AT&T Inc. (T) Management Presents at J.P. Morgan 51st Annual Global Technology, Media and Communications Conference (Transcript)
AT&T Inc. (NYSE:T) J.P. Morgan 51st Annual Global Technology, Media and Communications Conference Transcript May 22, 2023 5:10 PM ET
Executives
John Stankey - Chairman and CEO
Analysts
Philip Cusick - J.P. Morgan
Philip Cusick
All right. Thanks for joining us. Welcome to the 51st Annual J.P. Morgan TMC Conference. I am Philip Cusick. I follow the communications and media space here at J.P. Morgan. I want to welcome John Stankey, Chairman and CEO of AT&T.
John Stankey
It’s good to be here.
Philip Cusick
John, you finished selling assets about a year ago…
John Stankey
Before you get in -- can everybody get their drink water in for the cocktail hour?
Philip Cusick
The cart’s going to come around.
John Stankey
Yeah. I probably have to do the Safe Harbor statement, too. As you know, we have a website that you can go to, look at all of our Investor Relations material and some of the things I say today are forward-looking in nature and may not ultimately be the reality that sets in, so please understand that as you move forward here today. Thank you.
Philip Cusick
There we go. Did you hear I had to read that for Disney over there?
John Stankey
Did you?
Philip Cusick
Yeah.
John Stankey
I am sorry.
Philip Cusick
90 seconds of it. I did it in my best Mickey voice.
John Stankey
Oh! That’s what I have got the legal department down, so we are changing a lot at AT&T.
Question-and-Answer Session
Q - Philip Cusick
Yeah. All right. Good. So a year ago -- changing a lot, you spun off WarnerMedia and talk about what’s happened in the business in the last year in terms of efficiency and a more sort of streamlined organization?
John Stankey
So it’s actually a year, I guess, last month. So it’s not been that long. But I would say what’s happened at a macro level, the business is more focused business. One of the ways I describe it to people who ask me is, there’s more days where we come into work and we are calling the plays rather than the plays being called for us, which is a good thing.
We have when you think about all the things we set out to do, which is start the process of delevering. We made good progress in that last year, have more work to do as we drive to 2.5 times in 2025 and still committed that our excess cash moves toward that.
Our market momentum, both in the consumer fixed space and in wireless, has been strong. We have been much more efficient in how we attack the market. You have seen our margin expansion occur in both those spaces as we have gotten more efficient.
Our customer service levels have been improving across the Board, which has helped us achieve best-in-class churn in both our postpaid wireless space and our consumer broadband space. For the first time in our history, we surpassed both T-Mobile and Verizon in CSI customer satisfaction scores.
Our own polling that we do on research shows that we are making progress in a lot of key areas of how customers view the business, very, very strong progress in the reliability of our broadband product and the consistency of use on the wireless network.
Not maybe the fastest, but the consistency of use scores, which we know is one of the major determiners of customer’s choice on wireless networks has improved dramatically. So that’s helped.
And frankly, when you start to look at what we have been doing on the cost side, some of the basic blocking and tackling, where we started to close some of the gaps between ourselves and other industry players.
But also we have done a lot of work around how we start to migrate out of our embedded legacy infrastructure in the business and put a lot of plans in place. We have built some specialized products and enabled that to happen, we have been aggressively working the regulatory stance on those things and we are now poised and in a position where we can start working through that and executing that, and that will be kind of the next chapter in our ultimate cost takeout in this business.
So, I would say, by and large over the course of the year, we kind of set out what we intended to do, which would be a great communications company, take the asset base, get better returns off of it and start maturing our operations and our expertise on it and we are not done with that journey, but we are in a far better place.
Philip Cusick
You started with cost cutting and I want to go back to that because you are in the middle of a pretty substantial cost cutting program. Where are you in that and where are you in terms of starting that certain to come through in margins rather than being reinvested?
John Stankey
Well. it’s -- I think you are actually starting to see it come through in margins. You have been seeing some margin accretion work into parts of the business right now. And I would tell you, when you look at kind of where we are, we set out an initial target of $6 billion, we are just past the $5 billion of the $6 billion, we will finish the balance of that over the course of this year.
I don’t expect we are stopping to my point. I think our next chapter is to move into some of the legacy infrastructure on the copper base and what we are going to do to start sun setting, retiring a lot of those legacy products and services that we have. I fully expect that’s going to be something that will be a multiyear effort.
When I look at kind of where we are relative to our gaps against some of our most storied competitors, we are probably about halfway in the journey of getting to parity of what we expect. So we have got about another half to go. When I look at the initiatives we have on the plate and the things that we are doing feel comfortable that we can get that done.
And look, I think, you are going to start seeing that accretion come in the form of improved cash flows as we said, $16 billion this year. Some of that is coming on the backs of our improved cost management, and as we move into the subsequent years, we are going to be doing the same thing.
Philip Cusick
Okay. There were some very precise net add numbers thrown around in the industry recently that I don’t know how anybody can be that precise on where we are headed. But as you look at the industry and the customers that you can go after in the last year, has that customer base slowed in terms of growth and what do you think is driving that?
John Stankey
Yeah. There are -- I think I am probably syncing with you on what some comments were maybe a week or two ago by some in the industry, and I think the characterization of the industry, I would generally agree with. I don’t know that I agree with each of the precise allocations of the buckets within it.
I would say, in aggregate, the industry has slowed a bit, and I think, we have been saying since last year that it was going to slow a bit and I expect that was kind of the foundation, which we built our plan on. Everybody kind of looks at a little bit differently.
We don’t count prepaid to postpaid conversions as a gross add in the industry, others do. There are free line giveaways, which get counted as net adds, but if they are not accreting into revenue, is that the same as one that’s a new customer that’s paying full tilt for a monthly service fee?
So there’s a little bit of de-rating that goes on. I think the point is that we are going to see an industry that no matter how you count it, is suppressed probably in every category from last year a bit and I think that’s just an artifact in the post-COVID environment of.
In some cases, businesses rationalizing the infrastructure they need to support their businesses as they moved out of COVID, sometimes there were multiple devices, sometimes there were data packs, sometimes it was backup systems for temporary offices being put in place, some of that’s being worked out, and as a result of that, you see a little bit of thinning.
I think you had as you would normally in the early parts of a new entrant coming in, cable can look at the credit profile of certain customers differently than the embedded wireless players can look at.
They have a relationship, they sell broadband to a customer, somebody that we may have looked at as being credit unworthy, they may have a relationship with, and say, they are worthy, because we know what they do and we can treat them to a different type of product or service.
You work through kind of the fun end on those things, easy stuff comes on and then it suppresses a bit and I think we are going to see that as we move through the balance of this year, probably, also gated by a little bit of more tepid economic environment, is my guess.
Philip Cusick
I was surprised that one of your peers sat right here a couple of hours ago and told us that his net adds would be better year over year in the second quarter, a pleasant surprise. Do you want to give us where you are coming in?
John Stankey
Who was here earlier?
Philip Cusick
Mike Sievert.
John Stankey
Oh! Okay. Could guess.
Philip Cusick
I wasn’t going to say it.
John Stankey
Yeah. Just checking, I wanted to make sure.
Philip Cusick
Yeah. Right. Right.
John Stankey
I mean, probably, doesn’t surprise me. I would think a couple of things. One is, they just did a major price increase and rejigger their plans and through a bunch of promotional constructs and try to trigger some of that.
I think you have also seen -- at least I have seen some stuff floating around the industry of internal documents that they are also targeting that with maybe some additional free lines on certain accounts to incent some movement on that.
And so with that, I would expect that there is probably a little bit of pent-up demand in the front end of that new construct that you are going to see some customers move in and then it will, as it typically does if it doesn’t gain traction and the data that I have seen at least in porting ratios.
And what we see in the market suggests there was a bit of a spike in the first couple of weeks, and we are now kind of moving back to stasis and normalization. So I think that will probably contribute a bit.
Secondly, I know and it’s been in the public domain, there was a large government account that changed hands. It left AT&T and it went to a particular company. It’s probably 75,000-ish postpaid subscribers that are part of that government account. It was business that was a breakeven business for us.
I walked it because I didn’t want at the prices that were required to take it and I felt like kind of preserving profitability was an appropriate. I am sure that’s going to move through the numbers in the second quarter that will help. That’s a big chunk and sometimes you see those lumpy dynamics rolled through.
So it doesn’t surprise me that maybe they have a more flattish quarter two last year. But I think, overall, I still stand by my notion that I think the industry, in general, is going to be down. And I think we are seeing numbers that are very similar to what I saw in the first quarter where ratably, we are generally holding our share, notwithstanding, a couple of those comments I just made that I think are probably going to be one-off dynamics.
Philip Cusick
How do you think about tuning the business -- that’s very helpful -- tuning the business in a slower environment? You gave -- you let that one go maybe you fight for this one. So judging that, you want to grow, you want to maintain your share, but also very sort of rationally.
John Stankey
I wouldn’t -- the context of your question, I wouldn’t have made a different decision on that a year ago or two years ago. That would have been the same decision whether the environment was fast growth or slow growth. We do business that is accretive to the company and that’s kind of how we are tuned all the time.
Now I can tell you that we are perfect in a large business and somehow, somewhere, somebody doesn’t get something through that didn’t have the right eyes on it and maybe if, John Stankey, and looked at it, he might have said no and somebody else said, yes.
But by and large, the constructs that we try to run the business by what we do is to ensure that we are bringing in business it’s accretive and because of the breadth of our relationships, for example, with many large business accounts that we have, we have to look at that broadly.
And sometimes in a particular contract change or a particular construct that we are selling, we may be balancing that out against the entire book of business with the account and thinking about what holds and what allows us to stay at prime position. But those kind of decisions have always been the way that we have looked at things and make sure that in aggregate, we are delivering acceptable returns back.
Now to get to the point of your question, what do we do on a slower-growth business? Well, look, I think, it’s really important that you have low churn in a slower growth market and it’s good to be sitting here at the lowest postpaid churn voice churn in the industry right now, it’s good to be sitting here with the lowest broadband churn in the industry.
The best way to manage costs and manage profitability in slower growth is do not to have to re-trade customers. And we started that in a very strong position in that regard and propensity to switch numbers that we look out within our customer base are incredibly robust right now than in terms of our ability to hang on to the base and manage through things.
So that’s one. Two, you have to be very careful about which channels are bringing in the right profitable growth. We have been talking for multiple quarters about, we are not really just kind of run on one play, we have been working our distribution very carefully across a variety of different channels.
Some of those channels are more profitable than others. Some of them are better at bringing in new gross new to AT&T than others and so we are tuning that to ensure that we are prioritizing those channels and maybe backing off some of the channels that we are neutral to slightly positive with the expectation that in this environment that they may move to being less than positive. So, that’s probably the second biggest move we do.
Third, we are of course playing through where we have an opportunity to start gaining up on multiple products in a household, wireless, but no broadband, broadband, but no wireless. Those are easy accretive wins early on. We have done some good work in that regard over the last couple of years, but we still have more to do where we can be a bit more refined right now and we are doubling down on those areas.
Philip Cusick
You mentioned broadband wireless, wireless broadband. As -- I said earlier today that I have been doing this a long time and I have never said …
John Stankey
Oh! Yeah.
Philip Cusick
… where there wasn’t a lot of fear about competition. And yet today the focus of here is on cable and this convergence and just general deflation in both industries as wireless goes into broadband and broadband then goes into wireless. Is that a concern of yours or is that just overblown by investors?
John Stankey
I am always mindful of competition. I think there’s -- you don’t ever want to take your eye off the ball, but it’s step-back before I look at any specific issue, and I’d say, look at what’s just happened in the wireless space over the last two months and the restructuring of rate plans across our two largest competitors. You want to get that?
Philip Cusick
I am going to leave them.
John Stankey
So our two largest competitors just made some pretty significant changes and I think in most instances are trying to price and more value by taking rates up and sometimes restructuring, how the fringes come with it. But they are effectively, I think, suggesting that because of their large investments in their business, they should be able to get more from a customer. Boy if you are worried about competitive intensity, typically you wouldn’t see the war…
Philip Cusick
Price is high…
John Stankey
… is going this way, right? And so I am just like on a simple term, but I don’t do market structure for a living. But I think most of the books used to say that was an indication of a healthy structure in a market.
So, I kind of look at that, and I say, what cables down pricing to a segment of the of the base, aggressive pricing. There is segment that they seem to be able to touch one-line and two-line customers.
It’s much harder on an MVNO constructed three lines and four lines, when you get into costs of devices you get into the breakage dynamics that occur at the lower price point on average, lower price points that we sell at on a four-line, five-line, six-line.
Philip Cusick
Yeah. Just to clarify, I have heard this and people ask me what this means and I think what it means is, when you sell a single customer it 70, 80, 90 and you sell family lines at 40 to 50?
John Stankey
Yeah. I always love the -- a good comparison that comes out as everybody said, oh, rates are so much lower in Europe. What they are comparing is the one-line price in the United States with the one-line in Europe, what is the comparison is the family plan price in the United States, which over 65% of our customers are on greater than two-line family plans. And you compare those numbers and they start to look comparative, right, and it’s exactly right, and that’s how most of the market in the U.S. is sold.
So I would tell you that while there’s some near-term numbers. I don’t know that that scales necessarily to the broad-base, given the constructs of affinity plans. I would also say that when you kind of look at what we have got going on is, I am not surprised that the aggressive stance right now.
If you have the most vulnerable broadband product in the market, which if you do customer research, lease satisfied fixed broadband customers, the large players in the market tend to be -- the assuming our fiber product tend to be spectrum charter customers.
I think going and pairing them with another product is a good defensive move to keep them on your broadband product and I am not surprised that they are being competitive and aggressive with that.
But at some point in time being on a variable cost product. Where the usage element is increasing 40% a year and we are likely to start seeing some new application start to pop-up in the end of this year, customers start buying devices that are mobile usage intensive, that require high bandwidth capabilities to use them and avail themselves of them, they are going to be incremental add-ons to existing accounts, that play, it just feels like it’s going to get stressed to be low price leader when you don’t -- you are not the low price infrastructure provider.
Philip Cusick
So you have hinted about this. I think it was on the earnings call. The things that could come at the end of the year. So, I think, what you come at the end of the year is, the 5G networks will be much more complete than they are today yours and your peers and there some AR/VR devices that are big headlines coming from big manufacturers. Is that what you are referring to?
John Stankey
I think we will probably see some first-generation consumer electronics devices starting to show up and I think they are going to get progressively better and progressively more mobile over time would be my guess.
Philip Cusick
I assume that those would start as WiFi rather than 5G.
John Stankey
I would think you are probably. I think when we think about how the first smartphones emerged and what the utility was mobile versus fixed. I think we should assume that there’s probably going to be a migration of that, where largely the scaled infrastructure in the home and some mobile and then moving to more mobile.
Philip Cusick
Yeah. But as you look at the -- I imagine you walk through the skunk works in Korea or in Cupertino and sort of see what might be coming someday, is it one year, two years, three years, four years from now when those things are mobile and really dragging a lot of data through your network?
John Stankey
Well, look, I think, I said this, I think, you are going to start to see, to your point, as 5G networks with the capabilities that we are instantiated in 5G to do things like network slicing, unique characteristics of performance start to actually become more ubiquitous and capable, the applications will start to show up.
So as we get into next year, I think, you are going to start seeing those things occur. You are going to see usage -- start seeing usage being driven not only in the consumer space, but probably more prevalent in the business space.
When I am visiting large enterprise customers that we deal with, more often than not that conversation gets back to some degree of private infrastructure that they need within their operation. But it’s not just about the private infrastructure, it’s about how to take the private infrastructure and marry it…
Philip Cusick
For some…
John Stankey
… with the wide area network. So that it works as soon as you leave the office park or you leave the building out to the tarmac and you need that consistency. So I think you are going to start seeing that emerge and I think those kind of capabilities over time are the type of thing that having high performance mobile computing and making sure that your bandwidth and infrastructure is tuned to do that. It is going to be really important.
Philip Cusick
I think those things will come. They have just suffered from overhype by some of your peers.
John Stankey
Usually, but remember, early on in LTE, everybody said why the hell is everybody deploying 4G/LTE? Why all this investment and then, suddenly, it’s like, hey, when you have consistent streaming and you can actually watch video all the time, we can build some different applications and then boom, it goes, right?
Philip Cusick
Right. Speaking of broadband, the in-home portion. Getting this fiber network up and running I think is going to be really interesting as you roughly double the size of your network over a few years. What have you seen in terms of the return on this process of both the input costs, but also the performance of the business in terms of what people are taking and how many of them?
John Stankey
Well, the business is performing well. If it was not performing well, we wouldn’t have had the conviction do start the GigaPower venture with BlackRock. I think what we saw within our region actually we are so impressed by what we saw, we said is an extension of this outside of our region that we should be thinking of variance that we should understand that we are at a different moment in time.
Within our footprint and that which is owned and operated by exclusively AT&T, we have talked about the fact that when we did the original business case on 30 million customer passing in 2025.
We looked at a variety of different things, but the big sensitivities in the business case are the rate of penetration. How fast you get customers on the network after you build it, the ARPU and in particular what the terminal ARPU is on the customer at a steady-state, and then third, is the build costs. Those are your biggest impact around the financial return characteristics of it.
So on the rate of penetration I have shared publicly that our rate of penetration in the first year after a build is twice as much as what we expected when we did the original business case on the stuff to get to the 30 million customer passings.
Philip Cusick
Can you quantify that for us at all?
John Stankey
We haven’t got any further than that, but it’s substantial, okay?
Philip Cusick
Bar cart -- need a bar cart.
John Stankey
It’s twice as a lot and I will just leave it at that. The second, we are operating right now in what we assume to be the terminal ARPU. So where we stand in the business right now, we are actually at what would have been the terminal ARPU out at year 10. So the market…
Philip Cusick
When was this business case written?
John Stankey
This is right before we announced about 30 million homes, which is about 30 million passing, which was right about when I came into the job, so three years ago. The third part, cost to build. There has been a little bit of pressure on build.
Two parts of a build, there is what you pay for the electronics in the fiber. That part, less volatile, more governed by long-term supply relationships, we have scale. This is something by the way that we have been part of the JV are procurement supply contracts are availed to the JV to be able to buy fiber and electronics under that.
The second part is the civils. After you have electronics, you got to dig trenches and all the sexy things that you do to get stuff out in the neighborhood. That part has been more prone to inflation dynamics, because it’s a wage-intensive dynamic of hiring people to dig trenches and do work. But in the aggregate, you are talking about 5% to 10% increases in cost to build on something that is amortized over 30 years.
So if you pick a number, just as an example, if you said it was $1,000 per location and you go to a $1100 or $1050 and you amortize that over 30 years and the way you weigh that against how faster penetration…
Philip Cusick
Dollar…
John Stankey
… higher ARPU, you are doing better on returns, not worse than what we assumed back in 2020.
Philip Cusick
Okay. And as you look at the selling that broadband business and the wireless together, how is broadband sort of pulling wireless along or is wireless pulling broadband along in new markets?
John Stankey
So it -- we pull, when we have a new customer addition in broadband and when we penetrate broadband, we have gotten pretty good now around starting to form that base to move wireless customers that are not AT&T wireless customers and it’s really not rocket science, it really helps when somebody buys a product and they are happy.
So they buy fiber, it’s got very high customer acceptance levels. You are talking 10 points, 12 points of difference of NPS than other products in the market. It’s viewed when a customer starts to use it. They notice the quality and the difference. So they are receptive to listen into something at that point and so that helps a lot.
Now, as you know, we are adding maybe, I mean, you guys can all go do the math, call it, 300,000-ish customers on fiber a quarter. You rate debt then for market share, based on the markets that we sell and so that gives you a pool of customers go after, but it’s not as impactful as mass-market advertising to the national U.S.
The flip side, we go to the inverse of that share. Those people who have AT&T wireless and who don’t have broadband. We have been a little less effective on that, but we are now starting to get our group. We have a little bit more we need to do. But, I would say, there’s no reason that can’t be as productive as the inverse. But it hasn’t yet, we are getting there.
Philip Cusick
Okay. I want to spend a few minutes just to change gears a little bit and free cash flow is the thing that, has always been a focus for AT&T management and investors to the good and the bad. And in a business where operational metrics were all in line to better in the first quarter, the stock was down 10%.
John Stankey
I didn’t notice.
Philip Cusick
I imagine that was a tough day. So help us think about the pieces of free cash flow, where there is variability and where investors have risk and how you think about managing that going forward?
John Stankey
So maybe I will back up one step since you…
Philip Cusick
Yeah.
John Stankey
… we just went through the promotional event. Probably some things they do differently coming. I don’t know that it would have changed the outcome, the numbers or the numbers, I am not suggesting that you changed the numbers.
I thought we have communicated effectively that we expected it was going to be a down cash quarter and why? Apparently not effectively enough or the conclusion -- one of the other conclusions I have drawn is just got an investor base, it doesn’t like $1 billion period, no matter what you communicate.
So how did we get there? Probably a lot of reasons over a number of years, got a lot going on in the business, we are changing a lot, we are investing at record levels, we shifted our position in the market. Our supply base is different. We started new construction things that we haven’t done before.
So the cash flow characteristics of the business for that many moving parts and changes. dramatically changed and. Where we used to be a little bit more ratable quarter-to-quarter, first quarter was always a little bit soft, but never to this level. We have now engineered a business on working capital a variety of other things that resulted in a plan, that had us doing what we did.
And clearly, our investor base it’s not enamored with that lumpiness, even though we have kind of engineered it for relatively ratable and equivalent of profitability quarter-to-quarter, the cash flow dynamics were not that way.
And so as a management team got to step back and ask ourselves, what do we need to do to start architecting the business a little bit differently to except the fact that investors would like to see a little bit more predictability and ratability round it, one of the things we can do operationally and structurally to smooth that out moving forward.
And that’s one of the things and I think is take away that we need to do, and probably, if I was doing my job right, probably, should have stumbled to that earlier, and probably, should have immediately understood that given what took place in 2022 that people would without listening to what’s being said, whatever data was put out there go to a déjà vu all over again moment, say here we are again, we are just going through this process that occurred in the early part of 2022 to guide down on cash.
And I’d hoped, maybe I hadn’t process, the credibility had moved along and that people had all the visibility to be able to look at it differently and I was wrong. So, where do I think is different this time? I will point to three things.
One, you just hit one of them right on the head, profitability, customer metrics, customer growth, ARPU growth, EBITDA growth, profitability of our largest business, the guide that we have given on EBITDA growth of 3% or better. Those are all going to drive real improvements in cash flow as we move through the year.
Customers are paying us. We have every reason to believe they are going to continue paying us. That’s going to result of money in the coffers and improve the performance of the business in 2023 versus 2022.
Second, handset payments and handset expenditures. First quarter was a peak. It’s the peak because we sell more in the fourth quarter then we do it any other time in the year and based on the payment structure with the vendors we deal with that all comes due in the first quarter.
We also have some one-time dynamics that occur in the first quarter of compensation structures for bonus payouts that goes away. We know handsets will be lower and I just shared with you, look, if the industry is down in aggregate on gross adds, that’s going to mean the demand on handsets are going to be down, if we see dynamics of customers choosing in some segments of the market to extend the use of their handsets a bit longer, that will drive it down, we have pretty good line of sight to know that our handset commitments for the course of the year going to be down.
Third, the capital program and where we are? We did a lot of work-in the fourth quarter of last year, lot of that rolls into payments that get paid in the first quarter. First quarter was a bit harder than what it will be for us to kind of ultimately come in at the guide that we have given you on capital investments. So you should expect that that’s going to be a delta as we move through the course of the year.
These are things, handsets, capital, we are not talking about 30-day visibility into these decisions that we are making right now are for the balance of the year on capital. It’s got long lead times, you don’t just wake up in November and say, geez, I think, I am going to go spend money in December. You are making money decisions in May for decision -- for money that you are going to spend in November and December.
On handsets, you are 120 days out plus on ordering. So you know what you are ordering and you have your forecast and what you are doing. So we have good visibility on this stuff and when you roll it all through the numbers, that’s why we are confident in our $16 billion or better guide.
Philip Cusick
Only other thing I wanted to hit was last year there was a working capital drag in the second quarter that we talked about and is there anything going on in sort of working capital drag or bad debt that we should be thinking about in the business today?
John Stankey
I see nothing that, it’s going to be out of pattern. Our debt levels -- our bad debt levels and our collection levels are all perfectly consistent with what we would expect. They are all moving in a ratable fashion to our customer growth. So, yeah, there can be a little bit more bad debt, but it’s totally ratable, so you bring on more customers and there’s going to be a little bit more bad debt.
Nothing out of pattern to historic levels, nothing that we have done and changing credit quality. We have always had a high quality postpaid customer base. That’s one reason why we have the industry best postpaid churn on voice and so I see nothing that is any different about that nor have, because of customer dynamics around payment changed in any way, shape or form.
Philip Cusick
Okay. I will leave you alone on that one. So let’s finish it up with.
John Stankey
Just come back again in 60 days.
Philip Cusick
Or 360 at least. Let’s finish up with, you are three years into being CEO of AT&T. What are you excited about for the next three years?
John Stankey
It’s interesting you characterize it that way, because I actually -- I have gotten into this habit of kind of thinking about this is three-year chapters and you started -- where you started this conversation is, we restructured the asset base to the business, we spent a year now trying to get that asset base moving in the direction you want it to move and I think that’s -- it’s kind of been a block of things that we have had to do.
I think the next three years is really about protecting that set of place, it’s about getting that asset base to industry best return characteristics, customer best metrics, brand best support in the market. So it is about getting all those things that I think we have put a lot of time and effort in and how we needed to reposition and restructure the business and refining the plays to excellence.
And in addition to having to do it that way, part of refining the plays to excellence is getting the next level of distraction out which is backing away from those legacy historic products in the legacy captive infrastructure that served us well, that has been great for the business, but adds a degree of complexity and drag into the business that is we start to sunset square mileage, central offices, products.
We become a lot more agile in what we can do, because a lot of the stuff that comes along with maintaining that and operating that and having to worry about that drops away and you get a more and more focused business moving forward.
So this doesn’t sound really sexy, but I want capital allocation to get our balance sheet in order and make sure that we get the flexibility back that we need to have to operate in this industry. It’s about continuing to invest in those growth platforms and it’s about refining our execution and operation to literally get to the point that we are best in industry.
When those things happen, you then have an opportunity to go look at what other things you want to do with the business and where do you want to go. But as I talked about with the management team, let’s not overdrive our headlights, let’s earn what we need to earn first, which is to run this business well.
Philip Cusick
Let’s take full stop. Thanks, John.
John Stankey
Thanks for having me in Philip.
Philip Cusick
Thanks, everybody. Thanks for sticking around.
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