AT&T's stock fell 4% in premarket trading Tuesday after the telecoms behemoth cut its dividend payout to $1.11 per share from $2.08.

The dividend drop, according to the firm, reflects the distribution of WarnerMedia to AT&T stockholders.

Today, AT&T's board of directors approved separating WarnerMedia from the company and merging it with the rest of the media division with Discovery.AT&T to spin off WarnerMedia in $43 billion Discovery merger, cuts dividend  | Reuters

AT&T will receive $43 billion in cash and other considerations as part of the agreement, while AT&T shareholders will acquire approximately 71% of the new firm, Warner Bros Discovery, in shares. For each AT&T share they own, they will receive 0.24 WBD shares.

WBD will be owned by Discovery shareholders to the tune of around 29%.

AT&T intends to use some of the earnings to pay down its debt, which totaled more than $156 billion at the end of December. AT&T forecasts its net debt to shrink to 2.5 times adjusted EBITDA by the end of 2023, down from 3.2x presently.

WBD will be up against Netflix and Disney+ at a time when subscriber numbers are dwindling and content expenditures are rising. HBO Max, owned by WarnerMedia, rose quicker in the fourth quarter, with 74 million customers at the end of the year.