The cheaper, ad-supported version of HBO Max is set to debut in June, AT&T said, and the telco also substantially raised subscriber targets for HBO and HBO Max through 2025.

The company said it now expects 120 million-150 million HBO Max and HBO subscribers by the end of 2025, up from the 75 million-90 million it previously projected in the fall of 2019. With the upward revision, AT&T expects HBO’s revenue to more than double over the next five years. In 2020, WarnerMedia’s HBO segment had $6.8 billion in operating revenue.

AT&T released the updates in advance of its analyst and investor day presentation Friday. [UPDATE: During the event, WarnerMedia CEO Jason Kilar said the company has $80 million in ad bookings for HBO Max AVOD, which will not include Warner Bros. day-and-date movie premieres; he also said HBO originals will not include ads.]

“As HBO Max scales at a global level, the company plans to increase investment, with expectations for peak dilution in 2022 and break even in 2025,” AT&T said in the update.

AT&T also said it expects to end 2021 with between 67 million and 70 million HBO/HBO Max subscribers worldwide, which would be a 10%-15% increase from about 61 million at the end of 2020. The tally of worldwide HBO Max and HBO subscribers comprises U.S. HBO Max subscribers and domestic and international HBO subscribers, and excludes free trials, basic and Cinemax subscribers.

At the end of 2020, WarnerMedia had 41.5 million combined HBO Max and HBO U.S. subscribers, up 20% year over year. However, of the 37.7 million HBO Max-eligible subs at year-end, less than half of those — 17.2 million — had activated HBO Max.

AT&T expects the AVOD version of HBO Max, which will carry a monthly price less than the standard $15/month standard tier, to contribute to the overall streaming-subscriber growth numbers this year.

“It turns out that most people on this planet are not wealthy,” WarnerMedia chief Jason Kilar said at a Morgan Stanley investor conference last week, discussing the AVOD strategy. “And so if we can wake up and use price and be able to kind of invent and do things elegantly through advertising to reduce the price of a service, I think that’s a fantastic thing for fans. And I do think once they see it, because I’ve seen the service in terms of the designs that we’ve come up with, I think people are going to be so excited about how we’ve been so thoughtful about the insertion of advertising and how it’s a very organic nature of the experience.”

The company also outlined its previously announced HBO Max international expansion plans. AT&T expects to launch HBO Max in 60 markets outside the U.S. in 2021 (39 territories in Latin America and the Caribbean in late June and 21 territories in Europe in the second half of 2021).

HBO Max is one of AT&T’s three main areas of market focus, along with 5G and fiber expansion, according to CEO John Stankey.

“Our No. 1 priority in 2021 is growing our customer relationships,” Stankey said in a statement. “It’s about more than just adding to our customer base. It’s about expanding the growth opportunity in our three market focus areas and also increasing our share within each market.”

AT&T also said it expects to close the deal to spin off DirecTV and the rest of its U.S. pay-TV operations in the second half of 2021, in a new entity jointly owned with TPG Capital. That business has been in decline due to ongoing cord-cutting. However, even after the spin is complete, AT&T said it doesn’t expect the transaction to have a “material impact on 2021 guidance due to the timing of close.”

For full-year 2021, AT&T continues to expect consolidated revenue growth “in the 1% range” and adjusted earnings to be “stable with 2020.”

Other forecasts AT&T announced Friday ahead of the investor day event:

  • AT&T expects to deploy 3 million additional fiber customer locations across more than 90 metro areas in 2021; it expects broadband revenue growth in the “mid-single digits” along with expanding margins.
  • The company’s $27.4 billion investment in 80 MHz of C-band wireless spectrum through the recent FCC auction will include expected payments of $23 billion in 2021. AT&T said it plans to begin deploying the first 40 MHz of this spectrum by the end of 2021. All told, the telco projects spending $6 billion-$8 billion in capex deploying C-band spectrum, with the “vast majority” of the spend occurring from 2022-24.
  • In 2021 the company expects to have access to cash totaling at least $30 billion, including $9.7 billion cash on hand at the end of 2020.
  • The company is targeting a debt-to-adjusted-earnings ratio of 3.0X by year-end 2021, which factors in an anticipated increase in net debt of about $6 billion to fund the C-band spectrum purchase. For 2024, AT&T is targeting debt-to-earnings ratio of 2.5X or lower.