Coworking with Pascal Desroches

Coworking is a weekly segment where we talk to CFOs and others in the finance space about their experiences, their companies, and the larger economy. Let us know if you are—or you know—a CFO we should interview.

Pascal Desroches is the senior EVP and CFO of AT&T. Earlier this year, AT&T spun off WarnerMedia in a $43 million transaction to merge properties with Discovery.

This interview has been lightly edited for length and clarity.

In AT&T’s Q2 earnings, the company projected it would feel a $1 billion inflationary impact. How do you plan to offset that?

We have a major transformation program that’s trying to drive $6 billion in cumulative savings by the end of 2023. We are $4 billion into it currently. Also, earlier this year, we did increase prices for some of our older plans. The goal was to engage with those consumers in order to provide them with access to some of our newer plans which would probably fit their needs a little bit better. Yeah, you may have to pay a little bit more, but you’re getting a lot more value in terms of hotspot minutes and content with your offering.

Hitting the customer [with a price increase] is really hard and something that we really try not to do. And we think it’s important during this time that we work with customers—consumers are getting pinched.

As a CFO entering a high inflationary period, what is top of mind for you? What are the conversations you’re having?

I think we have to be very surgical in terms of, “What are the things that are most important to us?” Realizing what are the things that are really mission-critical in order to drive the performance of the company not only over the course of the next two to three years, but most importantly, over the 5–10 year horizon? And we want to make sure we’re in a position to continue to make those investments.

But at the same time, we have to be judicious. Are there things that we really need? That we can forego in the short term? Sure. What are the real-estate needs now since the pandemic? That’s an area that we’re narrowing down on: real estate, travel, entertainment. How much of it do you really need to do?

It’s making sure that we are paying attention to all the little things to really help us through this rough patch, but at the same time, making sure that for the things that we feel are really important for long-term success of the company, we continue to invest.

When you started your role as CFO of AT&T, there was this need to fix the balance sheet, as you said. What is that like, to turn around a balance sheet?

What happened over the course of several years was we had a number of acquisitions and we had a really high debt load. We also had $15 billion in dividend payments. And, we had major businesses that needed to be invested in significantly.

We looked at our assets and said, “What is absolutely strategic in the future?” and we concluded DirectTV, which was a great business for years, was no longer a core part of what we want in the company's future.

With WarnerMedia, we concluded that long term, there wasn’t a compelling reason to have media and connectivity under the same roof. So, we separated the two companies and put them each in their own capital structure. We took proceeds in conjunction with that transaction, $43 billion, and we used those proceeds to pay down debt and we also reflagged our dividend to reflect a smaller company.

That was a really painful decision, but important. All those things helped reduce debt, create additional financial capacity—such that the business that remains is able to invest, and is able to comfortably pay its dividend on a going-forward basis.

What do you think is required of the modern CFO?

Capital allocation, whereby you’re able to look at business plans and ideas that are not fully formed, but understand whether or not they have the potential to be successful, because you pick where you’re going to put the resources of the company. You cannot do everything; even as big as we [AT&T] are, we can’t do everything. You have to make choices, and really being able to discern business cases and understand where you have an advantage versus not, is a critical skill set.—KT