Second, if you look at what we are doing with the communications company, we're taking $43 billion of relief from debt from the transaction and paying down the balance sheet. We believe the balance sheet has been weighing on the multiple of which the communications company has been trading. And while I don't expect that we're going to immediately move to the multiples that we see our peers enjoying, we expect that there's going to be some improvement in that as well. And that the core communications stock, if you want to think about it as Remain Co, will actually trade in a more attractive place.

And then the third part of it is our decision to size the dividend appropriately for the business, given that we're shedding 30% of the company with media. And we shed about 5% when we moved out the DirectTV company. And as a result of that, when the transaction closes, but not until the transaction closes, we'll rework the dividend, but still pay an incredibly attractive dividend. Somewhere between $8 and $9 billion of our total annual cash flow will go toward paying that dividend. We'll be at a coverage of about 40% to 43% on that, which is a very comfortable place for us to be.

And that yield is still probably going to be in the upper 95% percentile of yield paying stocks. And so we think it's not only a good place to still be if you want a yield and a dividend, but when we reinvest some of that money that we free up and some great opportunities we have in fiber, and continuing our momentum that we have in wireless, that there's going to be more value created in the growth of the core AT&T moving forward that all shareholders will enjoy.

ANDY SERWER: Yeah, and John, I want to ask you about maybe just looking backwards a little bit, because I know you've had to talk about this, and this notion of unwinding both Direct and the Warner acquisition. And that must have been painful for you to degree. And maybe there's some solace in the fact you feel like you've solved this problem and practice going forward. But can we once and for all sort of get over this idea of putting content distribution together? Or was this a failure of strategy or was it a failure of execution?

JOHN STANKEY: Well, Andy, I probably step back and say, first of all, I don't know that I subscribe to the view that content and distribution aren't, in fact, going together. If you think about what a direct to consumer platform is, it is content where the content company owns the distribution under which it occurs on. And so I don't think about it actually as content and distribution not being together. I think about media, traditional media companies really making the journey to actually owning customers and owning more of their own distribution over time.

Now the question is, do you need to actually own the physical infrastructure under which it's distributed? And right now, given the capital demands of both businesses and the fact that really this distribution dynamic for media has become a global one, and the distribution for access services is really more geographically contained, in our case, domestic United States, the opportunity to grow value overseas and have a true global player and media outstrips the benefit of putting both content and access distribution together in a particular geography. And that's really the big change I think.

In 2015, I don't know that that was necessarily the conclusion or the view. Would I like to be in a different place where we weren't having to make this pivot and this shift? Of course, I would. But I think we've done it in a way where we managed to get HBO Max up and running, which I do not believe would have occurred if not for the two businesses being together.

The great content and storytelling of Warner Media, the exceptional distribution, market capabilities, things that allowed us to normalize distribution contracts with other distribution competitors, that's really what got HBO Max off the launch pad and allowed it to be one of the premier domestic direct to consumer opportunities. And that now is put in a position to go in and compete for these multi hundred billion dollar market opportunities in direct to consumer globally. And it's time to cut it loose.

And it's, I wish it didn't come to that. I wish the original thesis had borne itself out where we created more value by putting our access together with content. We saw a lot of benefit from it. We were world class in lowest levels of churn we've ever seen in our wireless business. Our momentum in the market that has occurred in both fixed and wireless has been because of what we've been able to do with HBO Max. But it's now time to try the different formula and see where that matures. And five years from now, who knows what changes in the markets that cause us to think about it differently.

BRIAN SOZZI: And, John, I just want to make sure, Brian here. I just want to make sure I have this correct. The remaining telco company wouldn't trade on the same multiples as your rivals. I guess that would be T-Mobile and our parent company, Verizon. Why would that be the case?

JOHN STANKEY: Well, look, if we are able to operate in a similar fashion, I would think frankly, when you look at our return characteristics and the momentum we have in the market, there's no reason we should trade at a discount. And we certainly shouldn't trade at as big a discount as we do today. And I believe part of that has been market momentum. And in fact, the management team has done a great job over the last couple quarters to demonstrate they can turn that around, they can grow EBITDA, they can generate service revenue growth, which is what you saw this last quarter and we're executing well in that regard.

The other part of it is look, if you have a choice, if you can go into the market and there's a balance sheet that's less stress, you may look at it and say, I'd rather have my money someplace else. And I think taking some of this overhang off the balance sheet will help to normalize that a little bit. As I said, I'm not hoping that we get right back to their multiples, but I'd like to see that narrow a little bit. And my belief it's the balance sheet that is, in fact, creating maybe that turn and a half difference between us and Verizon right now.

MYLES UDLAND: John, I want to ask a little bit about where we're at in the economic cycle and how you see things both from your role running a major Dow component, major telecommunications provider, and also thinking about M&A in this part of the cycle. A strategic move that businesses are making. Where does it seem like we're at to you with respect to the healing, I guess we could call it that, of the US economy and corporate America broadly?

JOHN STANKEY: It feels pretty good, Myles. I would tell you, if I think about my temperament and where things sit this time this year versus this time last year, it couldn't be more different. And it definitely feels like we have some tailwinds right now. And I would tell if you think about the guidance that we had put out assuming what 2021 would be from an economic perspective, I see nothing that suggests we can't achieve what we've put out.

In fact, I would say maybe in the second half of the year, we might see a little bit more economic activity than what we would have expected. I think that maybe the single watch out right now might be how fast the global economy heals from the pandemic. And there's aspects of our business, for example, that are tied to travel and commerce lanes overseas. That might be a little bit choppier. But things are pretty strong domestically.

In fact, I look at what's happened with the last round of stimulus, which has clearly put a little bit of a shot of adrenaline in things. I would love to see more people willing to come back into the labor force. So maybe a little less stimulus and a little bit more, come take the opportunities that are in the organic economy itself to ultimately employ and get people back to work.

And I worry that if we continue to go further and we don't kind of check ourselves on what additional government spending that we want to move forward on, that we could start to maybe drive some inflation. And that's not a '21 issue, but I certainly am concerned about that as somebody who runs a business moving forward into the future. And it's not that we don't have a couple of issues we need to address that can help economic growth over the long term, like some good infrastructure spending and maybe some thoughtful policies around what we do on education reform and a few other things.

But when you hear what's being talked about and the amount of government investment, I get a little bit worried about that and really think we should be mindful of the fact that we've got a core economic engine right now poised to grow and we can probably do that in a way that is inclusive to all in society and come out of a better place.

ANDY SERWER: Hey, John, speaking of infrastructure, let me ask you about 5G, because that's really got to be the growth driver of your business and also our parent company as well, and T-Mobile. And I just want to understand why AT&T's 5G and 5G strategy is better or preferable versus the competitors. What are the advantages?

JOHN STANKEY: Well, you know, Andy, I think one of the things that everybody should understand, is that there's a remarkable level of investment going on in the United States across the industry in total. And folks should step back and look at just what's been committed this year and what the guide has been from three large wireless providers, not to mention what's going on in core fixed infrastructure with cable players and other fixed providers, like ourselves.

There is just, there's a remarkable amount of money being invested in infrastructure right now. And that's a, it's a really good thing for the United States. And I think we're going to see over the course of the next three years, as a lot of this investment starts to actually be turned up and come to realization, incredible capabilities brought forward. And I'm excited about it, frankly, and I think that we should understand that every company that's in this space is a capable provider of services. Each has their strengths and each has their areas that they have to work around.

But the net of it is, we have great competition. We have companies that are striving to outperform against another. They're investing billions of dollars. Good things are going to happen as a result of that. AT&T will come at this a little bit different than others. In our case, we have an enviable position across all market segments. We service--

[BELL RINGING]

-- The largest of the Fortune 500 and the smallest homes. And that's a great place for us to be. And in order to do that, we need a really robust hybrid network, great fixed fiber that allows us to have advanced networking that's fixed for the largest of the Fortune 500 and every business in between, as well as people in their home. And we have a great wireless network. Maybe we have a little less capacity than say T-Mobile and Spectrum, but we'll offset that with other infrastructure that we have in place to have a very competitive and functional offer in the market.

We all know that customers want something other than just connectivity. They want ease of use, they want simplicity, they want somebody who can take complexity out of their lives and solve their problems. And we're working hard to do that. And we think that will be part of our value proposition and we're trying to demonstrate that customers that have deeper relationships with us across two products or three products get a better deal and a better treatment over time with us. There's a lot of ways to compete in this market, and I feel really comfortable about our market position. And I think the industry as a total is poised to do some remarkable things for the US economy.

MYLES UDLAND: All right there. We saw the opening bell down there on the floor on this Monday morning. Stocks higher in the opening minutes of trade. John, we saw some of those investment numbers in the 5G space, almost $100 billion of investment. And thinking again broadly about the investment cycle, the Capex cycle that you guys are undergoing and I think broader corporate America is really embarking on, is this the most unique environment that you've seen in your career in terms of companies going from a decade where you could issue debt, everything was cheap, but there wasn't a huge amount of spend underway too? It seems like the demand cycle is really telling corporates this is the time to start thinking about being aggressive.

JOHN STANKEY: I think it's a combination of things. I think one is the demand cycle and the application cycle will be incredibly promising when you look at what literally the notion of taking the land infrastructure of a scaled enterprise and taking it everywhere on demand from a wireless perspective. What that's going to do to the next round of innovation and autonomous vehicles, in medical, what it will do for city and city governments in terms of sensing and telemetry. There's going to be an incredible amount of innovation. And certainly, that is the promise that's driving some of it.

It doesn't hurt that we're in a moment when capital is widely available and relatively inexpensive from historical levels. And so when you have that, it makes the business case more attractive. And I think to your point, you step back and you look at this and say all the fundamentals are lined up for the private sector to really lean into this and do some remarkable things. And we all are. Policy has been set up really well for this moment. And we should be very careful and thoughtful about doing something that isn't a policy about-face or major adjustment that disincents that level of investment and that level of competition to bring these kind of services into the market.

JULIE HYMAN: John, it's Julie again. It seems like you're talking about taxes. Is that what we're talking about here? I mean, do you want to be more explicit about what exactly you think the mistake could be that we could see on policy here?

JOHN STANKEY: Well, Julie, there's such a broad spectrum of things that have been bandied about. Taxes certainly one. If you ultimately take cash flow out of these capital intensive businesses that want to invest, that certainly has an impact. But let's look at some other things that we're talking about, which is we've got the whole net neutrality debate back up and running. And we're asking whether or not we should start regulating services and have people file tariffs on those services that slows things down and has different entities evaluating whether that product is an OK product to bring to market.

We've got the debate occurring on things like government-owned networks to go and overbuild existing infrastructure that's already in place with taxpayer-funded money, expecting that somehow a local municipality might be better positioned and more capable of running a broadband network than private sector that is used to working in technology and reinvesting and making sure that technology is up to date in the most current, capable offering that's in the market. I mean, all these things, if it goes the wrong way, the sum total of which could really have a chilling effect on what I think is the dawn of amazing connectivity investment and technology cycle we're about to see.

JULIE HYMAN: John, would you characterize these various issues as sort of the biggest risk, the biggest potential risk to your business?

JOHN STANKEY: Well, I'm confident that ultimately once facts are on the table and the debate occurs, that cooler heads will prevail. And certainly have been spending my time and energy, Julie, over the last several months ensuring that we get down and sit down with the most inquisitive members of Congress to explain these issues and help them understand what's going on. So as they engage in some of these important policy decisions, they're making good decisions.

And I'm heartened by what I'm hearing and seen on both sides of the aisle. I think there's certainly a unique opportunity to have really smart policy that addresses some of those areas where the private sector will not be able to reach because of the economics of say 15 million rural homes. I think there's the right kind of conversation going on in the affordability debate to look at whether or not we should kind of re-engineer the universal service fund so that those that can't afford scaled and robust broadband can on a routine basis, count on the fact that a subsidy will come in and allow them to be on the network.

Those are the things that government should be looking at, and I think those that are investing their time to understand it are really getting smart about. And I'm optimistic and hopeful that both sides of the aisle want that to occur. And it really can be a great bipartisan issue to get everybody in the United States on the internet. I think we all think that that's a good thing to do. We should put the right policies out there to do that and not worry about things like overbuilding and doing things for people that are already on the internet that can afford to pay for it, while we're not paying attention to those two key threshold issues that I just mentioned, geographic distribution and rural, and affordability for those who can't afford it.

BRIAN SOZZI: John, Brian here again, I just want to go back to the media deal. If you were to combine Warner Media with Discovery in 2020, would have about $41, a little more than $41 billion in sales. Now the projections for 2023 for the newly combined company, about $52 billion, $53 billion in sales. How do you get from point A to point B? And is that outlook, how optimistic is that?

JOHN STANKEY: Look, I think it's very much in reach, Brian. First of all, we're seeing recovery in media companies right now because the pandemic hit them very, very hard. So you're going to have just some natural cycle, for example, in our theatrical business, that'll get much stronger. Our advertising business is coming back as sports, for example, gets back into a more normalized schedule.

But let's also not forget, one of the things that's very attractive to an AT&T shareholder, we have a direct to consumer business that's growing incredibly well. 30% revenue growth in HBO Max and HBO right now. That's only going to grow more rapidly as we launch the AVOD product here this month. We start our global expansion. Discovery is doing similar things in their space. The strength in that space is going to provide dramatic growth in that business, and it's one reason we want to unlock it.

If an AT&T shareholder wants to stick along for that ride and see that growth, they can certainly do that. As some smart analysts have said, when you think about the value that's going to be spun out to the AT&T shareholder, that's maybe like $7 to $8 of value, and that's like paying a dividend. If you want to stick with the growth and see what happens there, you could do that. If you choose to monetize that once the stock's in the market, you could obviously rotate back and do a yield play like what core AT&T might offer. But look, there's going to be great growth in media, and that's why we want to expose that stock to market in the way we're talking about.

MYLES UDLAND: All right, we'll leave it there. John Stankey, CEO of AT&T. John, really appreciate you being so generous with your time this morning. Thanks so much for hopping on. Andy Serwer, thanks so much for joining us as well. Hope to talk with both of you very soon.