Financial giant Wells Fargo downgraded its rating of AT&T's stock after expressing concerns about the volume of challenges that the second-largest wireless carrier in the country is currently facing. This week's report from the firm articulated a number of worries about AT&T that have been circulating the industry for over a year now, placing a particular emphasis on the telecom giant's purchase of Time Warner that's still seen as a risky move. With profit margins in the entertainment industry facing "continued pressure" and AT&T taking on massive debt in order to finance the $85.6 billion acquisition, Wells Fargo's analysts remain skeptical about the company's ability to start generating returns on that investment without going over some major bumps on its road to long-term sustainability.
AT&T already signaled it'll soon be looking to start deleveraging its operations but it's still expected to both invest in its Time Warner unit — now rebranded as WarnerMedia — so as to make it more profitable and continue with its multi-billion expenditures meant to fund its path toward nationwide 5G coverage. With the latter two goals being in conflict with the first one, AT&T now has "many new balls to juggle," the report states. With a debt of $123.5 billion, AT&T was already the highest debtor in the wireless industry at the end of 2016, with that figure jumping by 54-percent to $190.2 billion by the end of June, according to its second-quarter consolidated financial report.
The Dallas, Texas-based telecom juggernaut can find some solace in the fact that the fifth generation of mobile networks is widely predicted to deliver nothing short of an economic boom, enabling unprecedented technologies such as fully connected autonomous vehicles and remote surgery, and consequently creating millions of new jobs. However, 5G has yet to arrive, and with nationwide coverage in the U.S. not being expected to become a commercial reality prior to 2020, after which the telecom industry will actually have to sell the new services, AT&T may be in for a rough period, as indicated by the same report.