Paying Dividends Doesn't Hinder Investing, M&A: AT&T's CEO

AT&T Communications corporate offices at 175 East Houston St. in San Antonio.
Toby Jorrin
AT&T Communications corporate offices at 175 East Houston St. in San Antonio.

Investors of AT&T are best served receiving dividends—a practice that does not hinder the company’s ability to re-invest in the business or commit to M&A—Randall Stephenson, chairman, president and CEO of the giant telecom, told CNBC Tuesday.

“The dividend has never limited our ability to invest in the business,” said Stephenson. “In fact, we’ll invest about $19 billion in the business this year. That’s more than any other company in the United States will invest.”

Stephenson said AT&T has increased the dividends for the 26 consecutive years in which it has been paying them to investors. Currently the company’s investors receive a dividend that yields about 6.7 percent.

The telecom has strong growth components, due to its wireless and other initiatives, but it is not valued as such. One aspect of the old phone monopoly is that it still has land-line customers—an area of the business that has been in decline for years, due to the explosion of cell-phone service from AT&T itself and its competitors.

Another new aspect of AT&T’s business is u-Verse, its digital TV. The company has committed to serving 30 million homes, said Stephenson, and to date has finished 22 million. He said he expects the entire project will be finished by the end of next year.

Stephenson called AT&T’s relationship with Apple “terrific,” but declined to answer whether the telecom is preparing to share the iPhone exclusivity with other providers.

AT&T has recently initiated a tiered pricing, replacing its flat rate, plan for cell phone users.

Under the flat-rate structure, Stephenson said, “the top 3 percent are using the lion’s share of the bandwidth on the network, and the low usage subscribers are actually subsidizing the high-usage subscribers. We thought we needed to get the pricing rationalized in the industry. Those who use more, pay more; those who are using less, pay less.”

Stephenson said that AT&T has been working to correct service problems in such high-usage areas as New York, where customers have complained about poor connections and reception.

An earlier version of this story reported that AT&T has paid dividends for 22 consecutive years.

Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.