Randall Stephenson,


’s longtime manager, got an unpredicted mobile phone phone Sunday night from a hedge-fund manager at Elliott Management Corp., one particular of Wall Street’s largest and most aggressive activist investors.

The simply call was temporary and cordial, but behind it was a stinging rebuke of the telecom veteran’s mission to transform the cellphone organization into a media huge and leave a top lieutenant to end the work. Investor

Jesse Cohn

instructed Mr. Stephenson the hedge fund experienced concerns about AT&T’s system and execution, reflecting concerns percolating close to the business, said individuals common with the make a difference. Mr. Stephenson alerted his lead director.

The following day, Elliott Administration issued a 23-page report that publicly questioned the logic of AT&T’s $49 billion takeover of DirecTV in 2015, soon just before twine-slicing accelerated, and its $81 billion deal final 12 months to invest in Time Warner, household of HBO and Warner Bros, only to substitute almost all of its skilled entertainment bosses.

Elliott’s report Monday also questioned regardless of whether Mr. Stephenson’s presumed successor could effectively combine the conglomerate into a power ready to contend for advertising and marketing pounds in opposition to the likes of Google and earn a high-priced fight for streaming supremacy with rivals like Netflix Inc. and

Walt Disney

Jesse Cohn during a panel at Rock Heart/SVDX speaker sequence in 2016.


James McRitchie/CorpGov

Options for Mr. Stephenson’s triumphant exit, as early as future year, now threaten to switch into a monthslong struggle above the path of the $280 billion telecom enterprise and a check of the board’s loyalty to his extensive-expression vision.

The obstacle issued by Elliott pits the 59-calendar year-old AT&T chief govt versus a 39-yr-aged Wall Avenue supervisor recognised for pressuring his targets to shake up their functions.

Mr. Stephenson has used most of his dozen decades as chairman and CEO piecing alongside one another a fashionable media company that will be his legacy. The a few-10 years company veteran—who stated HBO’s “Succession” was a person of his beloved Television set shows—has signaled fascination in stepping down as quickly as upcoming calendar year, folks acquainted with his pondering claimed.

Mr. Cohn is seeking sweeping modifications even with Elliott possessing a $3.2 billion, or approximately one%, stake in AT&T shares and selections. Other activists have made use of related stakes to shake up companies as massive as

Procter & Gamble


Basic Electric powered

, usually getting seats on the board.

The places of work of Elliott Management Corp. in New York Town.


Kholood Eid for The Wall Street Journal

Mr. Cohn, a partner who operates U.S. fairness activism at Elliott, has explained to other traders that he would like AT&T to take a look at the sale of DirecTV and other belongings, as very well as have a say in choosing its up coming leader. Elliott ought to decide by the conclude of January whether to initiate a proxy struggle, but Mr. Cohn informed Mr. Stephenson that he wished to perform together.

AT&T reported it appeared ahead to engaging with Elliott, and that it was previously pursuing some actions laid out in Elliott’s report: “AT&T’s Board and administration group firmly consider that the focused and productive execution of our approach is the finest path forward.”

Mr. Stephenson, who declined to remark, has defended his method, saying AT&T is boosting its programming investments, encouraging HBO compete with developing quantities of streaming services and harnessing info from its cell phone and Television clients to contend with the most significant advert platforms. He has said AT&T’s subscriber pool features its media models a wide distribution program.

“The business enterprise model does have to adjust,” he reported immediately after winning an antitrust case last tumble to obtain Time Warner. He will get a probability to make his circumstance to investors Tuesday when he requires the stage at a

Goldman Sachs

meeting in New York.

Inspite of the significant-profile acquisitions, AT&T shares have been flat considering the fact that Mr. Stephenson took about. They hit a multiyear minimal in close proximity to $27 in December as traders apprehensive about the additional than $160 billion in personal debt the organization had accumulated from its acquisitions. The shares had gained 33% this calendar year prior to Elliott produced its letter.

AT&T’s Strategic Change

CEO Randall Stephenson took about AT&T in 2007 soon following the firm experienced acquired BellSouth and the Cingular Wi-fi joint venture. He has expanded into media by buying DirecTV in 2015 and Time Warner in 2018.

Phase profits, in billions*



Advertising Methods five%

Enjoyment 27%






WarnerMedia eleven%

(HBO, Turner,

Warner Bros.)

Sam Hendel, president of Levin Easterly Partners, which owns roughly 3.5 million shares of AT&T, explained he sees possible, especially in wi-fi as 5G networks grow. Time Warner is a fantastic asset, he mentioned, but he agreed with Elliott that AT&T has to include practical experience in media to the board and senior administration.

Elliott, which is operate by billionaire

Paul Singer

and manages about $38 billion, is recognized for its fifteen-calendar year crusade to get Argentina to make payments on defaulted bonds and for battles with chief executives, which includes at


The Communications Workers of America, a union that signifies about 100,000 AT&T personnel, stated Elliott’s drive would reduce its workforce. “Anyone who thinks that Paul Singer and Elliott Administration intend to ‘deliver considerably-achieving benefits’ to AT&T’s prospects is not familiar with the destruction this vulture hedge fund leaves in its wake,” CWA President

Chris Shelton


Conglomerates have fallen out of favor on Wall Road, the place lots of investors now prefer nimble, focused corporations. Investors this calendar year have valued AT&T, which has about thirty% extra earnings, a leading Hollywood studio and well known cable channels, a little far more than

Verizon Communications

which has largely caught to the wi-fi enterprise. These days, AT&T looks a lot more like


, a cable operator that owns NBCUniversal and Sky.

“When I was there, it was centered on getting the greatest and most effective telecommunications organization in the environment and we kind of caught to what we realized,” explained Edward Whitacre, who as main government from 1990 to 2007 rebuilt AT&T into a nationwide giant by snapping up regional Toddler Bells. “But time has moved on and it’s possible they created the choices that they experienced to make.”

Next in line

Last thirty day period, a single of AT&T’s leading executives, John Donovan, announced his program to retire after discovering out he was not having the major career. Shortly just after, AT&T’s board achieved to approve the marketing of John Stankey, just one of Mr. Stephenson’s longtime allies, to a newly made role of president and running main, making him the heir clear.

Mr. Stankey, fifty six, joined one particular of the Child Bells in 1985 and rose by way of the ranks. He and Mr. Stephenson share a friendship built through extra than two decades as the regional cell phone organization grew into the 2nd-premier wi-fi provider in the U.S.

John Stankey, AT&T president and operating main.


John Lamparski/Getty Photos

Mr. Stankey backed the DirecTV offer and inherited the top write-up there and at Time Warner, the place he took the helm past calendar year. The shift pushed apart veteran executives in each and every enterprise. He has clashed with people beneath him, in accordance to previous executives, and observed by some as imperious. HBO boss

Richard Plepler

and Turner main

David Levy


The board voted unanimously to approve Mr. Stankey’s promotion, spurring Elliott to go community with its stake, according to people common with the subject. The hedge fund experienced been finding out AT&T because the Time Warner deal. It considered the advertising of Mr. Stankey to oversee both equally media and companywide functions as hasty, the persons said.

“I’m a Stankey fan,” claimed Mr. Whitacre, the former AT&T CEO, who described him as a clever strategic thinker.

AT&T will resist any attempt to dictate its executive suite, in accordance to people today near to the firm. Board customers see place to enhance AT&T’s general performance but guidance Mr. Stephenson’s strategy and praise Mr. Stankey’s management, in accordance to a human being common with the board’s considering.

“There are not several men and women from the outside who would be clear candidates to run a complicated media and communications organization,” the human being mentioned. “A good deal of people who run media organizations really do not know just about anything about working a telecom small business.”

That raises the prospect of a protracted, monthslong fight in between the company behemoth and the hedge fund.

AT&T is doing work with Goldman Sachs bankers, among other folks, to mount a defense versus a potential proxy struggle.

“I don’t assume there’s going to be substantially management improve until eventually there’s blood in the avenue,” claimed an investor common with AT&T’s leadership.

The Time Warner constructing in New York Town.


Peter Foley for The Wall Avenue Journal

Serial drama

When Mr. Stephenson took the reins of AT&T in 2007, there were being no far more Little one Bells to undertake. Regulators thwarted a 2011 try to purchase wi-fi rival

T-Cell United states

In look for of progress and cash circulation to sustain AT&T’s requires, together with what is now a nearly $15 billion yearly dividend, Mr. Stephenson appeared to enjoyment.

He closed the obtain of DirecTV in 2015, which turned out to be in the vicinity of the peak of the pay back-Tv industry. There was inside disagreement over prospective clients of the newly enlarged company, which experienced amassed 26 million U.S. subscribers. A board-level presentation in early 2014 warned that the amount of spend-Tv homes ended up “likely at their peak and predicted to drop.”

Stacking Up

How AT&T and its subsidiaries fare versus rivals in several sectors

How AT&T and its subsidiaries fare compared to rivals in various sectors


Postpaid wireless

connections, in hundreds of thousands*





Pay back Tv shoppers,

in thousands and thousands*





High quality cable/

streaming subscribers,

in millions



a hundred and forty


Motion picture box office

in billions**




AT&T’s general Television business enterprise has shrunk, and losses have accelerated. Analysts anticipate AT&T to stop the year with fewer than 22 million shelling out Television set shoppers in the U.S.

Elliott is trying to get shareholder guidance to push AT&T to provide the DirecTV organization, according to individuals acquainted with the make any difference. Business M&A gurus explained it would probably be valued at considerably less than $25 billion, excluding financial debt, about half of what AT&T compensated.

If it ended up set up for sale, there would be handful of intrigued customers. AT&T finance main

John Stephens

reported Wednesday that a hookup between DirecTV and satellite rival

Dish Community

has been tried using previously. “From a regulatory point of view,” he said, “it has not been effective.”

Former executives say Messrs. Stephenson and Stankey also misjudged the needs of working a media company as opposed with a telecom small business.

AT&T has tried using to impose a phone-firm society on a resourceful enterprise, a previous Time Warner government claimed.

A WarnerMedia spokesman stated best executives who still left the firm all departed for distinct reasons, and he cited a deep pool of writers, directors and other inventive expertise doing work for the media unit.

Mr. Stankey, alongside with his promotion to chief running officer, stays CEO of WarnerMedia. He changed the leaders of HBO, Turner and Warner Bros., trying to get to break down fiefs and produce a one tactic. He brought in former NBC programming government Robert Greenblatt and reduced a 600-man or woman Time Warner company office environment to much less than a hundred.

Elliott criticized AT&T for pushing out a lot of the management at DirecTV and Time Warner, a sentiment shared by some existing and previous executives. AT&T stalwarts disagree, declaring important folks carry on to function at both models.

This week, Mr. Stankey secured a information partnership with Hollywood director and producer J.J. Abrams, who signed with WarnerMedia above other suitors such as Apple, a person acquainted with the deal explained.

Mr. Stankey’s greatest initiative, a streaming services that can contend with Netflix, as very well as new choices from


and Disney, has nevertheless to start.

Shortly immediately after the Time Warner deal closed, Mr. Stankey thorough plans for a a few-tiered streaming services with graduated pricing and diverse material. He sought small enter from top executives at Warner Bros. and HBO, blind-siding them with the announcement, men and women acquainted with the procedure mentioned.

By June, Mr. Stankey had to backtrack.The three-tier approach was complicated both of those to the market and within the company, and rivals had been coming out with straightforward, one-priced delivers. AT&T now options one provider, termed HBO Max, which will involve HBO demonstrates and other Warner content material, which includes “Friends.” It is envisioned to expense much more than $fifteen a thirty day period, in accordance to men and women acquainted with the venture.

Prime, Zendaya in a scene from the HBO present “Euphoria.” Reese Witherspoon, under, in HBO’s “Big Little Lies.”



Inside of the corporation, some executives have been puzzled by the shifting strategy on streaming. Tactic sessions for HBO Max in June were being intended to make clear the company’s method. But numerous who attended remaining with several queries unanswered on subjects that spanned pricing to programming, according to a human being acquainted with the make any difference.

—Lillian Rizzo and Joe Flint contributed to this report.

Publish to Drew FitzGerald at andrew.fitzgerald@wsj.com, Shalini Ramachandran at shalini.ramachandran@wsj.com and Corrie Driebusch at corrie.driebusch@wsj.com

Copyright ©2019 Dow Jones & Company, Inc. All Legal rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8