Mobile phone and entertainment empire AT&T (NYSE:T) has been a mess.

Stuck between U.S. wireless leader Verizon and faster-growing upstart T-Mobile, the company's phone business has struggled for years. Then AT&T finished its acquisition of media conglomerate Time Warner last summer, complete with a hodgepodge of TV, film, and communications assets, and muddied the waters for investors even more with billions in new debt.

In spite of the odds, however, AT&T is making solid progress towards having all of its various businesses work together. The stock has put up a respectable 21% return in 2019 year-to-date, though much of that is thanks to its depressed valuation at the start of the year. The company last week released more solid results from the second quarter, and at the halfway point of the year, the stock still looks like a good pick for value-minded investors.

A little good, a little bad

AT&T had good news in Q2. On the mobile side of the business, there were 3.9 million net subscriber additions, including 144,000 net postpaid smartphone additions, bringing the total subscriber count to 159.7 million. On the non-mobile side, legacy landline phone and cable TV continue to decline, offset by increases in high-speed fiber internet connections. All told, service revenue increased 2.4% for AT&T's largest bread-and-butter operating segment.

The Time Warner side of the business was more of a mixed bag. The company raised pricing on various services, including HBO, and popular programming like Game of Thrones coming to an end likely didn't help. Total TV subscribers fell by 946,000 to end the quarter and now stands at 22.9 million. High-speed internet was another bright spot within Warner, but overall revenue fell slightly -- although AT&T was quick to point out that operating profitability for the segment still managed a 2% year-over-year increase.

Still, things aren't all bad. Halfway through the year AT&T is reporting solid numbers and said it expects both the top- and bottom-lines to be up by low single-digit figures at the end of 2019 (although it's worth noting AT&T just lapped the anniversary of the Time Warner takeover in June). Not too shabby for a slow-moving behemoth.

Metric

Six Months Ended June 30, 2019

Six Months Ended June 30, 2018

YOY Change

Revenue

$89. billion

$77.0 billion

16%

Operating Expenses

$75.1 billion

$64.3

17%

Adjusted Earnings Per Share

$1.75

$1.76

(0.6%)

YOY = year over year. Data source: AT&T.

A bumpy road ahead, but at least there's a road

Since the Time Warner purchase, AT&T's primary concern has been paying down its ample debt burden. Though the bottom-line numbers have been underwhelming, AT&T has been using free cash flow (profits after basic operating and capital expenses are paid, which is up 51% year-over-year to $29 billion) to pay down its liabilities. Since June 2018 net debt has fallen by $18 billion and now sits at $157.9 billion, and management said it expects to pay down another $12 billion by year-end.

A couple sitting on a couch watching streaming TV from their television and tablet.

Image source: Getty Images.

That is still a large long-term financing load to be sure, but it brings the company into the range it was looking to get to when it set about fitting Warner into its existing wireless empire. It should help free up cash for down the road so AT&T can continue to evolve and monetize its new assets like TV streaming service HBO Max, due to be released in spring 2020; the company's film business; lesser-known initiatives like its video game segment; and the slow rollout of its 5G mobile network.

After the second-quarter report, AT&T is still priced attractively at 8.6 times trailing 12-month free cash flow. The business certainly isn't setting the world ablaze, and the TV and other legacy lines of business certainly aren't helping, but progress is nevertheless being made. For those looking for a value stock with a 5.9% dividend on the side, look no further than AT&T.