Can Hollywood’s Biggest Media Companies Avoid Getting Crushed by Debt? | WHAT REALLY HAPPENED


Can Hollywood’s Biggest Media Companies Avoid Getting Crushed by Debt?

Randall Stephenson, AT&T’s chairman-CEO, summoned all of his folksy Oklahoma earnestness as he made an enthusiastic pitch to Wall Street analysts about the telephone company’s bold efforts to transform itself into a multimedia powerhouse. It was late November, less than six months after AT&T had wrapped up its $85 billion acquisition of Time Warner. But before Stephenson could wax poetic about his plans to revitalize HBO, Warner Bros. or other newly acquired AT&T subsidiaries, he felt compelled to address the elephant in the room.

“If you hear nothing else this afternoon, I want you to hear me on this,” Stephenson said at the company’s investor presentation in New York. “Our discretionary cash flow is going to go to one place. It’s going to be paying down debt.”

Stephenson had no choice but to try to appease those who are plenty anxious about the mountain of leverage AT&T has accrued in the past four years, not only from the Time Warner purchase but also from its $49 billion deal for DirecTV. The nut stands somewhere between $170 billion and $180 billion plus.

AT&T is not alone in seeing red-ink levels rise in an era of merger mania.

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