Stephenson, 60, said in February he would remain CEO for the rest of the year, though he refused to project beyond that date. He will remain executive chairman of the board until January. AT&T shares were largely unchanged following the announcement.
Stankey, who was being groomed as Stephenson's successor over the last couple years, recently dropped his position as CEO of AT&T's WarnerMedia, which will soon be led by Hulu co-founder Jason Kilar.
Elliott Management, the activist investment firm that pushed for executive changes at AT&T, said it "supports" Stankey as the company's next CEO. The firm had earlier been skeptical of putting Stankey at the helm of the company, CNBC previously reported.
"We have been engaged with the company throughout the search process, which was a robust one, including a range of highly qualified outside candidates and overseen by independent directors," Elliott partner Jesse Cohn said in a statement.
Stankey will take over AT&T as the company is navigating the Covid-19 pandemic while juggling a massive debt load, a mass loss of subscribers for DirecTV and its entrance into the streaming wars with the launch of HBO Max next month. AT&T will also have to compete with a bigger competitor in T-Mobile after the company completed its merger with Sprint. Stephenson tried but failed to acquire T-Mobile in 2011 after the deal was blocked by the Department of Justice. AT&T shares are down 25% since Stephenson became CEO in May 2007.
In the first quarter of this year, AT&T lost 897,000 premium TV subscribers, which counts mainly DirecTV users. The company is preparing to beef up its offerings for cord-cutters as consumers are spending large chunks of time streaming content while under stay-at-home orders. HBO Max will launch on May 27 and be free for many AT&T wireless subscribers. The service will launch in a crowded streaming space at a time when some analysts believe newly laid-off workers may reconsider their spending on subscription services.
AT&T's heavy spending on acquisitions of DirecTV and Time Warner has landed it into about $200 billion in debt. Elliott criticized the moves when it took a $3.2 billion stake in the company last year.