AT&T highlighted capex and debt benefits as factors behind a large deal to combine its WarnerMedia business with pay-TV provider Discovery, detailing plans for the first reduction in its quarterly dividend in more than 20 years.

The operator noted the combination of the entertainment units would deliver a financial structure allowing greater capital investment. The planned dividend cut will free up cash-flow to combat debt and boost funding for its mobile network.

AT&T stated annual capex will stand at around $24 billion after the deal closes, which it expects in mid-2022, compared with the $21 billion budgeted for this year.

The operator also plans to phase out vendor financing, which has clouded its capex picture recently. AT&T borrowed money from its vendors which it used to buy equipment, paying back the loans over time. Now AT&T’s management says it wants to transition capex to an all-cash basis.

In a research note, Raymond James & Associates analysts noted the “exit of the media assets” left AT&T looking “more like Verizon, so it will refocus on its network investments”.

For now, though, AT&T’s ability to invest in its network remains somewhat constrained by high debt levels and a large dividend pay-out ratio.

On its recent earnings call, the company stated outlay on C-Band spectrum had driven its debt-to-adjusted EBITDA ratio to 3.1, though it expects this to be its “peak leverage ratio”.