John Donovan, as AT&T’s head of networks and then chief of the Communications business unit, has had a profound impact on the telco’s technology strategy, supply chains and public perception. He masterminded the Domain 2.0 program to reinvent the supplier relationships around software-defined networking (SDN), and oversaw the strategy to virtualize network elements as aggressively as possible, so far on track to hit the target of virtualizing 75% of network functions by 2020.
In a restructuring last year, following the acquisition of Time Warner, AT&T split into four major business units – Communications, run by Donovan; Latin America (headed by Lori Lee); Advertising and Analytics (run by Brian Lesser); and WarnerMedia (the renamed Time Warner, headed by John Stankey). Donovan’s kingdom included wireless, video and broadband activities, in a step – mirrored at Verizon – to converge wireline and wireless networks not just at access and core levels, but organizationally.
Donovan announced last month that he would retire in autumn 2019, and this has sparked a reshuffle which may affect the priorities and approach that AT&T will take as it continues with its network architecture and cost transformations, to support its convergence and 5G strategies.
John Stankey, currently heading up WarnerMedia, has been promoted to be AT&T’s president and COO, while Jeff McElfresh will replace Donovan at Communications.
As president, Stankey will still run WarnerMedia but will also oversee two other divisions, with McElfresh’s Communications and Brian Lesser’s Xandr units reporting to him. It appears that Lori Lee, head of Latin America, will still report directly to Stephenson, but had been seen as a potential replacement for Donovan, so may feel passed over.
“Now is the time to more tightly align our collection of world-class content, scaled consumer relationships, technical knowhow and innovative advertising technology,” said CEO Randall Stephenson in a statement. He also indicated greater convergence of the core telco business, Communications, with new acquisitions, adding: “It’s the natural next step in bringing together the distinct and complementary capabilities of AT&T Communications, WarnerMedia and Xandr to deliver for consumers the benefits of a modern media company. AT&T is alone in the industry in being able to bring together these three great businesses for the launch of innovative consumer offers, relevant advertising and new entertainment services like HBO Max.”
This shows that Stephenson is not backing away from the controversial strategy to acquire media and video businesses to extend AT&T’s services and revenue streams. It is also extending its addressable markets in other directions, particularly towards enterprise, IoT, network-as-a-service and cloud offerings. Although these efforts have not feature major acquisitions like the move into media, they are involving AT&T in an ever-more complex web of strategic partnerships to target new vertical sectors and use cases most effectively (see below on TechMahindra alliance).
It remains to be seen whether the activist investor, Elliott Management, will take a rosy view of the new structure, or indeed of the adventures in content and media, which have been unsuccessful at rival Verizon, and may be counted as distractions from 5G-enabled businesses in which AT&T would have a more natural advantage and differentiation, such as edge computing, automotive or enterprise cloud services.
McEflresh is now in charge of the unit which brings in 77% of the AT&T group revenues (based on the most recent quarter), and 84% of its profit, as well as being responsible for the massive 5G network program. He hardly looks like a new broom, having been with AT&T for 25 years, but some analysts believe that Communications now needs a stable pair of hands to keep operations running smoothly while the changes Donovan has unleashed take effect. McElfresh was previously president of AT&T Communications’ Technology and Operations group, where he was responsible for the network, technology, cybersecurity, data and labs operations. Prior to that, he headed up AT&T’s Vrio business and the company’s operations in Mexico.