AT&T CEO Randall Stephenson Retires, Elevating John Stankey

(Bloomberg) -- AT&T Inc. Chief Executive Officer Randall Stephenson, under pressure from investors to stem customer losses and justify his $85 billion foray into films and TV, will step down from that role on July 1, handing the job to his handpicked successor, John Stankey.

Stephenson, 60, is retiring but will serve as executive chairman through January to ensure a smooth transition, AT&T said Friday. Stankey, 57, has been president and chief operating officer since October.

The transition to Stankey isn’t a surprise, but it comes at a fraught moment. AT&T is in the midst of contending with the coronavirus crisis and has yet to launch its streaming platform HBO Max, a crucial initiative set to debut May 27. On the phone side, an expensive and uncertain introduction of advanced 5G mobile service is underway.

“Covid gives coverage to everything,” said Roger Entner, an analyst with Recon Analytics. “You don’t let a good crisis go to waste. They accelerated this move. If Stankey isn’t ready now, he won’t be ready in six months.”

Stephenson announced the transition Friday during the company’s annual shareholder meeting, which was held via an audio webcast in aid of social distancing. “We’re all excited to see you move into this role,” Stephenson said as he introduced Stankey.

“I can honestly say I don’t think I saw this coming 35 years ago when I joined the company handling customer requests for phone service,” Stankey said on the call. “It’s only possible because of the support of the many high-quality individuals that I’ve been fortunate enough to work with over the course of my career.”

Big Acquisitions

Stephenson’s 13 years at the helm of AT&T included the $85 billion acquisition of Time Warner, which thrust the wireless and landline company into the heart of Hollywood. That move and the earlier purchase of satellite-TV provider DirecTV buried AT&T under $200 billion in debt and spurred an activist challenge from Elliott Management Corp. The investment group hailed Stankey’s ascension on Friday after prodding the company previously for a rigorous succession process.

Elliott was initially reluctant to have Stankey become CEO, according to a person familiar with the matter, but the stability of having a longtime AT&T executive command the business became more appealing during the coronavirus crisis. Stankey also laid out a vision of running AT&T as an operator, rather than an empire builder in the style of Stephenson, the person said. And the firm, backed by billionaire Paul Singer, felt the search process was thorough.

AT&T’s board conducted an “extensive five-month search process” reviewing both external and internal candidates before approving Stankey, Stephenson said.

“Leadership succession is one of the board’s most important responsibilities,” board member Beth Mooney told shareholders Friday. “After an extensive evaluation, it was clear that John Stankey was the right person to lead AT&T into the future.”

Even though it came sooner than some expected, the timing seems right, said Wells Fargo analyst Jennifer Fritzsche. “The new WarnerMedia CEO is in place, the HBO Max launch date is set for May 27, and you had one executive who has had his foot out the door for a year,” she said. “I think the pieces were in place for Stankey.”

AT&T’s integration of what’s now WarnerMedia is still a work in progress, and Stankey will have to continue Stephenson’s efforts to meld the disparate cultures of a venerable telecom provider and a trendier entertainment stalwart.

Stankey has been overseeing the integration for more than a year. He replaced all of the original division heads, including executives at HBO, Turner and Warner Bros., in a move to blow up the old Time Warner fiefs and get the entire media and entertainment division rowing in the same direction.

AT&T investors took the change in stride. The stock was little changed at $29.42 as of 2:43 p.m. in New York. It had lost about a quarter of its value this year through Thursday’s close.

President Donald Trump, a frequent critic of WarnerMedia’s CNN, crowed about Stephenson’s retirement in a tweet. “Hopefully replacement will be much better!” the president said. Both Stephenson and Stankey have vocally supported CNN and its reporting.

“It’s too early to judge Randall’s legacy,” Fritzsche said. Acquiring DirecTV wasn’t a good move, she said, but what she saw as his positive decisions included the Leap Wireless takeover, which gave AT&T a significant amount of airwaves.

Stephenson’s decision to buy Time Warner came at a time when the company needed growth, Fritzsche said. It was a big, complicated pivot, and the jury is still out on it. Meanwhile, Verizon Communications Inc. chose to double down on wireless after its smaller media foray fizzled. “It was just a simpler story,” she said.

Turning a phone company into a modern media powerhouse has challenges, and while Stephenson may have set the course, it’s not clear that he was best suited to implement the changes, Recon’s Entner said.

“Who would have thought, 10 years ago, that Randall would be one of the world’s top media moguls,” Entner said. “Randall is this folksy guy from Oklahoma that doesn’t necessarily exude the media-mogul aura.”

Stephenson’s legacy is in his successor’s hands, Entner said: “He will be remembered through the lens of Stankey’s performance. Randall will be remembered as the guy who made it happen.”

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