That turned out to be a disastrous mistake, saddling the company with debt at a time when it also needed to inject capital both into its HBO Max streaming service and into its 5G network to keep up with T-Mobile and Verizon Wireless. With competing obligations, something had to give.
So AT&T executives are going back to what they know well.
"Our goals with the new AT&T are simple and straightforward," AT&T CEO John Stankey told investors during a call on Monday after the deal to sell the Time Warner assets was announced. "We plan to continue the momentum in our mobility business by stepping up our investment in our wireless network."
The strategy shift comes as both the media and wireless landscapes have gotten more competitive. Over the past few years, people have been shifting away from traditional pay TV services to streaming platforms, like Amazon and Netflix. The competition for viewership has gotten intense, especially as new entrants like Disney Plus come on the scene.
AT&T has lagged behind its wireless rivals in deploying valuable midband spectrum, which the wireless industry views as a key technology for offering faster 5G performance. Midband spectrum, like spectrum in the C-band that was auctioned off earlier this year, offers a good mix of capability that complements low-band spectrum, which features greater reach, and ultra-high-band spectrum, which transmits over very short distances at super high speeds.
Wall Street analysts like Jonathan Chaplin of New Street Research have been warning that AT&T was stretched too thin to invest both in wireless for its 5G deployment and in the HBO Max streaming service.
In a research note published after the company's first-quarter earnings last month, Chaplin pointed out that AT&T was lagging rivals in its investment in 5G and likely sacrificing investment in wireless to prop up HBO Max.
"AT&T is neglecting the cash cow (they are literally treating wireless like a cow, and not the longhorn variety), while they focus investment on sexier businesses," Chaplin wrote at the time.
With WarnerMedia out of the picture, Stankey announced on the call with investors on Monday that AT&T could focus on wireless and broadband again. He said that the company intends to double the network coverage it had expected with the newly acquired midband spectrum from the C-band auction. Instead of covering 100 million points of presence, Stankey said AT&T will cover 200 million of these connection points by the end of 2023 using that spectrum.
Stankey also said the company will continue to invest in its fixed broadband fiber deployments.
"AT&T will have the flexibility to invest and address the growing long-term demand for connectivity and be the leading, best capitalized broadband connectivity provider in the country through 5G and fiber," he said. "We intend to double down on our fiber expansion. We expect to double our current fiber footprint by the end of 2025, reaching 30 million customer locations."
Ultimately, the deal adds another ding to the legacy of Stephenson, who also attempted to acquire T-Mobile in a deal that was rejected by regulators. Some on Wall Street said AT&T's strategy to diversify its business was always flawed, part of a broader misguided push by telcos to get into media.
"Every time the cicadas come out to play, the telephone companies decide it's time to either get into or get out of the media business," said Craig Moffett, an equities analyst with MoffettNathanson. "It never works, because it was never a good idea in the first place."
Moffett added that AT&T made matters worse by overpaying for Time Warner, which he said wrecked the company's balance sheet by taking on too much debt. By contrast, he noted that when Comcast bought NBC Universal in 2011, the valuation was at a low point and the deal came at the end of a recession. He added that Comcast has done a better job operating NBC Universal, too.
"But that's not the same as validating the strategy," he said. "There haven't been any real synergies between the cable and media businesses, even at Comcast."
Good for consumers?
Many people in the public interest sector, such as Gigi Sohn, an adviser to former FCC Chairman Tom Wheeler, opposed the merger between AT&T and Time Warner from the get-go. She and others warned that consolidation between content producers and network operators would lead to higher prices, fewer choices for consumers and fewer voices online.
But even as AT&T sheds its WarnerMedia assets, Sohn said it's not entirely clear if there will still be some sort of sweetheart deal that will allow AT&T to continue to "zero rate" the HBO Max content and discriminate against content from other outlets.
Even if it's a clean break between AT&T and WarnerMedia, Sohn said she still has mixed feelings about Discovery buying the assets.
"I opposed the AT&T-Time Warner merger because I believed that this gave AT&T the incentive and ability to favor its own programming both online and vis-a-vis other multichannel video providers," she said. "So I think consumers will benefit from the fact that AT&T will no longer own both the means of distribution and valuable Time Warner content."
But she added that she worries about consolidation in the media market when it comes to the streaming services.
"Will Time Warner continue to provide content to other streaming services, or will it stop doing so and pull its content off of those services and onto its own?" she asked. "What does this mean for jobs and opportunities for the creative community? $3 billion in synergies is a lot of money, and will likely mean even more job cuts."