to allow us to continue to invest CapEx to keep the business fresh and moving forward. That's going to leave us with cash that continue to increase our dividends for our common shareholders. Even if those -- those increases may be modest, but we believe we can do that. And that leaves us with this cash situation to not only continue to pay down debt but also to retire those shares. So I feel comfortable about that. But yes, you watch it carefully all the time, but specifically in times of stress or uncertainty as we're facing with corona.

Right. Okay. And can you talk about the rationale or walk us through the rationale for the preferred offerings that you've done?

Sure. We have a collection of shareholders, probably in 50% range of our shareholders who are retail and who seem to and appear to own us. An important part of that equation is the dividend. I mean, I think that's important for all of our shareholders, but specifically for those retail shareholders. So we, if you will, decided to take a step in the water and try out whether the marketplace would be interested in a preferred from us. We did that in the fourth quarter. It was very successful. We did $1.250 billion worth of preferreds. So that was the first time in our history we've done that. It was very successful. We did 2 more issuances in the first quarter and did almost $4 billion equivalent U.S. dollars. So what we've seen is that there's a real appetite for the preferreds. The benefit of that for us is that we can then, if you will, reshape or realign our capital stack. So we take that money and we use it to retire common shares to bring those back in. When you do that, you do a couple of things. One, we're trading actually a lower dividend on the preferred than there is on the common. That's a good thing. Secondly, the preferred dividend doesn't go up. And as I mentioned before, we expect our common dividend to go up over the next 3 years. And heck, it's gone up over 35 years in a row. So for us, having that dividend be stable and not be growing is really important. And third is that those preferred shareholders share in our profits to the extent of the dividend, to the extent of the 5% or 4%, depending on what -- the euro dividend was about 2.8%. They share in profits of that while our common shareholders share in profits to a 9% to 10% range so it leaves a lot more profitability for our common shareholders. At the same time, it allows us to bring in some of those common shares and return some additional cash over and above our dividend to our common shareholders. So we think all of that together makes a very good common sense. As I say, it's really low-cost capital and it's capital that's much lower cost than our common stock equity is today.

Got it. Makes sense. Okay. And any updates to the $5 billion to $10 billion monetization target that you've talked about in 2020?

We've talked about a $5 billion target. We've still got CME to close yet. We still got Puerto Rico to close yet. We still got more tower deals that we had announced. All 3 of those things we announced last year but have not closed yet. Those together just in kind of general are a little over, probably close to $3.5 billion. We have had on the market our regional sports networks, and we're looking at the potential for those. I will tell you, we have literally hundreds and hundreds of millions of dollars of real estate and additional assets that are under contract already that are small, work centers, administrative buildings, things like that. We continue to scrub our balance sheet, $500 billion balance sheet. If I can find 1% of the items to sell, I have another $5 billion over what I've talked about. So all those things are in process. So we'll keep working those as well as working free cash flow opportunities. Things that we've established ourselves are pretty good at, whether it be accounts receivable securitizations or other monetization strategies like we did with our tower options receivables last year. So we're going to continue to work with those kinds of things, things that may not be a division or an operating corporation, but rather parts of businesses that we can monetize. Feel good about getting the $5 billion in this year and hopefully, we can have success over and above that. But we're targeting that and feel good about the ability to get that done.

Okay. And I wonder if we could talk about the wireless competitive environment. And how would you characterize the current competitive environment and what are some of the drivers that you expect to drive growth in wireless for 2020?

Yes. So I would suggest it's competitive. It continues to be competitive as it has been in the past. I feel like we're very well positioned to compete. As I've said in the past, we're doing rational competitive offers. We're not the ones giving away phones with regard to prepaid customers and so forth. But we've seen a lot of that competition get more rational recently. If you want to know what I think the lead for us is, 5G is going to be a very big deal for us. We have 80 million people covered today with 5G. I think we have 80 cities. And by June of this year or mid part of this year, we'll have 200 million POPs covered with 5G. So going forward, 5G will be an advantage for us. Secondly, when the 5G handsets come out, this will be important because handset upgrades have been slow. And so as those 5G handsets are sold into the marketplace, that not only gives us the opportunity for equipment revenues particularly in the second half of the year, but also gives us the opportunity to upgrade our services to our existing customers, moving from Mobile Share Value to unlimited. And then if they want to get 5G services, they get up to the elite unlimited. So that's a very positive thing. I will tell you, the launch of HBO Max in the second quarter, in May here, we expect that to be a big positive for our wireless business as we're able to use that and bundle that with our elite unlimited customers and give them HBO Max services. All of those things are going to be really important. In addition to those, I think we're going to be able to continue the service revenue growth you've seen over the last 3 quarters. I think you'll be able to see the continued customer growth you've seen specifically over the last 2 quarters. I think a lot of that's generated by FirstNet. And as we continue to make progress on FirstNet, I believe we're going to be able to continue to grow our wireless business. So we got a lot of really good things going and we feel good about the wireless business. We just got to do some more of the same, some more of what we've been doing. And then specifically, we're going to strive to those additional wireless revenues, specifically those service revenues fall to the bottom line with regard to keeping our costs in line. So those get to drop down into our EBITDA, into our operating contribution and our profitability.

Do you see room for margin expansion in the wireless business going forward?

I think there's always that opportunity. But I will tell you, I think of it as much as anything as EBITDA growth and the ability to grow EBITDA. And I say that from a perspective of, we have about 17 million, I think, prepaid customers. The EBITDA margins on those customers are different than the postpaid voice customers, but they're very good customers. They're very profitable customers. So we do well with those customers. We have a great service and a great price but it's profitable. And that EBITDA contribution is very important even though the margins may differ from some of our other products. So I think about it as the total EBITDA growth. But yes, all these things will help us not only grow EBITDA but also grow margins.

Okay. Makes sense. And let's talk about the network a bit. How has the network upgrade positioned AT&T from a capacity and a network quality and user experience perspective relative to competitors?

Yes. So I think to anybody that's been following us, the FirstNet contract was unique. It gave us 20 megahertz of very high quality, previously unused spectrum, very clean spectrum. We had a contract to put that in service and we're -- 80% of the coverage area has been put in service. But when we did that, we also took some previously owned AWS and WCS spectrum, about 40 megahertz depending upon the market. And we put all of it into service at once. So now the key to our network and our position is that we have 160 megahertz of what we'll call sub-6 or low and medium band spectrum that is either in service or being put in service across the country. This is giving us great coverage. This is giving us great speeds, giving us great quality. We've been winning awards from GWS and from Ookla and others that support that. It also gave us the opportunity to get very far ahead of the 5G upgrade because as we were doing this, we were sensitive to what we need to do for a 5G network. And that's why we're able to state that by the end of second quarter, we'll have a nationwide 5G network. So that's the basis for it. Our competitors don't have that spectrum in that sub-6 area in service today. T-Mobile and Sprint, when they get together, when they do close, will have the spectrum, but it's a long way from being put to use. We'll have ours in service. And so that gives us a great advantage. As I mentioned before, having the ability to have a HBO Max product and put that on top of that service and other 5G services on top of that network is going to be really important. But our spectrum position, specifically in the low and medium band, is very good. The build-out we've done is very good and been very economical. And that leads us to having a significant 5G lead and a network lead in the marketplace.

And you mentioned FirstNet. How much progress have you made towards increasing your market share of the first and second responder market given your position as the FirstNet provider?

Yes. We got 1.2 million FirstNet customers today. And that's growing. We've got over 10,000, if you will, entities, police departments, fire departments, municipalities, counties, state governments that have now qualified us. And so we've got a lot to sell into. But your reference in your question, Bryan, is really important. It's not only the first responders as I think about them, those wonderful people who are out there, the police and fire and emergency medical technicians, but it's also the folks that go into these tornado or thunderstorm ravaged area and climb the power lines and put the power lines back in service and put the telephone lines back in service and put the gas lines back in service and work in the hospitals, they're also now qualified for first responder-type services. So this opportunity is growing significantly. We would tell you that there's probably 10 million or more in that category and that they can not only buy a phone device for themselves. They might buy, depending upon what they do, a bodycam, a tablet, but they may all have husbands or wives that we can sell to and their families. And then, of course, there's always the administrative people back in the dispatch office and the management office of these fire departments and so forth. So we're just getting started, if you will, but we feel really good about 1.2 million customers already on. And as I say, we're about 80% complete with the coverage requirements, which is way ahead of schedule and is leading to this great quality network and the utilization of all the spectrum that we own.

Okay. And continuing on with the theme of network, and I know you talked about it a little bit, but can you talk specifically about your plans for deploying 5G in the network, the timing? And yes, maybe if you can give some color on how your 5G plans differ than some of the other U.S. carriers.

Yes. So right now, today, we got about 80 million POPs covered with 5G. That includes core network as well as millimeter wave. By June, we'd expect that to be over 200 million or more, 200 million or more, and that will give us the claim to a nationwide network. And we'll continue to grow that throughout the rest of the year and into the future. We have a number of cities. We're in specific locations within those cities, whether it be sports arenas, whether it be hospitals, business campuses, factories where we have 5G+ or millimeter wave 5G capabilities. And all of those things give us a lead over our competitors in the standpoint of the ability to offer services. I'll give you some examples in the IoT space or the 5G -- the millimeter wave 5G space. We've got automated factories that we're working with down in Austin. We got a hospital, Rush hospital up in Chicago where we provide 5G for the campus to allow for better service to patients and better administrative services for doctors. AT&T Stadium in Arlington, Texas, right here, near Dallas has a 5G capability in the sports venues type situations. So you'll see us doing that. There's been a good push and pull, push by our sales guys to our customers to experiment, pull from business customers to get into that. But because of that, we have a very good opportunity to learn and develop. And that will lead us in then to the consumer applications that we will see develop throughout this year and into the future. But our network is really the key and our build is really well underway. And we believe we're going to have the best, deepest coverage on the 5G perspective than any of our competitors, specifically because we're using this sub-6 spectrum in combination with a very healthy collection of millimeter wave.

Okay. And how is the 5G performance so far in areas where you have rolled it out? Can you talk at all about how the network speeds on 5G compare to your 4G network?

Yes. The 5G+ and millimeter wave, you can get 1 gig speed or better and it works really well for automated factories, transportation or downloading videos or doing that kind of sharing, the kind of things that are done on the sports venues and the campuses. It's pretty impressive. And it's going very, very well. And we're learning from the business customers that we're working with on new applications, new capabilities. On the 5G, as it is today with regard to the broader network or the nationwide network, we're seeing increased speeds and quality, but not the peak speeds that we'll see in the future as we roll out some of the new technologies and specifically as our consumer base switches to 5G phones. So right now, you can have that network out there, but if there's not a lot of devices in service -- I can't say that our customers are seeing much but they will be when the new phones come out. And then going forward, what we'll see is an improvement in the latency and speeds as the technologies that go into the network continue to improve, whether that's dynamic spectrum sharing or any other technologies that we'll roll out. But quite frankly, we've had such a big jump in our network coverage because of FirstNet that our LTE speeds have jumped up significantly so our customers are already experiencing some of that positive impact from the build. We believe that's why you've seen our service revenue grow the last 3 quarters. We believe that's why you've seen the third and fourth quarter were our best customer net adds on postpaid voice we've had in years, and we believe that, that's because of those improvements that are even pre-5G.

Okay. And how about on the spectrum side, how comfortable are you with your spectrum position? Do you expect heavy bidding for C-band and CBRS and if the auctions get structured in a fair and efficient method?

Yes. So the first thing I'd say is, going to be careful and not talk about the -- we're in a quiet period for the 37, 39 Auction 103 results, so I've got to be careful to step back from that. But as I've mentioned many times, we're very comfortable with our low and medium band spectrum, the 160 gigahertz that we have and getting that into service. That's great. We're comfortable with the size of the millimeter wave spectrum that we had before the auction started. I think people are familiar with that, whether it was from a prior auction from the FiberTower acquisition. We're always looking for more spectrum. We see that the C-band auction is scheduled or tentatively scheduled for fourth quarter this year. We know that there's a lot of discussions still going on with that. We'll certainly have an interest in it, but quite frankly, it's not something that's essential to us on an immediate basis because we have this significant amount of spectrum already owned and already placed in service. So we have an opportunity to participate and certainly have the wherewithal to do that and will be interested, but we don't have the immediate need for that spectrum or putting new spectrum into service in the same line as some of our competitors.

Okay. And why don't we move on to the entertainment side of the business? So recently, management said that AT&T's pay TV subscriber trends would converge with the broader industry by the end of this year versus the steeper declines that you've been seeing. Could you walk us through how you expect to achieve that improvement?

Yes. So a couple of things. One, last year, we had a number of customers, 2.5 million almost at the beginning of the year that were on 2-year price locks, who sign up for a promotional offer and that had a commitment that those prices didn't go up for 2 years. Well, you know how it goes in the cost of content going up every year and the initial promotional offers. Those customers would see measurable increases in their prices as we decide to bring them back up to market. Because of that, we had a lot of customers decide that they weren't going to stay with us. That was a big impact in all of '19. And we focused on long-term value customers, so doing that, it was not an incentive for us to go and give them offers where we just couldn't be profitable on. So we, if you will, migrated out of that customer base. Secondly, on our intake, we now are going to come across 1 year anniversary here of only marketing to those customers where on a price point and an offer that would generate long-term value for both us and our customers. And doing that means we had a lower amount of gross adds or intake through most of last year. We'll have some of that occur in the first 4, 5 months of this year, first half of this year, but we'll lap that change in marketing activity here in the end of the second quarter. So we'll get a year-over-year comparison that's more on a consistent basis. Those 2 things alone will change the trend. Third, our AT&T TV offer, which is very simple offer. We just released it, just announced it, just launched it. It's too early to get into extensive discussions. We've been pleased with the launch, but it's just very early, so I don't want to go past there, but we believe that, that AT&T TV product will allow us to very cost efficiently add new customers. It adds to the, if you will, universe of profitable customers and also adds to our coverage in the sense that we can sell this product to people who have broadband or fiber that is ours because it's so easy to use. Those things, I think, are really the key for us in expecting that by the end of the year, you'll see improvements in our trends such that they'll, if you will, look like the rest of the industry. But it is -- as everyone knows, the linear TV industry is going through transition, and we'll continue to see that ourselves.

Okay. And on the WarnerMedia side, have you made progress toward distribution agreements with HBO's current MVPD partners yet? And do you expect to have those agreements in place when you launch HBO Max?

Yes. I think we've announced one distribution agreement with YouTube. I don't have any others to announce today. We do have our internal capability to distribute for the DIRECTV and the HBO NOW customers and the DIRECTV customers with HBO. So from that standpoint, those together are a significant number. We continue to work with others. We feel like it would be a positive for all of us to have those capabilities, but I don't have anything to announce today, Bryan, so I'll leave it at that. We're still positive and still working hard on it, but I don't have anything to announce.

Okay. How do you plan to leverage the product in your other businesses, namely wireless? How does Max give you an advantage via content over wireless carriers that are bundling streaming video services that are owned by third parties, so ownership versus renting, I guess?

Yes. I think the first thing is I own it, and so I have the umbrellas. I have the owner's economics over the product. Two, the cost to add, if I'm a customer with HBO Max and we add 4 or 5 people to it, I don't really add much in the way of cost. Whatever we spent on that content has already been spent, now we just amortize it over not just 1 but 4 or 5 more. And so the cost per unit goes down. So there's good economics to using it that way. And a very specific way for us is simply this. We have Mobile Share Value plan offers and we have unlimited offers. There's a variance in price where our mobile Unlimited Elite customers, the ones who get the best, who use their device as a hotspot and get 5G capabilities and get HBO Max, they may not pay for a separate line item for that HBO Max, but their total monthly bill may be $15 to $20 higher than the base unlimited package. And so that ability to generate revenues, whether we call it mobility service revenues, we call it HBO Max services or how we designate it, that ability to generate that additional revenue is significant, especially where your cost of providing that service to them is de minimis on an incremental basis. But secondly, it could be a really -- we expect it to be a good tool in managing churn and retaining customers. And that can be very valuable when you already have that setup. So that's just one example. We can do the same thing with fiber, where we're selling into our fiber base, our 10 million unsold fiber that we're now striving to sell into. The ability to put HBO Max with that might give us a new offer, just like putting AT&T TV with that is a new offer. So when you think about the HBO Max, it's not only a great tool for the HBO franchise, great tool to own the customer relationship and to have that in place, but it's a great tool for supporting our broadband business and our wireless business. And we think there's a lot of opportunities. We learned from HBO NOW how to do this, and we think HBO Max, because of its wide application, its wide attractiveness to a great number of demographics is really going to be helpful.

Okay. And on HBO Max, how do you expect the product to evolve in terms of international rollouts as well as introducing live TV and advertising?

Yes. So we're first focused on rolling it out in the HBO Max official offering with a product that covers multiple demographics, millennials, children, adults of any gender, any background. I think that's an expansion of the demographics covered by HBO. And so we think that's the first focus. Certainly, it will be basically a domestic product, I would expect, for the launch and going forward, where you'll see us try to get our existing HBO customers to utilize it, expand into other non-HBO customers and expand it through bundling with our other products and services. And expect next year, we'd move towards an AVOD product, an advertising-assisted product to provide the affordability of the product into more people by the use of advertising and supplementing it so that, if you will, we're still generating the revenue, but it doesn't have to necessarily come out of the consumers' pocket. While those things are going on, we'll continue to look to further expansion internationally and further expansion with the potential to add other products and services, like you said, live TV. I don't have any specific announcements on that. I can tell you that we're looking at all of those things. They're very good questions. I think the most important thing for us is to have a good solid launch, get the adoption rate of the product, have it very successful, which I expect it will be, have confidence it will be, use it, particularly in the second half of the year with 5G, in helping our wireless -- strengthening our wireless business, take advantage of the fact that the incremental cost for us to add a customer is very manageable and then move on into next year with a very successful start and giving us a basis to move forward with an AVOD and other offerings, including international and potentially other things to add to it.

Okay. Can you talk about -- shifting over to broadband and fiber? Can you talk about the underlying trends in AT&T's fixed line broadband operations and whether you expect a return to net subscriber growth this year?

Yes. No, I'm not giving any specific guidance on categories of fiber or broadband or IP, DSL and so forth. What I'd say is, I expect us to get -- in the second half of last year, we had a number of content discussions and some content disruption that had some challenges for us with regard to our video business, but they also cause some overlapping challenges with our broadband because so many of our customers were buying broadband and video together. I believe we're going to have a renewed interest. I think we've come out with some offers just recently on our available fiber and broadband products that we're encouraged by. So we think we've got a significant opportunity. Specifically, if you think about the -- if you will, the 14 million fiber that we built and 4 million we sold into, we have a significant opportunity to expand that base to move towards a penetration rate that's closer to the 50% or above. So I feel very good about that. We have a renewed emphasis on net utilization. And then quite frankly, we're going to continue to have some additional fiber capabilities, whether it's on greenfield builds, whether it's on customer demand. I don't want to suggest we're going to build at the same level we were in the first half of last year, where we're adding nearly 1 million a quarter. I'm not expecting we're going to do that. But I don't want to leave anybody with the impression that there's not going to be any additional capacity. And then as a side bar, which I don't think you asked, but we really do have significant opportunities with fiber for our business customers. We talk about 14 million fiber-to-the-prem, but really, there's 22 million business and consumer locations passed with fiber that we have the ability to sell into. But we got extensive fiber network, we just need -- we're just going to take advantage of that in the competitive environment and move it forward and grow it from there.

Okay. And a question on Entertainment Group EBITDA. 2019 was a year of stable EBITDA despite the subscriber and revenue headwinds that you had. How should we think about EBITDA and margins in 2020 and beyond?

Yes. You're right. Let me make a couple of points. One, you're right, we did have a positive EBITDA last year in the Entertainment Group. The positive EBITDA was led by a lot of great work in our video and controlling costs and made some tough decisions in the content management. But quite frankly, it was really generated in large part by the significant performance of our broadband business, growth in ARPU, growth in profitability, expansion, improvements there. And so with that, that's where we're going to continue to focus our growth activities. And you try to use that to increase our profitability on that piece of the Entertainment Group. We're not giving out specific guidance on the Entertainment Group or on video, but needless to say, we got a lot of work to do with regard to continuing to manage costs to keep the economics there, working as best we can. We're hopeful that the steps we take -- we believe the steps we've taken are going to lead to really good results, but we haven't given any guidance on that and I'm not going to start with that today. But we feel good about where we are on that broadband and the capabilities we have with regard to that business.

Okay. And maybe just one more on WarnerMedia, actually, that I wanted to ask you. Can you just talk about your strategy as it relates to Turner given the secular pressures in that business from pay TV subscriber declines?

Yes. So one thing I'd point out is that, if you look at the fourth quarter, subscription revenues grew, I think, about 3% for Turner. So the strategy we've put in place with regard to customer contracts and providing services and so forth have been working. Secondly, as we go through this year, the advertising piece of the business with regard to political advertising, in particular, and also, we'll see what happens with the Final Four and all the events. But the capabilities we have with that and so forth, we believe that the live sports portion of that business and the investments we've made there as well as the investments in news that we've made, give us a really good chance. Secondly -- getting an opportunity to continue to provide really good numbers. Secondly, I'd tell you that, when you have 4 of the top 10 or 4 of the top 20 cable channels when you think about TNT and TBS and CNN and that collection that we have, when you think about those and you think about what's going on in the TV market, you'd see that people are picking that up on a streaming device as well as on the traditional cable package. So for us, the challenge is to continue to make that available because people want to watch and because it is, if you will, something that's demanded or needed or has a great following. And so we believe that, that provides us a different opportunity than maybe some of the channels that are out there. We don't have 10 channels of the same thing or the same version and we have kept it pretty narrow, pretty high quality and ranks very, very high in the level of cable channels or programming channels. So we feel very good about that aspect. This year, particularly the advertising, ought to be better because of the political environment and the election year and because we are the host for the NCAA tournament. We'll see how that all plays out but feel good about it. And like I say, we're going to continue to market it over-the-top also. So that's how we look at it. That's how we think about it. That's why the CNN and the sports are put together, news and live sports are put together as part of that programming.

Okay. I think we've gone over on time already. I'm going to sneak one more question in and then we'll let you go. And that's on the outlook for the Business Wireline revenue in 2020. The business saw an improvement in the rate of revenue decline from previous years recently. Do you think that, that improvement can continue? And from a profitability perspective, can you sustain margins at the 2019 levels even as the legacy revenue pressures persist?

Yes. Certainly, our goal is to sustain margins, as our goal has been for a number of years and we've been doing a really good job with that. The continued cost management that we've done over the years, we'd expect that to continue and feel good about that. We are encouraged by the continued growth in strategic services and the total wireline improvement in trends. We're not giving specific guidance on that, but I will point you to this. If you look at Business Solutions, that Business Wireline team they also sell our wireless products to those business customers, our IoT, our connected devices, our FirstNet. You can see that, that is growing in total, not only from a revenue perspective. So I feel really good about that. We continue to outperform many of our competitors in this space. The team is doing a good job. We have more work to do, but we feel good about it. And I think the key is going to be to continue to see an efficiency with regard to cost of product delivery as well as we'll see what happens with regard to demand for our services as business customer trends continue to change and whether it's more mobility, more working from home, more remote locations, more security services. But we are -- we have been seeing some good signs out of the Business Wireline group and it continues to contribute a lot of EBITDA and a lot of cash to our business so we feel good about the efforts that, that team is putting forward.

Okay. Great. Well, why don't we wrap up there. John, thanks so much for your time today. I think we had a great discussion. And thanks to everyone on the webcast who joined us.

Bryan, thank you. And thanks, everybody, for listening. And please, on your way home today, be careful. Don't text and drive. Thank you.

Thanks. Bye.