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

Well, thanks, and good morning. Welcome to Citi's Global TMT West Conference. For those of you I haven't met, I'm Mike Rollins, and I cover the communications services and infrastructure sectors for Citi Research. We have disclosures available on the conference website. And I'd like to welcome back John Stephens, Senior Executive Vice President and Chief Financial Officer of AT&T. John, Happy New Year, and thanks for joining us this morning.

Well, Mike, thanks for having me. I really appreciate being here, and thanks for everyone's interest in AT&T.

Great. Well, I think you may have something to mention before we begin?

Sure. Let me just mention the safe harbor...

Safe harbors?

Yes. We're going to talk about things that may be forward-looking. Results may vary. Please refer to our SEC filings and our website information. And also, as most of you know, we're in the middle of the Auction 107, the C-band auction. We're in that quiet period and as such won't be able to comment on any of those matters. So with that, Mike, I'll hand it off to you, let you kick it off, and we'll go from there.

Thanks. Well, congratulations on the upcoming retirement.

And as I think back to all the changes for AT&T and the industry during your tenure as CFO of AT&T, I'm curious now, how do you view AT&T's positioning and how are you thinking about the priorities for the company in 2021?

Yes. So first of all, I'll only make one comment about our folks who responded to the Nashville Christmas Day Bombing. First of all, our thoughts and prayers go out to everyone in Nashville, the community. But my personal and the company's gratitude to all of our people, our network team, our real estate teams, our security teams who all did a phenomenal job of responding, our first aid teams to get the networks operating and to serve customers, it was really remarkable. And it was a year of those kinds of activities with the hurricanes and the storms and just the overall pandemic. So it was just a year of really remarkable stories by our people. When you think about it from that -- when you start from that perspective, I feel really good about the business, where it's going. I feel strong about our priorities. Will 5G wireless and fiber going well and doing very well? Our new software-based entertainment products, HBO Max and the other AT&T TV and the process, the momentum we've seen in those and then really this relentless customer focus we have. So when you think about how I think about the business going forward, that's really where I focus. Really great people, great assets and really good momentum in the business and focusing on those customers and those subscriber relationships, those resilient, reliable subscriber relationships.

So we're going to throw a survey question, the live survey, John, to get our audience involved right from the beginning of our conversation. And then as they're polling, we'll go through another subject and then come back to it. So the first question, and we'll get to this, 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 before we get there, John, you mentioned the investment in the customers. And so I'm wondering if you could further unpack the types of investments that you're making, whether it's in wireless 5G customers, whether it's your HBO Max customers. And how do you think about the ability to continue to invest in these customers over time?

Yes. So let me take it a step back to -- certainly, we're investing customers. Let me take you a step back to what we've invested in our networks, right? So we have got this nationwide 5G network at the deepest low-band and medium-band spectrum portfolio. We have the 10 used today. We have the fastest, highest-quality, best coverage, best speeds for iPhones, all those network investments that we made are paying off. We've got this 15 million footprint for fiber to the prem and millions of business customers covered -- over 1 million business customers covered by fiber-to-the-prem such that we've got a fiber network that's out there today and available. And then we've got this historic inventory of content, whether it's the current Wonder Woman '84 and movies like Tenet that you've seen this past year or this historic legacy of Warner Bros content. So my first point here is that, from a starting point, we have the assets that are there, that are available. And then you say, "Okay. How do you best use those with customers?" Well, in the wireless business, we're making decisions to invest in that customer base. You need time. We have 5G out there. We got new iPhones coming out. We've just revamped our retail and service delivery systems online and retail in store. And so we made the decision to invest in our best customers. Give them a great offer. If you will, give them the best offer for the best customers, it's, quite frankly, is -- is it a competitive offer? Absolutely. Is it a rational offer? Absolutely. When you think about the fact that customers trade in a phone, they sign -- they stay on for another 30 months. These are customers that we know their history of payments, their history of churn. They're going to stay with us. They're going to pay us. And we're going to trade in phone. On top of that, we get the opportunity to sell them up on whether it's adding HBO Max, whether it's going through the Unlimited Elite programs. So it's really a win-win for them and for us. And so we think of that as invest in those customers, but these are our best customers. And you saw -- you can see some of the results of our prior investments in the third quarter, but we had really strong postpaid wireless that adds. And this investment I've just talked about is coming in this fourth quarter. We're excited about the results. It's showing that we -- as we said before, we're seeing continued positive momentum in that basis. Same story goes through for fiber. You've seen what happens with the fiber investments and the ability to grow 350,000-plus fiber net adds last quarter. Great capabilities to sell in, if you will, an inventory of ready assets to sell in more. So we think about that giving competitive pricing on a quality 2-way system, if you will, with upload/download speeds at the highest quality, feel very good about that. And we think about that as a growing a subscription, a monthly subscription business and having that relationship with the customer and the ability to grow that. And it goes on from there. Same thing with HBO Max and what we're doing there. And then the -- and for all of Warner Media, but specifically for HBO Max and growing that customer base. You've seen HBO's. We've said before at the end of the third quarter we're ahead of our target for the full year. We were ahead in third quarter on total HBO and HBO Max customers. So those investments, establishing a monthly subscriber business and that relationship is really important. And while we've got a tremendously large base of it, we expect that, that will continue to be a growth focus for us. And we're really where we think about adding quality customers on that side.

I want to come back to several of those items that you mentioned and delve in a little bit more detail, but we've got the survey question up. So if we can show that for our audience. And while we're doing that -- well, let's see the results first, what our audience thinks, and then we'll go to the question. So just for those who are listen-only, 48% neutral. Remember, the question was, how do you view AT&T's vertically integrated assets for future revenue and cash flow growth? 28% net negative, 25% net positive. And so, John, I think what's been interesting in the industry is there's been a bifurcation of strategies. You have, on the one hand, Charter and Verizon much more focused on broadband access, whether it's wireless or fixed. And you have Comcast and AT&T with this vertically integrated approach with content and the access assets. So how do you see the vertically integrated approach creating greater value relative to the strategies that are just focused on the broadband access? And then those players are partnering in content versus owning it.

Yes. So let me build it from different building blocks. First of all, let's talk about it from a network perspective. And from a network asset investment perspective, when I put fiber on the ground, I have 3 opportunities to use it. I have an opportunity to use it in my fiber-to-the-prem business for my consumer customers. I have an opportunity to use it for my business customers as I connect to buildings and office parks and corporate headquarters. And I've got an opportunity to use it from our wireless backhaul. So that integrated carrier approach clearly has value and clearly gives a better opportunity for utilization of assets. So I'd just point that way. Secondly, when you think about our business wireline business, it has done really well and continue to be very efficient and cost-efficient in maintaining its EBITDA. But it's really strong in selling wireless. And so those customer contacts on the business side that provide the big pipes and the fiber and the connectivity between retail locations or factory locations and headquarters, those are all very important, but they will also lead to connecting those employees to their businesses and the employees doing a lot. And so that integration there is proving very well. When you think about the wireless piece and the ability to combine wireless and broadband and HBO Max and other entertainment, we believe and continue to believe it's very valuable. It adds to the quality of our offerings and the things that customers can get. The challenge is to maximize it. The challenge is to make sure you give those customers that great value at a good price and you maximize those opportunities to grow those monthly subscriber relationships. We feel good about the strategy. We believe in it, and we just need to continue to do what we did, continue the momentum that you saw in the second and third quarter, specifically the third quarter. We need to continue that momentum here in the fourth quarter and throughout 2021.

And you mentioned about the benefit of having wireless and HBO Max. And we're going to spend a few minutes on HBO Max, of course, in a moment. But just that you're seeing on the wireless side, are you seeing a benefit either in terms of the trade-up of ARPUs for customers wanting to take HBO Max with their wireless package? Or are you seeing just more attach rates? What kind of benefits are you seeing between the wireless and the HBO Max relationship?

So we are seeing more attach rates. We are also seeing a movement towards upgrading to our Elite Unlimited plan, our highest-tiered unlimited plan. And as such, we're seeing those revenues -- those positively impact revenues per customer for that basis. Those are tied to the opportunity to get HBO Max there. So it's a double benefit for the customers. So not only having that opportunity to get high-quality HBO Max content, but also to have a high-quality unlimited plan. So yes, we are seeing an uptick in move towards the Elite Unlimited. That transformation or that trend continues. And yes, we are seeing customers take advantage of our HBO Max offering in that Elite package of product.

And on wireless, can you describe what's working for AT&T to maintain or improve the gross edge share? And is there anything about the fourth quarter and now being in a full 5G competitive cycle that we should be mindful of?

Yes. I think it comes down to having a great network. You have to offer a really great product, one. Two, and we do that and the network awards and the network claims are out there. We're real proud of and I'm real proud of what the network team has done. And that takes a lot of work. The FirstNet spectrum, the FirstNet build-out, all those kinds of things they've done over the last 3 or 4 years has really helped. And that's one. Two, you can offer a product, a great product at good prices and we're doing that. And prices that are focused on the customer of what they want and how they can build their portfolio of services. So whether it's some of the traditional family plans, whether it's the unlimited plans, whether it's getting HBO Max, it's providing them the choices that are appropriate, that they're focused on. Quite frankly, it's about -- just relentlessly giving good customer service. We've redone our retail distribution this year. We've improved our online distribution. And that has been a significant investment, but I think that customer experience, and you see it in the reviews we're getting from our customers. And so when you think about it, great network, great product, great offerings and fair price and really good service, that's what's going to keep you competitive. That's what's going to allow you to grow share to add customers, to lower churn, to be a differentiator with your competitors. And that's what we're focused on. And we have the assets and the capabilities to do that. We saw us perform in that way in the third quarter. I think we had -- when you take into account total postpaid voice net adds, including migrations, we had more postpaid voice net adds than anybody. And so I think you can see how strong we're doing, and we just need to continue that. We need to continue that momentum.

And I'm going to do our next preview of the topic that's coming up with our live survey question. So our second live survey question, and we're going to then talk a little more about wireless first, but we'll get to this. The second live survey question is the HBO platform exited the third quarter with 38 million domestic subs. I'm just going to wrap up one number in there because it can get a little confusing, right, between all the different ways you could be segmented. So 38 million was the end of 3Q. How many domestic subscribers will HBO reach, which, of course, includes HBO Max, by the end of 2021? And the choices are below 40 million, 40 million to 45 million, 46 million to 50 million, 51 million to 55 million and over 55 million. So we're giving a lot of choice to people. But before we get to those answers and before we can get to that subject, a couple more things on wireless. So John, if we take your comments -- and by the way, feel free to vote, John, if you like. Unfortunately, we don't have the remote controls like we usually do. But -- and just so our audience knows, the responses are anonymous. We are not tracking who's responding and voting for which choice. Wireless. So you talked about the subscriber side. You talked about what you're seeing in terms of rate plan mix. There were some hits to revenue during the pandemic for fees waived and roaming revenues going away. So when you take all those things together in a blender, should 2021 be a better year for service revenue growth for wireless for AT&T? And are you more optimistic about wireless service revenue growth in 2021?

Well, certainly, Mike, when you have customer growth, remember, I'll give it to you this way, we had over 1 million postpaid connections in the third quarter of growth. We have 5 million total connections when you include connected devices and prepaid and wholesale. So when you're adding customers, that gives you the strength to add revenues. And so you can continue that momentum and you continue to add customers, whether exactly that rate or another. But if you can continue to add customers, you can get service revenue growth. So we feel good about that. Quite frankly, we might -- we made it through the Keep America Connected and other aspects of our program really well. Our customers responded well. Our team did a great job. Yes, we had some investments in those customers, but it worked out well. We feel good about that. If you will, one of the bigger challenges in wireless this past year was wireless roaming revenues related to international travel. And quite frankly, I'm not sure when that's going to come back. I follow what carefully the company does. I know the airline industry is very interested in that coming back, but we're -- I'm not betting on that, having a crystal ball as to when that's going to bounce back. I think there's still some uncertainty there. But certainly, the core question, the core answer is, sure, when you grow in customers, you have that opportunity to grow service revenues. We'll give further color about our guidance for next year in our earnings call, like we do on a regular basis at the end of January here. But certainly, when you have customer growth, that's really the key. Well, it's monthly subscribers, it's really critical.

And the other side of this is, for some of that growth in customers, you've been investing in retention, as you described earlier. Do we have to be mindful that there may be an outsized cost to this program? Or does it get rolled into just the other places where you can save money with the cost-cutting programs?

Yes. So very specifically with the best offer to our best customers program, whether there's this $300 credit or $700 credit for a new phone, sure, there's cost. Absolutely. But then you're going to remember that gives us a chance to give someone an upgrade to a higher early plan and add services that gives us the opportunity to add more phones, more devices, tablets, whatever. Quite frankly, they also have to provide a trade-in, which offsets some of that cost. And they make a 30-month commitment to us. So churn is very low. And as I said before, these are customers I know. I know churn is going to be low. I know they're going to pay their bills on a timely basis. We know who these are. These are the ones we want to keep. They've been really good loyal customers. So from a cost perspective, is there are a cost share? Or does the accounting recognize some of those costs on a upward basis? Yes. Is it a very reasonable investment for the impact, specifically the impacts of lowering overall churn? Oh, definitely, we believe so. Long-term value is where we're at and what we focus on. This is absolutely a positive for that aspect of it. So we definitely believe in it.

Let's go to HBO Max. If we can see the results of the survey, we'll see where the audience sees your subscribers for next year. And then we'll talk a bit more maybe about what just happened with HBO Max. So for those dialing in, 31%, 40 million to 45 million; 31%, 46 million to 50 million; 18%, 51 million to 55 million; 13% over 55 million; and 7% below 40 million. So John, can you talk us through the latest update with HBO Max launching Wonder Woman simultaneously on the platform in 4K with the theater release and what you're seeing in terms of the customer growth off of the evolution in the platform?

Yes. And Mike, I'll save any kind of specific numerical announcements for later on this month when we do our earnings announcement. So I may -- the headline number, I'm not going to provide. But what I will tell you is that we -- when we came out of the third quarter, we made some announcements with regard to Wonder Woman '84 and with regard to releasing a series of new movies, contemporaries in the theaters on HBO Max. And as John Stankey has publicly said before, we saw a 4 million uptick from 8.5 million to 12.5 million pretty quickly during the quarter. So feel good about -- that's a good indicator. That's a factual indicator of things moving forward. And quite frankly, as you mentioned, 38 million at the end of third quarter was well ahead. So we feel good about that. What we're trying to do here is to take -- to utilize what is a really difficult situation. We have a whole collection of really high-quality content that's ready -- all ready for release, ready for utilization. And we've got an uncertain health care situation with regard to people's willingness to get into theaters. So to work with the theaters and to work with that situation, we decided to come up with a solution to put Wonder Woman '84 not only in the theaters on Christmas Day, but in the homes on HBO Max. And we're pleased. We're pleased with what's going on with engagement. We're pleased with what's going on with the response from our customers. The next step is what you saw for next year with the announcement that we'll be simultaneous or contemporaneously issuing some movies on HBO Max and in the theaters. But once again, for the upcoming year, the situation has already changed to the theaters, right? I mean, it's a challenge, and it's an important piece of our business, for relations source, but it is a challenge. And so what we're doing is utilizing these really valuable pieces of content in the best way we can in coordination with the theaters and with HBO Max. We're -- we feel good about, if you will, making -- utilizing this in the best way we can. And we'll see how it goes. We're excited for it. We're positive about it.

Some of the questions I've been receiving since the announcements of Wonder Woman and the '21 film slate is whether or not there's a risk of a talent drain or talent departure to other studios who may have taken a different approach over 2021. What's AT&T's view of that, the risk or the opportunity, from what the strategy is for 2021 for HBO Max?

We've got a long history of working with the talent, and we'll continue to work with them. And I think we've got a reputation that goes on for decades. Warner Bros Studios, in particular, is just near decades and decades, almost 100 years. And so from that perspective, I think the challenge is this is a unique situation in the sense that COVID and the pandemic has got -- somewhat an impact in the United States marketplace, but worldwide, and we can't change that. That's not -- as the business, any side of the business growth, the talent, the producers, the distributors, we can't change it. That's just the reality. So we're just working to keep this system moving healthily and forward and utilizing the great content that's already there.

And are there any other data points that we should just be mindful of in terms of the engagement or any other incremental observations you can share about HBO Max over the last few months as you release Wonder Woman and you're gearing up for the slate in '21?

Yes. We've seen really good engagement in utilization of platform where we've seen people with. The important piece of it is, is once people get on to see what else is there to see the high quality and the depth of the content that's there, I think you've seen our prior announcements with regard to coming to agreements with Amazon and Roku and [ Ontario ] and HBO Max, those are real positives for them and for us. And then we've seen similar just wholesale distributors improve, the connectivity improve, the opportunity to get on HBO Max. So all of those kinds of things are good. The real important thing is how do customers react, how much they engage, how much time they spend and how -- then the quality they find in the product, but we feel very good about that. On kind of specific metrics, we'll have more specific metrics in the coming weeks or at the earnings release later in January, so I'll stick with that.

Last 2 questions on this. Do you view AVOD as a retention tool to keep the customers that are coming on now another option to hang on and engage longer? Or do you view AVOD as a new acquisition tool to just broaden that market that may be thinking about the subscription, but maybe are mindful of the cost of the subscription?

Yes. I think maybe a little bit of both, but first and foremost, I think about widening the available customers. So if you think about my wireless business, I got postpaid, voice, and I got tablets, but then I've got resellers. And I've got prepaid. I've got a whole collection of services that cover all the customers. That's what AVOD's going to help us do with regard to expand the opportunity to serve customers in a different way. And will there be movements between HBO Max and AVOD and an S5 platform? Certainly. But I think of it as an opportunity to, quite frankly, further serve additional customers, attract [ new ] customers. And from a finance guy's perspective, further amortize the investment in content over a greater customer base. So it's just another way to serve customers in a really positive way.

Switching gears to the fiber side of the business. You referenced earlier some of the net adds that you're seeing on that platform. And fiber has become, from what I sense, a louder part of the conversation over the last year in terms of the key focus. Can you give us a sense of where you are in terms of the breadth and depth of AT&T fiber? And what are the range of options to invest more quickly and go after more homes with gigabit Ethernet -- or Internet, excuse me, capabilities, whether it's over, fixed or 5G or whatever the end medium is? But maybe give us a sense of those items?

Yes. So once again, coming to this point, we've built 15 million fiber-to-the-prem locations on the consumer and small business side. And then we connected over 1 million new businesses over the last 5 years with regard to our fiber builds. This fiber, if you will, capability has been here for years and has been expanded significantly. So we need to keep that in mind as we go through this. Secondly, then with the work-from-home phenomenon that has been this last year and the last certainly 12 months -- 9 months, what we've seen is a real demand for really the highest-quality service in the home. And that's fiber, and that's really high-quality 2-way download and upload speeds that have parity and can allow for things like we're doing right now with regard to having Zoom calls or other virtual conference-type activities. So what we've seen is that be a new focus of the home subscription model and that we are able to, because of what we built in the past, really lean into that. And you've seen us do that, 350,000-plus net adds this quarter was the highest, I think, on record for us. And we still have a lot more to sell into. And we think that demand for that high-quality 2-way communication, superior service makes sense. So we're going to continue to push on that. I don't have any numbers for you today, but we're going to continue to push on that. We think that's important. And it comes at a really good quality, good revenues and ability to maintain that customer and grow that customer base. In addition, these fiber investments that we'll continue to make and continue to share our footprint have the opportunity to be used in 3 ways: not only for this consumer base but also for the business customers that you can add on to that and also for the wireless backhaul. So once again, that integrated carrier aspect of our 3 opportunities to realize some revenues from the fiber investments really important. And so I think you'll see us continue to focus on it. We've got to keep growing the base and keep getting that high-quality product to consumers' homes.

I'd like to turn to some of the financial indicators that the teams provided, I think, late in the fourth quarter regarding CapEx and initial free cash flow aspirations for 2021. Before we do that, I want to reveal our third live survey question. And we're going to come back to this, of course, after we go through these topics. And that third one is, will AT&T maintain and/or grow the current annual common dividend per share? And we've given 5 choices. Yes, expect the dividend to stay the same over the next 5 years. Yes, expect the dividend to return to modest annual growth after 2021. No, expect a cut within 12 months. No, expect a cut within 1 to 3 years. And no, expect a cut in 3 to 5 years. So number of choices. We're going to come back to that in a moment as people submit their views. So first on this capital investment. The gross capital investment, I think, was indicated at $21 billion for 2021? What's in that number? Is there more fiber investment in there? And it represents, I think, a little bit of a step-up from 2020. So maybe just some color on what's changing from the investment profile from 2020 into 2021.

Yes. So you're right. You're right, Mike, there's a couple of things going on. One is, it is an expectation of a step-up in fiber, not only in the success pace for adding new customers, but also in expanding the footprint, yes. Two, we'll see some capital efficiency with regard to AT&T TV, if you will. On the television side, AT&T TV is more efficient than -- from a CapEx perspective, than putting a satellite dish, so there will be some savings there. We've made significant progress, huge progress over the past few years and continuing into 2020 on first half. So we'll see some adjustment there. But those are really -- and then you'll see us invest in some transformation efforts. So if you're asking, is there a growth, an increase? Yes, it is. I want to talk about that, I talk about that in labor. I talk about that and transformation investments. Is there any kind of moderation? Yes, I think AT&T TV is going to help us moderate that aspect of the capital. And then, quite frankly, some adjustments in the normal course because we're finishing out the build at wireless. It doesn't mean we're going to slow down the build at all or we're not going to continue to build is that at the rate in which we're building to satisfy the contract and be ahead of the first contract, things have gotten done. The teams achieved their goals. So that's really how I think about it.

And then moving to the $26 billion free cash flow goal for 2021, what's in that number in terms of changes from 2020? And there are several things that you've talked about before. There's cost-cutting that's happening within the organization. I imagine that there's maybe some changes in cash flows and timing coming off the pandemic. Can you kind of unpack, like what are the pluses in that $26 billion and maybe some of the minuses if we were to compare that number versus 2020.

Yes. Let me say this, we'll give more detail, but the whole point to walk away with the $26 billion for this year and a 50-ish -- 50 percentage payout ratio and a 26 for next year, which is in that same payout ratio, is really sending the message that these monthly subscriber relationships and these business relationships that we have generate strong cash flows and have tremendous resiliency. We've gone through COVID, a worldwide pandemic that has significantly impacted our overall business, whether it be travel, whether it be the entertainment business, whether it be the investments we've made in protecting our employees and our customers. We've seen all that, and we're still generating $26 billion in free cash flow, and that gives a very, very strong dividend payout ratio. Very, very high quality, very good bets. And by the way, we believe we can do that next year. We expect that next year. Getting into the unpacking of the specifics of it, I will -- we'll wait and do that in a later date. But I would suggest to you we've done the work. We feel comfortable about it. And the real story here is whether it's $100 million-plus wireless connections, whether it's $15 million-plus broadband business connections, whether it's resiliency of our networks, we have strong cash flows and strong cash coming in, and we have the ability to invest and ability to manage our debt and an ability to pay a solid dividend. So we feel real good about that. That's really the story. We're -- I think it's really underappreciated. The relationship business that we have, the business customers with consumers, with people who want to buy entertainment, we really have tremendous relationships that provide monthly subscriptions that are really strong. And I want to make sure I emphasize that.

Let's go to the dividend survey question from our audience and see what they've selected. So expect a cut in 1 to 3 years is 43%; dividend to stay the same over the next 5 years, 22%; expected dividend to return to modest annual growth after '21, 20%; and then expect a cut within 12 months 10%. And then in the 3- to 5-year time frame 5%. And so maybe this is an opportunity, John, obviously, curious for what you think of those answers, but then also, the Board did decide to change the dividend payout strategy from the prior goal of modest growth to maintaining it in 2021. So if you could just share what the Board was thinking with that decision and how you look at the opportunity to continue the dividend payout over time for AT&T.

Yes. So Mike, what I'd characterize is the Board makes a decision on the dividend every year. And each year, they've taken into account the full scope of the marketplace economic conditions, all aspects of it. I would suggest to you, today, our stock price doesn't recognize the value of that dividend. And to add to that dividend wouldn't have made sense with regard to share price. It makes more sense to use those funds to pay down debt to keep flexibility in the business. So I just -- I think it's that simple. I mean the remarkable nature of this is you come through COVID where you have some real challenges across American business. We maintained our dividends, continue to pay out, continue to generate really strong cash flows. So I think, from that perspective, pleased about where things are at. But I wouldn't suggest -- I would suggest that the Board makes the decision on the dividend on an annual basis. And this year, they decided to hold it firm in a really quality payout that is really sustainable, as we mentioned, with the strong cash flows.

And is there anything that the investors should be mindful of in the future as they just try to anticipate the durability of the dividend over time?

Well, I mean I think the first thing I think about is what we've done with the balance sheet over the last few years, whether it's the monetization of assets like Puerto Rico or CME or Country Rule or some of the other things we've done, real estate, Hulu, just kind of a whole number of things. But also, if you look at what our debt portfolio looks like, in our debt towers, is the fact that for the next 6 or 7 years, the debt towers are very manageable. Some would even imply small. And that the interest rates at which we're borrowing at today on an overall basis are lower than they were 10 years ago when treasury rates were much higher. So what we've seen is -- are really significant progress in managing the balance sheet, giving us a lot of runway to continue to invest, to continue to pay a dividend and to continue to pay down debt. And so we feel really good about where we're going. But I think it's often underappreciated, the effort that the treasury -- particularly the treasury team and did in managing through, this what has been a remarkable year 2020 in the financial markets as well as the economy given the worldwide pandemic. So I think that's often underappreciated about how manageable everything is with regard to our commitments.

And when you look at that $26 billion of free cash flow, is there a certain amount that's not in there because of, because of the accelerated media investments, where you might say that a certain amount of that with reasonable period of time is recoverable and would be on top of that $26 billion number?

I mean, sure, Mike, there's all kinds of puts and takes, but let's just get back to the kind of the normal basis that we got to continue to grow HBO Max subscribers. We've got to continue to grow our fiber subscribers. We've got to continue to grow our first set subscribers. We've got to continue to grow our overall wireless subscribers. We've got to continue to grow down in Mexico. And the subscriber growth we saw down there, CNN needs to keep putting up just great ratings. So those are the things we'll leave you. Let's focus on those. I -- certainly, we're making investments. Certainly, we are investing in HBO Max, and we're investing in fiber. We're investing in our wireless business. And those investments, we believe, will pay off in the long term. But I choose to focus that into kind of, if you will, taking apart -- it's certainly not until a later date at this call, but rather, I'd really focus on it. We feel good about the momentum -- growth momentum in the customer base. And remember, these are subscribers who pay us on a monthly basis. Those relationships are important. And when you look at things like churn and growth, you feel even better about low churn is the best way to grow a customer base because it's keeping customers you already have. And so feel good about where we're at and optimistic about us moving forward.

And just on a separate topic of asset monetization. Can you frame for us how you're looking at asset monetization currently? And what are the factors that you're evaluating? There's been the press reports of the satellite video business or the video distribution business more broadly. Like what are the factors that are important to AT&T and any kind of decision for that?

Yes. So first and foremost, no comment on anything that's in the press with regard to an individual line of business. Secondly, what we've done is gone through a review of all of our assets. And I think about it from a balance sheet review as well as a business year review. Starting out with the businesses and determine whether they fit within our priorities and within our critical -- whether it be 5G, fiber and broadband and connectivity, whether it be software-based entertainment, whether it be in customer service. But how does it fit within that? How does it play out in those aspects? That's one. And that's exactly what's the marketplace for it and how do you look at it. When I go to the balance sheet, so there's all kinds of other assets that are out there that you've seen us monetize other -- whether it be a division, whether it be a portfolio investment that we continue to look at from how I have commonly thought about it. And I've said before is we're a $500 billion balance sheet. If you -- whether you want to pick a 1% number or 2% number or whatever, there -- when you have $500 billion, a continual scrub, a continual valuation, a continued analysis can reap literally billions of billions of dollar on annual basis of asset monetization without strategically changing the business in a significant way, but we're going to continue to do that. Once again, I'm not going to -- there's a lot of noise out there to press us out. Not comment on anything.

Last question is on the business wireline. You talked about some of the resilience on your business wireline segment. And just curious, as you look at the economy, there's been so many moving pieces this past year between stimulus, unemployment, the ongoing effects of the pandemic. How should investors think about the business wireline revenue base and the resiliency of that over the next 12 to 24 months? And are there things that we should just be watching out for as barometers for that business?

Yes. So I think what you ought to look at to the resiliency will be based in the stability and growth in the strategic services aspect of it and the fact that the strategic services is becoming a higher and higher percentage of the overall base. Now the economy -- if the economy wouldn't have had the pandemic, could have migration to strategic services gone even faster? Absolutely could have. But as we get into that, 2/3, 70% higher percentage of that overall wireline -- business wireline revenue base being strategic services, it will have more stability to it. But what I think we want to take away from this is the remarkable resiliency of that business through this pandemic and, quite frankly, the team's ability to really, through software-ification, as I call it, or through putting network virtualization and streamlining cost, our ability to continue to generate EBITDA on a really strong basis, that's what I think has been remarkable about that. And I think this business has -- and has a lot of gas left in the tank. The ability to grow that revenue is going to be critical about the strategic services growth. And that is going to be impacted by the economy. And it's going to be impacted by what happens with small businesses and what stimulus we get and whether there's another infrastructure fund. And we'll see that add. The other piece, though, I want to make sure I give credit to, this is in our -- our business wireline group, that's really leading the charges we are to wireless sales in first half and wireless to the government authorities and wireless sales to businesses. And they are really driving a lot of positive activity there. And it's been valuable. So from that perspective, I feel very good about that unit and what it does and the ability to -- and that integrated carrier methodology between that wireline and wireless products and services. It's really been successful for us. And it's really strengthened our wireless business. So I feel good about that.

John, thanks for your time today and for joining us.

Thank you, Mike. You take care. And everyone, be safe out there. Don't text and drive. And please keep yourself and your family safe.

Be safe and well. Thank you.

Thank you.