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6,800 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | incrementally better as we move through the year. As I think about ARPU, it's always a combination of things. I actually would say, as I move into next year, I wouldn't dismiss, if I was able to be a little bit more effective in the value segment of the market and that came at a plateauing of ARPU because I was getting a little bit better growth in that segment because of the mix that was occurring that wouldn't bother me, frankly. But I would say on the embedded base of customers we have, our ARPU growth is because we're able to get customers to say, they want to buy up and get more from us and buy other products and services that add value to that relationship, whether it would be insurance or what they're needing to do to upgrade plans in order to get higher performance off the wireless network and more features and services that we bring in on the higher rated plans. We'll continue to do that. We still have room to grow on that. We certainly have been very diligent as we have been in the last couple of years to look for pockets in our base of where we think there is a value mismatch, and we can possibly realign some pricing into the market, that's helped us this year. It helped us last year, I would expect it might help us a little bit next year. So I feel like we can continue to do the right things and managing the returns and yields of our customers. But I would actually like to see us maybe do a little bit better down at the low end of the market overall. And that would naturally come at a little bit of a play on ARPU from a company that has leading ARPU in the industry. |
6,801 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: We’ll go ahead and take our next question.
Operator: Thank you. That will come from the line of Jim Schneider with Goldman Sachs.
James Schneider: Good morning. Thanks for taking my question. If we consider the pace of your fiber net additions and broadband heading into next year, if you're passing the same or more locations with better penetration, is there any reason to believe why those fiber net additions shouldn't accelerate next year? And then relative to CapEx, I believe we heard from one of your competitors yesterday that CapEx is moving higher in 2025, mainly due to accelerated fiber investment. And then, obviously, this is an area where you've been the most vocal in your industry in terms of fiber expansion, is expect you would see the same trend in your CapEx next year? |
6,802 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Jim. I guess I would say our rate and pace of build has been more level loaded over the last several years and as we introduce new footprint, it's been very ratable in kind of what we bring in. There's still seasonality that occurs in our net add dynamics that are more market based around buying cycles of the consumer. I wouldn't expect it to dramatically change as you move into next year. I don't see anything where there's a footprint that's going to come in that will dramatically change that dynamic because we've been at a pretty steady pace of new footprint as how we brought it in. So I don't think you should see any dramatic change in the rate and pace of what we've been able to do and how we're doing it. And I can't speak to my competitors. I can tell you, I'm well aware that we've been investing at the top of the industry over the last four years and that's been necessary for us to reposition the company to where we are today and see some of the opportunities that are in front of us, and I feel very comfortable that, that investment has driven the right kind of growth. But we've been on that trajectory. We've already been doing the things that, I think I'm seeing other people starting to maybe look at and consider investing capital into. So it's not like I've got to start investing in fiber. I've been doing it for over four years now, and we've had great success at it. We have a great footprint. We're the leading provider of fiber in the market. And I think a lot of that’s in our run rate. And as we’re getting better and better and driving costs down, there’s things that we can do to start to moderate our capital intensity as we get some of these things behind us over time, and we’ll talk a little bit about that as we move into our Investor Day and how we see that playing out over the next couple of years.
James Schneider: Thank you.
Brett Feldman: We will take next question, please.
Operator: That will come from the line of Sebastiano Petti with JPMorgan. |
6,803 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: We will take next question, please.
Operator: That will come from the line of Sebastiano Petti with JPMorgan.
Sebastiano Petti: Housekeeping question. I think last quarter, you pointed out that the postpaid phone ARPU should probably, you see more of an impact or more of a benefit in the fourth quarter than third quarter related to the price increase that kind of went into effect mid-3Q. Is that still the right way to kind of think about it? And relatedly, of the $90 million one-time benefit, is that within postpaid phone ARPU or is that perhaps captured somewhere else within service revenue? And then maybe, I guess, broader kind of question. I mean, John, you did talk about the 4.9 gigahertz award to FirstNet for AT&T. Obviously, I think in -- at Communacopia, did kind of talk about the supply of spectrum likely influencing pricing across the industry over the next several years, an election upcoming in a few weeks here, probably not going to materially change the availability of spectrum for a few years. So just thinking about AT&T's appetite, given your peer kind of did some transaction in the secondary market just last week? Thank you.
Pascal Desroches: Hey, Sebastiano. How are you. So in terms of our -- the pricing actions that we announced, those will impact the fourth quarter, but it's all baked into the guidance that we provided to you -- the updated guidance we provided you. So we feel really good about the overall trajectory of the business. And the $90 million adjustment related to our simplification of our building of administrative fees really is -- it is impacting postpaid ARPU. |
6,804 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: So my comment on kind of where we are. I think about spectrum and the portfolio spectrum of the 4.9 not much differently than any other spectrum that needs to be developed. It takes time. If the FirstNet authority decides they want to deploy that in a way that is similar to how they've deployed Spectrum previously. It will certainly take time to have infrastructure put in place and to figure out where they wish to do that and how they want to deploy it. So I don't think this is anything where you've got the same dynamic that you might have in the secondary spectrum market right now where you can acquire something, flip a switch and ultimately get capacity into your network and an opportunity to continue to grow on things. And for that very reason, of course, I'd be interested in the secondary market, and it's something that we pay attention to and if I can go in and pick up attractive spectrum that is harmonized with our existing holdings that we can go and get additional capacity without putting more capital into the network to do things that's a good move for our shareholders. It's a good move for our customers. It's a good way to sustain growth and where there's opportunistic opportunities to do that, I always pay attention to those things. I'll never -- not examine those and understand whether or not there's an opportunity to do that. And I think what's important to understand and is, we'll certainly talk about in December, we've worked really hard over the last four years. I think the team has done a remarkable job of improving the qualities of our cash flow. What our capital position is? Pascal talked about it in his comments, about where we are on the balance sheet. And we have latitude and flexibility to do those kinds of things, and do them strategically and carefully. And so to the extent that they present themselves, I do that. And similarly, as we work with the FirstNet authority there's win-wins in a lot of these things. And just like there was a win-win in how we introduced their |
6,805 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | the FirstNet authority there's win-wins in a lot of these things. And just like there was a win-win in how we introduced their initial holdings spectrum and allowed them to get some of the product and service capability that is truly differentiated using our embedded portfolio spectrum and services that are in place, while we ultimately deployed the dedicated bands to them. I see the same opportunity presenting itself as we work through 4.9, where we can continue to give them advanced 5G services as we’re harmonizing that spectrum and putting it out in the network and allowing the next generation of unique and differentiated public safety services for FirstNet to be developed that we can both benefit from that if they choose to do that is the band manager for that spectrum. |
6,806 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Operator, we have time for one more question, please.
Operator: Thank you. And that will come from the line of Kannan Venkateshwar with Barclays.
Kannan Venkateshwar: Thank you. Maybe a couple on '25. I know it's a little early for you guys to start talking about it. But maybe if we could just understand the levers, I mean, operating leverage this year has been very high, especially on the mobility side because of upgrade rate and also churn being low, of course. So if you could just talk through maybe some of the levers next year, maybe on the cost front or maybe the price versus value dynamic? That would be helpful. And the same question on cash flow, just in terms of leverage, you -- obviously, taxes will be a headwind. But when the financing in theory should be an easier comp and directly we, of course, would be depending on when the deal closes, that would be another variable. So if you could just help us think through the operating leverage side and the cash flow that would be helpful. Thank you. |
6,807 | T | 3 | 2,024 | 2024-10-23 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Sure thing. I'll start, and John will probably chime in. Here's the way I think about it, we've been investing because we expect to continue to grow our business over time. So you should expect a continuation of our EBITDA growth over time. And we will -- our Mobility business, we're really pleased with how we've been performing. And I believe that it's one that we can sustain that. Similarly, we're really pleased with our Consumer broadband business, and we continue to believe that there is opportunity to drive more operating levers there as we continue to scale fiber, what you should see is over time, profit margins that are much closer to some of our scale broadband competitors. And I would -- we still have an opportunity across the board to continue to work on cost, whether it is costs associated with serving our customers through the use of AI, machine learning, there are plenty of opportunities there as well as we have opportunities to continue to rationalize our real estate footprint. And over time, the other benefit to think about the 2025 is the fact that, the last 2023 and 2024 will be a year that we have spent paying down vendor financing balances fairly significantly. And as we exit this year, I would expect us to be at a level that we will manage the company at overtime. So while those investments have depressed free cash flow over the last two years. We're going to be in a position where they are not going to depress free cash flow. Going the other way, we would expect higher cash taxes and the absence of DIRECTV to help offset some of those tailwinds. But by and large, we are investing because we believe long term, this is a business that we can grow both top line and bottom line.
Brett Feldman: All right. That is the end of the call. Thank you so much, everyone, for joining us this morning.
Operator: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now disconnect. |
6,808 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Operator: Welcome to AT&T's Second Quarter 2024 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.
Brett Feldman: Thank you, and good morning, everyone. Welcome to our second quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our CEO; and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking, as such, they are subject to risks and uncertainties described in AT&T's SEC filings, results may differ materially. Additional information, as well as our earnings materials are available on the Investor Relations website. With that, I'll turn the call over to John Stankey. John? |
6,809 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Thank you, Brett. I appreciate you joining the call. Hard to believe we are already halfway through the year, but we are and our team delivered solid second quarter results as we continue to grow the right way by efficiently adding high-value wireless and broadband subscribers. Our strong start to the year is built on the foundation of what our team has accomplished over the past four years. As a result of this hard work, we're now repositioned around our connectivity strengths. This puts us on a clear path to becoming the leading provider of converged 5G and fiber services. Since Pascal will go through the quarter in detail, I'd like to spend some time highlighting how our team's execution of our investment-led strategy is driving consistent results. In Mobility, we delivered 419,000 postpaid phone net adds in the second quarter and 768,000 during the first half of the year. This put us modestly ahead of last year's pace despite ongoing wireless market normalization. And we're not just growing customers. Our Mobility EBITDA grew by more than 5% in the second quarter, driven by more than 3% growth in service revenue and 100 basis points of service margin expansion. We're delivering consistent results by keeping the customer at the center of everything we do. It's a winning play that we continue to run. The efficient first-half growth we achieved in our Mobility business positions us well for the back half of the year when we expect higher activity levels driven by the availability of new devices and features, seasonal purchasing activity, and promotional cycles. In Consumer Wireline, we added broadband subscribers for the fourth consecutive quarter, driven by consistent growth in AT&T Fiber and early success with AT&T Internet Air. Once again, this story is about growing both customers and profitability as our Consumer Wireline business delivered more than 7% EBITDA growth during the second quarter. This was driven by approximately 18% growth in fiber revenues and improved operating leverage as we |
6,810 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | during the second quarter. This was driven by approximately 18% growth in fiber revenues and improved operating leverage as we transition from legacy networks to advanced broadband infrastructure. While some portions of our business are still being pressured as customers transition off legacy voice and data services, our significant investment in 5G and fiber and consistent execution is driving durable growth across the large majority of our business. I expect this performance to continue, putting us on track to deliver on our full-year financial guidance. The durable trends in 5G and fiber are being driven by more than the solid individual execution within each business. We believe the success of our fiber business is driving growth in mobility and vice-versa as consumers increasingly prefer to purchase mobility and broadband together as a converged service. For example, today, nearly four out of every 10 AT&T Fiber households also choose AT&T as their wireless provider. As a result, our share of postpaid phone subscribers within the AT&T Fiber footprint is about 500 basis points higher than our national average. In our fiber business, we continue to achieve key penetration milestones faster than we anticipated and considerably faster than the fiber providers that do not operate wireless networks based on publicly available data. A key reason for the strong performance is our ability to sell fiber to our mobile customers. Additionally, we're able to reach new broadband customers through our substantial mobile distribution channels. The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks at scale. Over time, we expect this to drive greater returns on invested capital in both our mobility and broadband businesses than either would be expected to achieve as standalone operations. While our convergent strategy began with a focus on our owned fiber footprint, we also |
6,811 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | to achieve as standalone operations. While our convergent strategy began with a focus on our owned fiber footprint, we also see attractive opportunities to expand the availability of AT&T Fiber, and our converged offers outside of it. This includes the continued scaling of our Gigapower joint venture and through capital-light arrangements with other providers of commercial open-access fiber networks. We expect the continued expansion of AT&T Fiber, both in-footprint and outside of it will enable us to drive significant growth with converged customers. Ultimately, our convergence strategy closely aligns with our primary focus over the last four years, growing in a durable, sustainable and efficient way. We still have a lot to accomplish as we execute this strategy, but I am encouraged by our momentum and see a long runway of growth with 5G and fiber together. More importantly, I like the distance between us and our competitive set with respect to our positioning to organically address more customers more profitably. Our commitment to our investment-led strategy has played a pivotal role in our success and made AT&T the largest capital investor in the U.S. connectivity infrastructure since 2019. In addition to our ongoing network investment, we continue to reduce our net debt and leverage due to a combination of higher EBITDA and growing free cash flow. We expect these trends to continue and remain on pace to meet our target of net-debt-to-adjusted EBITDA in the 2.5 times range in the first half of next year. This should provide us with greater financial flexibility to support sustained investment in growth, as well as enhanced shareholder returns. We're excited about what all this means for the future of AT&T. And given that our direction remains constant and our performance consistent, I'm going to avoid belaboring what we've been discussing for a number of quarters now. I turn it over to Pascal. Pascal? |
6,812 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Thank you, John, and good morning, everyone. Let's start by reviewing our second quarter financial summary on Slide 7. Second quarter results were in line with our expectations with revenues down slightly as a decline in Business Wireline service revenue and low-margin mobility equipment revenues offset growth in higher-margin wireless service revenues and fiber revenues. Adjusted EBITDA was up 2.6% for the quarter as growth in Mobility, Consumer Wireline in Mexico, which collectively drove more than 80% of our total revenue in the quarter were partially offset by continued declines in Business Wireline. In the first half, adjusted EBITDA grew 3.4%, and we continue to expect adjusted EBITDA growth in the 3% range for the full year. Adjusted EPS was $0.57 compared to $0.63 in the year-ago quarter. Consistent with 1Q, the quarter includes about $0.09 of aggregated EPS headwinds from the four items we discussed earlier this year. For the full-year, our expectations remain for adjusted EPS in the range of $2.15 to $2.25. We generated second quarter free cash flow of $4.6 billion, up nearly $400 million year-over-year. This is the result of sustained growth in adjusted EBITDA, improved conversion of EBITDA into free cash flow, and lower capital investment. Capital investment for the quarter was $4.9 billion, down $1 billion compared to the prior year, primarily as a result of lower payments for vendor financing. Capital expenditures were $4.4 billion, up approximately $100 million compared to the prior year. We remain on track for capital investments in the $21 billion to $22 billion range for the year with higher spending in the back half of the year as we ramp our wireless network modernization. The quarter also included a lower net impact from securitization of $1.5 billion relative to last year's second quarter. Now, let's look at our Mobility operating results on Slide 8. For the quarter, we delivered 419,000 postpaid phone net-adds, up from 326,000 a year ago. This improvement was driven by a |
6,813 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | 8. For the quarter, we delivered 419,000 postpaid phone net-adds, up from 326,000 a year ago. This improvement was driven by a 9 basis point decline in churn to 0.70%. We grew Mobility service revenues by 3.4% driven by strong execution and our balanced go-to-market strategy. Postpaid phone ARPU was $56.42, up 1.4% year-over-year, largely driven by higher ARPU on legacy plan. As expected, service revenue growth was partially offset by lower equipment revenues with a postpaid upgrade rate of 2.9%, which was down slightly from 3.1% last year. For the year, we continue to expect modest postpaid phone ARPU growth and Mobility service revenue growth in the 3% range. Mobility EBITDA of $9.2 billion grew 5.3%, or by more than $450 million year-over-year as we converted over 85% of our service revenue growth into EBITDA. During the first half of 2024, Mobility EBITDA grew 6.1%, and we continue to expect Mobility EBITDA growth in the higher end of the mid-single-digit range for the full year. As John noted during his remarks, our Mobility outlook anticipates higher activity levels in the back half, consistent with seasonal trends. In particular, we anticipate higher marketing spend in the third quarter compared to last year. We also expect to see greater benefits from our announced pricing actions in 4Q versus 3Q. Based on our strong subscriber and EBITDA growth through the first half of the year, we believe our Mobility business is well-positioned to capitalize on a more dynamic wireless market in the back half while achieving our financial targets. Now, let's move to Consumer Wireline on Slide 9. Our growth in Consumer Wireline was once again led by fiber subscriber growth, which has consistently yielded strong returns. Overall, we added 52,000 total broadband subscribers in the quarter. This is the fourth consecutive quarter of positive broadband net gains and we expect this trend to continue. Where we have fiber, we win, and we added 239,000 AT&T Fiber subscribers in the quarter. Our 2Q AT&T Fiber net adds are |
6,814 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Where we have fiber, we win, and we added 239,000 AT&T Fiber subscribers in the quarter. Our 2Q AT&T Fiber net adds are consistent with the three primary drivers of quarterly net-add variability that we've previously shared. These are the pace at which we put new fiber locations into service, which is the largest variable in any given quarter as new inventory we're able to serve can fluctuate. Second, overall broadband market dynamics which have remained fairly stable. And finally, typical seasonality. We expect these to remain the primary drivers of quarterly trends in AT&T Fiber net-adds in the back half of the year. And as a reminder, the third quarter typically has favorable seasonality relative to the second quarter. We now pass nearly 28 million consumer and business locations with fiber and remain on track to pass 30 million-plus fiber locations by the end of 2025. As we've stated before, the better-than-expected returns we're seeing on our fiber investments potentially expands the opportunity to go beyond our initial build targets by roughly 10 million to 15 million additional locations. This assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure. We are also encouraged by early performance of AT&T Internet Air and our success in proactively migrating customers with legacy copper-based Internet connections onto this fixed wireless service. We now have AT&T Internet Air in parts of 137 markets with nearly 350,000 total consumer subscribers, including 139,000 added during the quarter. Second quarter broadband revenues grew 7% due to strong fiber revenue growth of approximately 18%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber ARPU of $69 was up $2.30 year-over-year with intake ARPU remaining above $70. Consumer Wireline EBITDA grew 7.1% as growth in broadband revenues and ongoing cost transformation continue to improve profitability. We still expect Consumer Wireline EBITDA to grow in the mid-to-high |
6,815 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | cost transformation continue to improve profitability. We still expect Consumer Wireline EBITDA to grow in the mid-to-high single-digit range this year. Now, let's cover Business Wireline on Slide 10. Business Wireline EBITDA was down 13.9% due to continued industry-wide secular declines in legacy voice services consistent with the trends we discussed last quarter. The reported decline in EBITDA slightly improved in 2Q versus the first quarter. This primarily represents benefits from favorable timing of anticipated items and early traction on cost-saving initiatives. Looking into the back half of the year, I want to remind you that we benefited from approximately $100 million of IP sales in the third quarter of last year that are not expected to recur next quarter. So the year-on-year trend in Business Wireline EBITDA is likely to see some pressure in 3Q before improving in 4Q as comparisons ease. Also, I'd like to note that 2Q results included less than one month of revenues from our cybersecurity business prior to deconsolidating its operations into a joint venture. On average, this low-margin business contributed about $100 million in quarterly revenues. The key point is that Business Wireline is performing in line with the outlook we provided last quarter. So for the full year, we still expect Business Wireline EBITDA decline in the mid-teens range. While near-term declines in legacy voice revenues are likely to weigh on Business Wireline EBITDA trends for the remainder of the year, our 5G and fiber expansion continue to present attractive growth opportunities in business solutions. This includes sustained growth in FirstNet, which now has more than 6 million total connections. Similarly, we're excited about the potential we have with emerging growth products like AT&T Internet Air for business, which we launched nationwide, and Dynamic Defense. Now, let's move to Slide 11 for an update on our capital allocation strategy. Our approach to capital allocation remains consistent and deliberate. We're |
6,816 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | for an update on our capital allocation strategy. Our approach to capital allocation remains consistent and deliberate. We're successfully balancing efficient growth with long-term investments in delivering converged network services to more customers, paying down debt, and returning value to shareholders. We remain focused on deleveraging and have reduced our net debt by about $2 billion year-to-date. At the end of June, net debt to adjusted EBITDA was below 2.9 times and we're making steady progress on achieving our target in the 2.5 times range in the first half of 2025. We continue to address near-term maturities with cash-on-hand and this quarter, we repaid $2.2 billion of long-term debt maturities. Looking forward our debt maturities are very manageable and we are in a great position with more than 95% of our long-term debt fixed with a weighted average rate of 4.2%. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $700 million versus the first quarter. Additionally, the second quarter net impact from securitization facilities was a $700 million use of cash. These efforts highlight the improving quality of free cash flow we're delivering. We expect to continue reducing our aggregate net balance of direct supplier and vendor financing on a year-over-year basis, which should lower our interest expense and continue to improve cash flow ratability over time. DIRECTV distributions in the quarter were about $740 million, and we continue to expect DIRECTV cash distributions to decline at a similar rate to 2023, or by about 20% annually. We generated $4.6 billion of free cash flow in the quarter and $7.7 billion in the first half of the year. Free cash flow is up $2.5 billion compared to the first half of last year, which is consistent with our goal of driving more ratable free cash flow. Looking into the second half of the year, we expect cash taxes to be a billion dollars higher compared to the second half of last year. We also expect to incur a onetime |
6,817 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | we expect cash taxes to be a billion dollars higher compared to the second half of last year. We also expect to incur a onetime payment of $480 million in the third quarter related to our wireless network transformation. Overall, we're on pace to deliver on our full-year free cash flow guidance in the $17 billion to $18 billion range. To close, I'm very pleased with our team's performance in the first half of the year and we're on pace to deliver on all of our full-year financial guidance. Brett, that's our presentation. We're now ready for the Q&A. |
6,818 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thank you, Pascal. Operator, we're ready to take the first question.
Operator: Our first question will come from the line of John Hodulik of UBS. Please go ahead.
John Hodulik: Great. Thanks, guys. A couple if I could. First, John, you talked about higher activity levels in the second half in wireless, and obviously, there's a lot of concern about upgrade rates with the new iPhone. I mean, are the comments that you made just a function of sort of typical seasonality, are you expecting sort of a new upgrade sort of initiative? And what does that mean? If so, what does that mean for the levels of churn we've been seeing in profitability and sort of overall competition in the space? That's number one. And then number two, you had some comments about Gigapower and the potential open-access relationships. As it relates to Gigapower, any color you can give us on how that relationship or partnership is doing in terms of rollout and customer uptake? And then is there room for more of these relationships with other third-party open access providers? Are you talking to anyone else and how big could that opportunity be? Thanks. |
6,819 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Good morning, John. How are you? So on your first question, first, I'd start out by saying whatever happens going forward, we've been focused on ensuring that we try to set up the business to respond to what the customer wants to do with their accounts and keep that a focus of what we think our strategy ought to be and how we go-to-market. And I think it's important to understand that whatever happens going forward is going to be a factor how customers decide to do things. And I think we'll be positioned as a company to deal with that either way. There is seasonality. First of all, as you know, when we get into a new device cycle coming out from typically one of the handset providers, there's a little bit of a suppression effect that occurs a month or two before they go to market, and then there is an increase in acceleration that occurs. And as you heard both Pascal and I talk about, we've expected that that cycle is going to continue, and I think we're in a good position with our guidance to be able to adjust to whichever way it goes. I've looked at some of the notes that have been written recently about sizing and looking at this particular dynamic. And I think that they're directionally consistent when you start thinking about the reality that we have accounts that have discrete handsets that mature in their cycles at different times. You typically don't have an entire account, at least in how we built our customer base that gets to a upgrade cycle all at the same time. So we're able to kind of look at history and understand a little bit about it. And if the customer decides that there is meaningful features in the new devices, we're going to respond to it. We're going to deal with it. But I feel like we're in pretty good shape to make that happen one way or another. Now whether or not there is something more compelling in this cycle, frankly, none of us know exactly what's going to come in. We do have some reference points. There have been other AI devices that have come into the handset |
6,820 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | what's going to come in. We do have some reference points. There have been other AI devices that have come into the handset ecosystem over the last couple of months. I haven't seen anything in them that suggests to me it's going to cause customers to immediately say this is world-changing for them, but it doesn't mean that somebody doesn't unlock the key at some point. Typically these feature enhancements take one or two cycles to get them right and ultimately bring them forward, but time will tell remains to be seen. I would also say that there's a lot of ways you can experience AI without having to necessarily change out hardware per se. I mean, we're already seeing that in ways that AI is implemented into search and browsers and things like that. So how customers get comfortable with it and start to adopt it, we'll watch and I think we'll go through the cycle. And if there's a little bit of spike at the front-end and then it slows down a little bit later, we've been through those cycles before and we'll do fine. Pascal, I don't know if you want to add anything to that. |
6,821 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: You know, John, I would just add one thing. When you look at our performance for the overall Company as well as Mobility, we are running ahead halfway through the year of the full-year guidance that we gave. And so whatever the environment is, I feel like we are incredibly well-positioned for it. |
6,822 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: On your question about where we are with Gigapower, I'm going to defer the answer to your question. I plan -- I think I told you when we started this that I owed good insight and transparency on the data to the investment community around how we perform. And I kind of put a benchmark out there and we did that said we needed 18 months to go through what I consider to be a reasonable cycle of investment of turning the product up, getting into markets and penetrating it, getting an update to understand how we're performing. And we will be at that point right about it, Communacopia, and I expect I'll probably spend a little bit of my time at that session giving you the kind of insight you'd like. And I would tell you I'm looking forward to that opportunity to have that conversation. And my belief is we have a lot of opportunity to grow profitably on fiber and convergence in a variety of different models. And it's -- go back to the remarks I just made, we understand how to sell both products together, number-one. And I think as I move around the industry, one of the things I pick up, I'm being shared with those that we can partner with is, I think people notice that we seem to have a formula that's different in its capabilities and its effectiveness than maybe what they see occurring in other pockets around the United States. And so I think we are acknowledged of being pretty competent in this area and I'd like to press my bets in that regard. And we've done things such as, as you would expect, we do. One, we're not selling fixed wireless broadly across the footprint. So I think our competitive positioning with partners looks a little bit different than some. Two, because we did Gigapower, we built a back office for Gigapower that already has a wholesale relationship structure that works with AT&T and the Gigapower entity where we make that available to others. And if somebody wants to use that infrastructure and use it as a means to jointly market our products and services where our wireless can help |
6,823 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | wants to use that infrastructure and use it as a means to jointly market our products and services where our wireless can help their fixed assets, and we view that as being a very helpful dynamic of somebody who is trying to get scale. So I do see further runway and opportunity there for us to do more and we're active in that space and you should expect that as we move forward and we continue this race to convergence. It's one of the tools that we're going to do to put distance between ourselves and everybody else. |
6,824 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Hodulik: Thanks, gentlemen.
Brett Feldman: All right. Operator, we'll take the next question, please.
Operator: Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.
Simon Flannery: Thank you. Good morning. And I think we managed to get this far without mentioning ACP. I wonder if you could just give us an update on what you've seen so far, what do you expect in the third quarter? And then coming back to the comment about in-region fiber, you've talked a few times about the 10 to 15. I think you're almost at 28 million locations, pretty near that 30 million. So help us understand where you are on that evaluation process and what should we expect in terms of you giving us a new kind of map for the next three years, or whatever, and how that flows through to CapEx, et cetera. Thanks.
John Stankey: Good morning, Simon. On ACP, I think we indicated to you probably last quarter, maybe even the quarter before.
Pascal Desroches: Start of the year. |
6,825 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Yes, that we would be effective at working through this. We didn't see it as being material or significant. And I characterize that we saw no reason we continue to be able to deliver on our commitments back to you. And that is in fact happening and will happen. We are most of the way through the ACP effect. Has there been an effect, sure, a little bit. It's not the sole reason we're a little bit down on fixed broadband this quarter. There's other reasons moves are continuing to be a bit suppressed is one of them. Seasonally, second quarter tends to be down a bit. But we had a little bit of an impact because of some adjustments that were made going through that. But the vast majority of our customers, most importantly, we know who these customers are, right, because we know that they're getting the discount are through a transition process and we feel fine about it. I'm pretty proud and pleased with how our prepaid business performed this quarter. It had some impacts from ACP associated with it. But I think if you look at where we were with churn and where we were with gross adds and net adds in that space, I think we came through it and demonstrated that we had good-quality customers who still need to use the service one way or the other and we've accommodated them. So we still got a couple of people hanging out there on some what I will call transitional promotions. I expect that there'll be a little bit of shrink in some of those transitional promotions. They're all following our expectations as we calculated what we thought the impacts are going to be. They're all consistent with the guidance that we have been giving you. So I wish we hadn't had to go through this with our customer base. We did, but I think we've handled it well and we're largely through the impacts at this juncture and moving on to do other good growth. In terms of where we are, we've been very clear that we'll give you kind of an update on our capital allocation strategy as we approach this 2.5 times adjusted net debt to |
6,826 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | that we'll give you kind of an update on our capital allocation strategy as we approach this 2.5 times adjusted net debt to EBITDA ratio in the first half of next year. I would expect that as we go through our normal cycle toward the end of the year here as we start to give guidance for next year, you'll get what you need in terms of moving forward. And I don't think there's going to be any shocks in this. Our priorities remain the same. We want to make sure we can continue to grow the business. That's first and foremost. I want to leave a business to whoever sits in my chair later that has a good strong sustainable franchise that can be healthy and that the next generation of individuals that work at this Company feel confident and proud about where the Company is going to go. And we'll invest in a way that we make sure that we have that capability and that kind of a franchise built. Then of course, we want to continue to maintain our commitments to our bondholders and our dividend, and those are what I would say the top three. But as you know, we'll have some optionality to go beyond that as we get into next year. And I think we'll be very deliberate about that. The Board is being very deliberate about it right now. We're spending multiple cycles on it. We're spending a lot of time looking at scenarios. I think we'll continue to invest in growth in this business at some level in some way, but I also believe we have optionality to change our formula around how we return to shareholders. And I think you'll see us employ the right approach to that. |
6,827 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: We're ready for the next question.
Operator: Our next question will come from the line of Jim Schneider of Goldman Sachs. Please go ahead.
Jim Schneider: Good morning. Thanks for taking my question. Two, if I may. First on fiber side. Relative to the long-term fiber passings target of $45 million -- $40 million, $45 million, which we talked about, can you help us understand whether you're seeing stronger returns and actually accelerating the pace of build-outs from here? And how roughly would you expect that pace of additions or passings to add to the trend in 2025? And then secondly, in terms of Internet Air, you mentioned that it's now available for business nationally. Does that imply that the run-rate of net-adds could accelerate materially in the coming quarters? And how much headroom do you see in your overall network capacity relative to adding business fixed one -- fixed wireless subscribers? Thank you. |
6,828 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, good morning, Jim. So our fiber targets as Simon alluded to earlier, it's 30 million passings by next year. And we're well on our way to doing that, and you can check the box if that's going to occur. And as I just said, I expect that with what we've been seeing and the performance of fiber, and I've been pretty clear about this for our in-region organically developed and built fiber, our returns on the overall investment portfolio have been better than we expected when we kind of started into this process in the call it the 2014-'15 timeframe. And we're giving you some additional insight this quarter as you now understand what some of the strengths are as we get into these markets where we begin to have some scale in the fiber footprint that we can jointly market, both wireless and fixed together. So that's a really powerful combination for us. And that return characteristic, I would say is still call it in the early innings. We still have a ways to go. As you saw by the numbers we put out there, it's great progress. It's clearly, I think probably the strongest in the industry, but there's still a lot of headroom in there. And I think to the extent that we fine-tune that play and we begin to bring in some of the product innovation that we want that's joint between these things and the service innovation, we can do even better and improve that return. Hence, you know my comment to Simon's or my answer to Simon's question, do I think we're going to continue to invest in growth moving forward and move beyond 30 million passings? I think the answer to that is probably exactly what that number is in pace. We'll give you a little bit more color as we get into the latter part of this year and make sure that we've got the Board 100% where we -- we're all in the same mindset around that. And as I said, we're going through that process right now to make sure we're deliberate. I think one of the things that you should keep in mind as we go through that is what I said to John. We have a lot of tools of |
6,829 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | I think one of the things that you should keep in mind as we go through that is what I said to John. We have a lot of tools of which we can go in and put a good converged offer in place and a lot of ways to do it. And I think because our financial returns have been as strong as they are, there's a lot of capital out there available and people want to enable partner and there's a lot of ways we can go about doing this, whether that's through capital-light approaches with straight wholesale and becoming a good partner to others that are building or doing partnership arrangements or doing organic build. And I think we're going to take advantage of all three and we can do that in a way that drives really good returns back into the business that everybody looks at and says that makes a lot of sense. In terms of where we are on the Internet Air run rate, you should expect that we're going to continue to grow and you'll see improvements in our rates associated with that. But I don't want you to take that and say that that's an artifact of a change in strategy. We are executing the strategy we put out. And again, I don't want to sound like a broken record, but I've articulated that our strategy is a bit different than others. We're not broadly offering Internet Air everywhere we do business. We're being selective in how we do that. We're doing it in places where it makes sense to aid our transition from legacy technology to new technology that helps us take cost out of the business. We're doing it in places where we have very fallow capacity that we can be confident will be long-lived in nature and not something that we end up having to incrementally invest in two years out after we sell into the market. We're doing it, as I said last quarter, any place the right business customer wants to buy it will sell it. And that means whether we've got capacity or not, the business product is a different product. The business product has different usage characteristics. The business product has different ARPU characteristics and |
6,830 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | product. The business product has different usage characteristics. The business product has different ARPU characteristics and the business product has different characteristics around how you can bundle and serve multiple products together. And so I feel very comfortable in a nationwide offer on business that when we pick up the right customer there and how we employ that capability, either for primary or backup that we can profitably add it to other portfolios into our service offerings and reinvest in it in a way that makes sense for the business. So you'll continue to see us scale further in the business market. We're still getting the distribution tuned and honed in that space, and I would expect you see improvement in our numbers in the business segment as we move forward in the coming quarters. |
6,831 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Jim Schneider: Thank you.
Brett Feldman: Are you ready for the next question, operator?
Operator: Our next question will come from the line of David Barden of Bank of America. Please go ahead.
David Barden: Hi, guys. Thanks so much for taking the questions. John, I wanted to maybe go back to something you just said, which was that there's a race to convergence in the market. And I think that not everyone agrees that that's a true statement, that maybe it's more of a race for AT&T to exploit the opportunity it has in its footprint to converge as much as possible. You mentioned that you've got a 500 basis point market-share advantage in the areas where you've deployed fiber. Could you kind of share more data that would support your argument that there should be a race to convergence that AT&T is in a unique position to take advantage of these economics beyond simply market share? And then if I could, the second question would be there's been a series of events over the course of the year, network outages, data breaches, disclosures about previous data breaches. Is there anything that we need to know about how that's impacting either your go-to-market or the possibility of future financials? Thank you. |
6,832 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi. Good morning, Dave. So look, I -- you will get more and more as we move forward over time. I think I gave you just a lot of insight with what we shared today, and I'm not necessarily going to tick off other things that we look at, but you should conclude a couple of things. One, our combined customers are happier customers. They have lower churn and they have longer lifetime values. Why raise the convergence because that's a good way to make money and it's a good way to keep customers in the fold. And I don't know, I hope not everybody believes that's the right strategy. I think it is. We're going to continue to push the pedal on it because we're uniquely positioned to do it well. And that's what I think is the exciting thing about this Company. We have an opportunity for great organic growth and organic investment that allows us to control our own destiny. And when part of that is constructed around a share take dynamic, we don't necessarily have to tie ourselves to the overall growth of the market and whether, or not there's growth in fixed broadband connections we can play into we just want somebody else's connection. And I think we're demonstrating that we can do that effectively. So maybe that's why it's more important to me than somebody else who's already a dominant player in the space and wants to think about it in a different lens. And when I say race, I mean, this race is going to take place over years. It's not going to take place in a quarter or a year or two years. It's a reordering of assets. And I think if it's done right, it's going to be really, really effective. I think customers are another driver behind this race. I don't think customers intuitively love to have more relationships in their life with suppliers of critical services to them than they have to. I think they like to have a few trusted relationships if it works well. And so whoever figures that out over time, whoever can give the customer great value and ensure for them that wherever they go around the globe at |
6,833 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | that out over time, whoever can give the customer great value and ensure for them that wherever they go around the globe at whatever time, either through organic owned and operated relationships or third-party aggregation can be the one place that somebody goes to get that connectivity, I think that's a winning combination. And I believe the person that does that the best will ultimately return the best in this industry and gain scale the best. So that's my rationale behind it and where we're going, and I think that's our true north of how we think about orienting this Company, how we're thinking about product development, how we're thinking about how we want to structure pricing plans. We're just keeping that in the back of our mind over the next decade because I think that's where the management team needs to go and what needs to happen. And I understand this will be a race that we fight year after year after year. It's not quarter after quarter after quarter. Look, going to your second question, there's nobody more disappointed that we have to actually address your question and work through these issues than I am. And I know that all of my coworkers here share that same disappointment that we've had some instances where we've let down our customers. Now having said that, I think we've done the right things in responding to it. We care about our reliability. We care about how well we run this business from a privacy and a data security perspective. I think we know how to do those things. We are operating in an incredibly dynamic environment on two fronts. One, we're changing a lot in our business, which is necessary, and I'm proud of the changes we've been making and I'm proud of the progress we're making, but it comes with a lot of moving parts. And two, the threat environment we're in is a really, really difficult environment and it's going to get probably more difficult. Some of the geopolitical dynamics that are going on are putting pressure on that. Good companies just like ours are all having to learn |
6,834 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | the geopolitical dynamics that are going on are putting pressure on that. Good companies just like ours are all having to learn some new things and are seeing new threats and new environments that they have to adjust to. And unfortunately, because we have a big large customer base, I think there's a little bit more focus put on the kind of missteps or issues and learnings that we might go through versus some others from time to time. But everybody is dealing with this problem. What I'm proud of is how we've dealt with it. We've been responsive. We've done it in a way that I think we've taken good action to learn from those things internally. We've been transparent with our customers around what the circumstances are. I think we've stood behind our product in those instances. We are, I think, navigating that from a communications perspective from all evidence that I see data-wise in a way that we are doing as good a job maintaining our customers' confidence as I could hope. And I'm not dismissing the issue in any way, shape or form. I view it as very, very important. It's clearly something I don't ever wish to go through, but we've handled it about as well as we can going through it. And as I've indicated to you and as Pascal indicated to you, we feel confident in our financial guidance going forward. We feel confident in our public statements and filings that we've made on these subjects where we describe the fact that these are not material to the performance of the business. And that's where we stand today, and we're going to continue to strive every day to do better and not have this conversation again. |
6,835 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | David Barden: Thanks, John.
Brett Feldman: Are we ready for the next question?
Operator: Our next question comes from the line of Sebastiano Petti of JPMorgan. Please go ahead.
Sebastiano Petti: Hi. Thanks for taking the question. Pascal, I just wanted to see if I could -- if we could follow up perhaps on the -- I believe it was $480 million one timer to -- in the back-half of the year that you anticipate from the wireless transformation. Maybe a little bit of color on what that is and perhaps was this fully contemplated within guidance at the beginning of the year? And then an additional question for John. Just try to help us think about given where we are from an FCC perspective with a lack of spectrum authority, maybe lack of a pipeline as well on the spectrum side, how are you and the team perhaps thinking about spend and augmentation of the wireless network, or how you're planning around that just kind of given those two dynamics? Thank you.
Pascal Desroches: Hi, Sebastiano. In terms of the payment we expect to make is we've said -- we reported late last year that we were entering into a new agreement and that as part of that, we'd be phasing out one of these -- one of one of our vendors. And we expected some level of determination payment associated with that. And whether or not that was contemplated in our guidance, I'm not going to get into but we are very comfortable sitting here today that we are going to be able to pay that and still deliver on our full-year commitments. |
6,836 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Sebastiano. So to answer your question, first of all, I think it's important to frame that it starts with a point-of-view that we view capacity as being a fixed resource that has to be managed very, very carefully, and so made some comments earlier about our point-of-view around fixed wireless and how we deploy that spectrum and where we deploy that capacity. I mean, it ties into a point-of-view of how do we invest in the network moving forward and how do we monetize that scarce resources effectively as we can. And that's part of our planning, and look, the good news is we put a lot of capacity out there over the course of the last couple of years and we have a little bit more to go. But we're using that wisely. We're being very deliberate around how we deploy it. We want to make sure we give ourselves the longest runway to return as we can. And I think our strategies are directly proportional to that. And I don't think you should disconnect our investment in fiber from the fact that we've got spectrum planning issues to do and I'll get to maybe that part in just a minute. All right. We think that a good way to pick up high-density traffic in places is to do it over fiber, not to do it over wireless. And so that's a difference and maybe my point-of-view on to Dave's question, convergence, and how the market develops over time and trying to be deliberate in how we do capital allocation. Now in the near term, I expect we're going to be using every trick in the book as we historically do to ensure that we can deal with the 30% growth. One trick in the book is you continue to advocate for policy change. And I've been pretty vocal. I mean, I -- you go and look in some of the comments I've made, I've gone out of my way to walk into some public forums to say that I do not think spectrum policy in this country is on the right path right now. And that change could come possibly with a change of posture from the existing administration, which may get tweaked and adjusted by a new leader or by an |
6,837 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | possibly with a change of posture from the existing administration, which may get tweaked and adjusted by a new leader or by an administration change. And that's important because I think there are things we can do from a policy side to improve the availability of spectrum, which is the most effective way to increase capacity in a network, and we'll continue to advocate and push for those changes as we move forward. Second, there are some options in the secondary market. Some of them that will be available through normal course and frankly, some others that could be made available if there were some policy and spectrum adjustments made to how particular spectrum assets that have been put into the speculator market that they're out there could potentially be used and put to use. And I think a good policy for this country right now would be that for everything that we have licensed that we'd want it to actually be invested in and turned into service. And it seems to me that, that would be a good thing, especially when this country is behind other countries like China and other regions of the world and getting licensed spectrum into service. So I would suggest that if we look at that, there is some near-term opportunity to use existing licensed spectrum that's out there by just tweaking some rules and doing some things differently to get investment in it and actually, get capacity in. Third, we talked about what we're doing around O-RAN. And I think if you go back to my comments, I shared with you that one of the reasons we think that it's so critical that we open these interfaces up and we take this step is to play in the next generation of wireless deployment. It's in more distributed radiation points rather than macro sites, and to get the benefits of openness in the cost curves, in the flexibility. I've seen those interfaces open and getting a multi-vendor environment and then using our dense fiber assets that we're deploying is a match made in heaven to be able to deal with that growth in a more cost-effective |
6,838 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | dense fiber assets that we're deploying is a match made in heaven to be able to deal with that growth in a more cost-effective way. And so that's a deliberate aspect of our strategy as to why we're doing O-RAN the way we're doing, why we're thinking about O-RAN is busting open the smaller cell structure to get more innovation, more providers, and how to then layer that on top of the fact that we're putting denser fiber reaches into our network that allows for us to take advantage of that. That allows for a more efficient growth of capacity as we move forward. So I would tell you that I think we've got a lot of tools in place to be able to do this, but it starts with market discipline around how you sell the product and service. And I feel like we're in a pretty good shape around our mix of fixed and mobile assets and how we're thinking about that evolution of convergence. |
6,839 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: I think we're ready for our next question, operator.
Operator: Our next question comes from the line of Michael Rollins of Citi. Please go ahead.
Michael Rollins: Thanks and good morning. Two topics, if I could. First, on Mobility, just curious if you could further unpack where the strength in the postpaid phone net adds came from during the quarter, and if you're seeing any changes in the competitive landscape with some of the adjustments to the promotional strategies from some of the cable and M&O competitors? And second, on the cost structure, curious if you could share your progress on the multi-year cost-cutting targets, and how you're looking at the durability for EBITDA growth on a consolidated basis to potentially outpace the consolidated service revenue performance. Thanks. |
6,840 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Hi, Michael. So look, I would tell you the story really isn't a whole lot different than it's been. We're intercepting customers and channels where we think we can make a difference and where we can add them profitably. You can look at the macro numbers and you'll notice one of the things that's occurring is we're growing a little bit faster in the business segment on wireless than we are in the consumer segment. And part of why we grow better in business is because we're doing better in some of the government, public safety, you know, first responder structures, and that's a help of what's occurring there. And as we get with our large enterprise relationships, do the right thing in that space that can help us grow a little bit quicker. But our intercept channels around how we've been picking up customers in the consumer space are -- they've been strong. They've gotten a little bit stronger. We've been able to demonstrate that we can work with them on a quarter-to-quarter basis and do some things to tweak how we're going to market and make them more successful. And I think you're going to see that if you went and dissected that, we got a little bit from a lot of different places. We didn't just get it from one. And I'm particularly pleased that we're really not just driving this, as I've said before, from very aggressive low-ball national offers with low-price entry points to be able to pick up those customers. When you look at our growth of converged services, you should conclude that we're getting incrementally better quarter-over-quarter around marketing to our consolidated basis of either wireless, no broadband, or broadband, no wireless. So as all those things come together, that's why we did a bit better and we'll continue to take that where we can as long as we can take it profitably. Where we are on kind of costs? Look, I just point to the fact that we're continuing to get margin accretion in our business and you're seeing it. And you're getting margin accretion that outstrips the service |
6,841 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | to get margin accretion in our business and you're seeing it. And you're getting margin accretion that outstrips the service revenue growth because we're managing the cost structure more effectively. And I don't go to sleep at night worrying about not having more opportunities to run the business more effectively. I think we have opportunities as we reposition this business to be a 5G and fiber provider. There's a lot of infrastructure and a lot of overheads that have been built up to make this business what it was over a century. And on a base of technology that was great when it was available and it served its time, but it's not going to be the technology that takes us forward into the next decade. And so we're getting better every year at mining out those costs. We continue to make progress on the regulatory front. It's a state-by-state battle, but we're making progress on the regulatory front and getting the flexibility to change those cost structures. I think this management team has done an exceptional job of retooling our labor structure around these things and I feel really good about what we've been able to do. And I think we're positioning this Company for an opportunity for growth and a sustainable franchise moving forward that will give people an opportunity for great careers advancing that I feel really good about. It's hard work. We still got a ways to go, but we're getting there. And technology is working in our favor right now. When I said earlier that we put a lot of fiber out there, I've mentioned it to you, we are seeing the benefits in our operating costs as a result of that. And I don't mean to beat a dead horse, but as I said, I wish I was early in my career right now operating in our network organization because what we see in failure rates, in reliability, and on-time performance and what we're able to do to avoid missed appointments because the network just works the right way, and we're not dealing with unexpected things, makes for an operating environment that is far more |
6,842 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | just works the right way, and we're not dealing with unexpected things, makes for an operating environment that is far more cost-effective than it's ever been. And we're getting help with technology on the software side. And that software is allowing us to do more that's taking labor out of our labor-intensive processes that allow us to serve customers better and have them walk away feeling better about their experience with AT&T. So we're making good progress. We're going to continue to do that. And I would tell you, I think we can continue to take cost out of this business, continue to improve our consumer margins, continue to hold what I think are some of the best competitive margins in the wireless industry, and grow the business. |
6,843 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: All right, operator, we have time for one more question.
Operator: Our last question will come from the line of Bryan Kraft of Deutsche Bank. Please go ahead.
Bryan Kraft: Thanks. Good morning. I have a question just on the industry. Investors are growing concerned over the potential for a volume slowdown in the wireless industry, and also that perhaps the industry has taken as much pricing power as it can for a while, leaving minimal room for further pricing actions. I just want to ask, what are you seeing in the market as it relates to these issues? Do you share any of these concerns on either volumes or pricing power? Thank you. |
6,844 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Yes. I don't mean to sound like a broken record again, Bryan, but I'm going to. I think we've been talking about the fact that we saw volumes moderating in the market for a period of time. And I think what we're seeing this year, even though we're a little bit ahead of the first half of last year, I still expect we're going to see a little bit moderating volumes in aggregate in the industry, and that's been all part and parcel to our guidance and our expectations moving forward with you. I would go back to the fact I think what makes our circumstances unique is, yes, we have part of our business that's focused on the fact that you want the industry to continue to grow and it's doing that. It's doing that because people need to use more of your product. They'll pay you more for better performance and more features and we're certainly seeing that. But we also have a share-take opportunity and that share-take opportunity allows us to create our own growth by ultimately winning customers from others and that's part of our formula that's been effective moving forward. And boy, if we get the formula figured out in the mid-part of the business market, which we continue to work really hard on and haven't gotten quite where I'd like to get, I think that could be another great opportunity for us to show incremental improvement in our performance. Look, what I would also tell you is, do I think that ultimately, we're going to see a situation where the quality of growth is examined more carefully, yes, I do. And I feel really good about what we've done around that. I think the quality of growth that we're bringing forward in this quarter, you can tie a direct relationship to customers that are coming on the payroll to ultimately EBITDA growth in this business. And they're all paying, they're all doing the right thing, and I'll take that quality of growth going forward. I don't worry about the circumstances. I don't get nervous about it because we've been doing that for many, many quarters. It's not an |
6,845 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | worry about the circumstances. I don't get nervous about it because we've been doing that for many, many quarters. It's not an adjustment to our plan. We're going to continue to go find those quality customers with a competitive offering and bring them in, and that will ultimately sustain the business going forward. And I don't think this is an issue of price increases -- for price increases sake. We've been able to demonstrate more value to a customer. We've been able to give them more things. We've been able to do more for them on their accounts. We have continued room to be able to do that to differentiate the product and service. And when we deliver that value, ultimately, command some improvement in ARPUs moving forward. With that, Brett, I'm going to thank everybody for their time this morning. Appreciate it. I -- as I said in my opening remarks, it feels like we're in a little bit of a repeat and rinse and repeat cycle here. That's a good thing. We've been pretty consistent in our approach. I don't have a lot of new things to tell you about how we've been executing around things other than we're doing what we did the previous quarter. And I don't mean to belabor it, but I think at the end of the day, that was clearly one of the objectives of this management team, which was to get to something that allows us week in and week out, month in and month out, quarter in and quarter out to try to manage the same set of issues and get incrementally better. And I think you're seeing that happen in this Company right now and that focus is helpful for us over time and I think we still have more miles to run and actually improve in that play. |
6,846 | T | 2 | 2,024 | 2024-07-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: So thank you for your time and thank you for your interest in AT&T, and I hope everybody enjoys the balance of their summer.
Brett Feldman: All right. Operator, you can close out the call. Thanks, everyone.
Operator: Ladies and gentlemen, that does conclude our conference call for today. On behalf of today's panel, we'd like to thank you for your participation in today's teleconference call, and have a wonderful day. You may now disconnect. |
6,847 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Operator: [Call Starts Abruptly] 2024 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Following the presentation, the call will be opened for questions. [Operator Instructions] And as a reminder, this conference call is being recorded. I would like to turn the conference call over to your host, Brett Feldman, Senior Vice President, Finance and Investor Relations. Please go ahead.
Brett Feldman: Thank you, and good morning, everyone. Welcome to our first quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our CEO, and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our Safe Harbor statement. It says that some of our comments today may be forward-looking, as such, they are subject to risks and uncertainties described in AT&T's SEC filings, results may differ materially. Additional information as well as our earnings materials are available on the Investor Relations website. With that, I'll turn the call over to John Stankey. John? |
6,848 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Thanks, Brett. I appreciate you all joining us this morning. We started the year with a solid first quarter, as we continue to make steady progress on our investment-led strategy, being the best connectivity provider through 5G and fiber. We're growing the right way by adding valuable long-term wireless and broadband subscribers. Since Pascal will cover first quarter results in detail, I'd like to spend some time highlighting how our strategic priorities are enabling us to deliver positive results and build a long runway for sustainable growth. When you look under the hood, it's clear that our largest and most powerful EBITDA growth engine mobility is running well. Our strength and value proposition help us deliver 349,000 postpaid phone net adds in the first quarter. We now have about 71.6 million high value postpaid phone subscribers, which is up 1.5 million from a year ago, and these aren't empty calorie additions. Our results reflect the quality of our customer growth with higher ARPU, higher adjusted operating income, improved margins and lower postpaid churn. We're also growing efficiently, thanks to our consistent and simple go-to market strategy. Our postpaid phone churn of 0.72% was our lowest first quarter churn ever on record. And once again, we expect to report the lowest postpaid phone churn among the major service providers this quarter. This highlights the value customers place on the wireless service we provide and the continued strength of our best deals for everyone's strategy. Now let's move to fiber, which is our fastest growing engine. The story here is familiar and one we like. Where we have fiber, we win, and we're bringing fiber to more Americans than anyone else. Since the first quarter of last year, we passed about 2.4 million locations with fiber and now passed more than 27 million consumer and business locations. Over the last year, we grew our AT&T fiber consumer subscriber base by about 1.1 million to nearly 8.6 million customers. This includes 252,000 AT&T fiber net |
6,849 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | AT&T fiber consumer subscriber base by about 1.1 million to nearly 8.6 million customers. This includes 252,000 AT&T fiber net additions in the first quarter. As a result of our established fiber success in early AT&T Internet Air subscriber growth, we've grown our consumer broadband subscriber base for three consecutive quarters, and we expect this trend to continue. We're even more excited about the converging power of 5G and fiber together, where we have AT&T Fiber, our strong national 5G wireless brand provides us the opportunity to be customers single converged provider seamlessly connecting them both in the home and on the go. We're able to deliver convergence at a level that none of our peers can match, as we're the only provider that benefits from owners' economics and scale with both 5G and fiber. This all matters because convergence presents clear benefits. When a customer has both our wireless and fiber products, we see a meaningful improvement in churn and net promoter scores. This ultimately translates to much higher lifetime values for converged customers. We are also making great progress on ensuring more Americans have access to high-speed Internet. Just this month, we expanded our commitment to $5 billion over this decade to help bridge the digital divide in our country. We've already contributed to connecting approximately 5 million Americans, and our goal is to help connect 25 million people in total by 2030. We believe that connecting changes everything and that we must collectively address the communications capabilities of our country's needs for the next century not the last one. To make this happen, we need sound policy, that's done, right, and our teams are working hard to make that happen. The future of connectivity is critical to advancing our society. That's why we're focused on growing and evolving our networks. As a result of these efforts the areas, where we're investing most heavily through 5G and fiber are performing very well. For a perspective, in 2023, mobility and consumer |
6,850 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | we're investing most heavily through 5G and fiber are performing very well. For a perspective, in 2023, mobility and consumer wireline together represented more than 80% of revenue and about 85% of EBITDA in our communications segment. This means, we're growing the large majority of our business and driving improved operating leverage across it. We expect this to continue. However, we still have legacy elements of our business that we're in the midst of transitioning, particularly in business wireline. In the quarter, business wireline EBITDA was down 16.5%, as the industrywide secular decline of legacy voice continues. While the wholesale market is stabilized, the reality is that businesses are transitioning to mobile and cloud-based services at an accelerated rate, as post pandemic workplace restructuring takes hold. We see the benefits from this connectivity transition in business solutions, where wireless service revenues grew 4.6% in the first quarter, outpacing our overall mobility services revenue growth. While we continue to actively work our legacy transition strategies to end of life products, reduce our operating footprint and eliminate fixed costs, we're advancing several cost savings and productivity initiatives to align with this reality, such as vendor and management workforce rationalization. We also strongly believe that the future focused area of business solutions aligns well with our core connectivity competencies and we continue to build out a connectivity portfolio with real long-term growth opportunity. Take FirstNet. This prioritized service for first responders shows what we're able to accomplish when we focus on growing our business in areas, where we have traditionally under indexed. Additionally, our continued 5G and fiber expansion will enable new growth when paired with broader distribution. We have relationships with nearly 2.5 million business customers today and an opportunity to win with more small to medium sized businesses. One way we intend to meet small and medium businesses |
6,851 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | and an opportunity to win with more small to medium sized businesses. One way we intend to meet small and medium businesses connectivity needs is with our new fixed wireless service, AT&T Internet Air for business. We believe this is a durable national play with business because it's able to serve as a reliable 5G powered primary Internet Connection, where fiber is not available in remote locations when temporary access is needed or with small and medium businesses that don't require always on video streaming. While it's still early, we've been very pleased with the solid demand we're seeing from businesses. Given our success, growing core connectivity, we're focused on furthering the AT&T value proposition in ways that matter to our business customers and security is at the top of their list. That's why we introduced AT&T Dynamic Defense, which provides built-in security controls on top of worldclass access. The takeaway is that we're well positioned to capitalize on emerging connectivity opportunities with businesses thanks to the strong relationships we have with almost all the Fortune 1000 and our leading position in fiber and the fact we operate the largest wireless network in the US. Our business wireline operations transformation will not be a linear process and we're going through the heaviest lift right now. However, our strong momentum across our growth areas of mobility and broadband is allowing us to outpace legacy declines and drive positive consolidated results and we remain on track to deliver on all the consolidated financial guidance we shared in January. Now let's spend a moment on our second priority of being effective and efficient in everything we do. Last year, we set a new target for an incremental $2 billion plus in run rate cost savings by mid-2026. This came on top of the $6 billion plus run rate cost savings target we achieved last year. The continued adoption of AI is not only helping us make progress on this goal, but also benefiting our employee and customer experiences. This focus |
6,852 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | of AI is not only helping us make progress on this goal, but also benefiting our employee and customer experiences. This focus on efficiency is translating into improved operating leverage despite continued elevated inflation. You can see this in our cash operating expenses, which were down year-over-year in the first quarter contributing to adjusted EBITDA margin expansion of 170 basis points. This brings me to our final priority, which is our deliberate and balanced approach to capital allocation. As we indicated would happen, our capital investment levels have come down year-over-year, as we move past the peak of our 5G rollout. Still, we remain a top investor in America's connectivity and continued to expand fiber at a steady pace. Even with this continued investment, we delivered first quarter free cash flow of $3.1 billion compared to $1 billion a year ago. This aligns with the expectations we shared for more ratable quarterly free cash flow, which we've accomplished by efficiently growing EBITDA, improving cash conversion and reducing our short-term financing balances. Our strong free cash flow has also enabled us to pay down debt. We finished the first quarter with net debt to adjusted EBITDA of 2.9 times and continue to expect to reach our target in the 2.5 times range in the first half of 2025. So it's clear we're operating well against our business priorities, and as a result, we're growing share with 5G and fiber. In mobility, we've been increasing our share of wireless service revenue growth even without the benefit of fixed wireless, which is reported in consumer wireline. We also expect that this will be the 11th time in the last 13 quarters, where we deliver the industry's lowest postpaid phone churn. In consumer wireline, we're outpacing cable, as we add broadband customers. This is driven by AT&T fiber, which is consistently captured over one-third of broadband net adds across major providers for the past three years. So, in summary, across the services and technologies most important to the |
6,853 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | across major providers for the past three years. So, in summary, across the services and technologies most important to the future, 5G and fiber were performing well and growing our share in a healthy industry environment. This gives me confidence in our strategy and tells me our team is making solid progress on our priorities. With that, I'll turn it over to Pascal. Pascal? |
6,854 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Thank you, John, and good morning, everyone, and let's start by reviewing our first quarter financial summary on Slide 7. In the first quarter, revenues were down slightly as a decline in low margin mobility equipment revenues and business wireline revenues offset growth in high margin wireless service revenues and fiber revenues. Adjusted EBITDA was up 4.3% for the quarter, as growth in mobility, consumer wireline in Mexico were partially offset by continued decline in business wireline. For the full year, we still expect adjusted EBITDA growth in the 3% range. Adjusted EPS was $0.55 compared to $0.60 in the year ago quarter. In the quarter, there were about $0.11 of aggregated EPS headwinds from four items we discussed last quarter. These include higher depreciation, higher non-cash postretirement benefit costs, lower capitalized interest, and lower equity income from DIRECTV. For the full year, our expectations remain for adjusted EPS of $2.15 to $2.25. First quarter free cash flow of $3.1 billion was up more than $2 billion compared to last year. The important takeaway is that improved conversion of EBITDA to free cash flow has allowed us to pay down short-term supplier obligations. The paydown of this facility should allow us to continue to drive more ratable quarterly free cash flow. Cash from operating activities came in at $7.5 billion versus $6.7 billion last year. As a reminder, the first quarter is typically the high watermark for device payments and we expect payments to get progressively lower throughout the year. Capital investment for the quarter was $4.6 billion, down about $1.8 billion compared to the prior year. Capital expenditures were $3.8 billion, compared to $4.3 billion in the prior year. Now let's look at our mobility operating results on Slide 8. The wireless industry remains healthy and our mobility business continues to deliver strong results, driven by our consistent go-to market strategy and solid execution. For the quarter, we reported 349,000 postpaid phone net |
6,855 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | driven by our consistent go-to market strategy and solid execution. For the quarter, we reported 349,000 postpaid phone net adds. We grew service revenue by 3.3%, which included the impact of customer credits. This was offset by lower equipment revenues with postpaid upgrade rate of 3%, which was down from 3.7% last year. We continue to expect wireless service revenue growth in the 3% range for the full year. Mobility EBITDA grew 7% or about $600 million year-over-year, which exceeded service revenue growth on a dollar basis. This demonstrates we're significantly improving operating leverage and highlights the efficiency of our consistent go-to market strategy, which has enabled us to take costs out of the business. We now expect our mobility EBITDA to grow in the higher end of the mid-single-digit range this year, driven by better-than-expected performance with business wireless customers and continued disciplined cost management. Our postpaid phone ARPU was $55.57. This was up nearly 1% year-over-year, largely driven by higher ARPU and legacy plans. For the year, we continue to expect modest postpaid phone ARPU growth. Now let's move to consumer wireline results on Slide 9. Our growth in consumer wireline was led once again by our fiber subscriber growth, which has consistently yielded strong returns. In the quarter, we had 252,000 AT&T fiber net adds, which is in line with the outlook we provided. This is the 17th consecutive quarter with AT&T fiber net adds above 200,000. We now have fiber penetration of 40% with several markets well above that level. Broadband revenues grew 7.7% including strong fiber revenue growth of 19.5%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber ARPU of $68.61 was up more than 4% year-over-year with intake ARPU remaining above $70. Consumer wireline EBITDA grew 14.6% due to growth in broadband revenues and ongoing cost transformation. We now expect consumer wireline EBITDA to grow in the mid to high-single-digit range this year, driven by |
6,856 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | cost transformation. We now expect consumer wireline EBITDA to grow in the mid to high-single-digit range this year, driven by continued strong fiber revenue growth and disciplined cost management, partially offset by continued legacy copper declines. As our customer base continues to migrate to fiber from legacy services, our broadband support costs are decreasing, thanks to fiber's more efficient operating model, greater reliability and higher quality service. And while fiber remains our focus and lead product, we continue to be encouraged by the early performance of AT&T Internet Air, our targeted fixed wireless service, which is available in parts of 95 locations. We now have more than 200,000 AT&T Internet Air consumer subscribers, having added 110,000 in the quarter. Ultimately, we couldn't be more excited about the future of consumer wireline with AT&T fiber well positioned to lead our growth and AT&T Internet Air, helping us provide quality broadband service to customers, where we don't offer fiber. Now, let's cover business wireline on Slide 10. Business wireline EBITDA was down 16.5% due to faster than anticipated rate of decline for our legacy voice services. At the start of the year, we shared that we expected business wireline EBITDA trends to improve on a full year basis. However, due to faster than expected decline of legacy voice services, we now expect full year business wireline EBITDA declines in the mid-teens range versus our prior outlook of a decline of 10% plus or minus. As John mentioned, we're advancing several cost saving and productivity initiatives. This should benefit results in the second half of the year when we also have more favorable year-over-year comparison. As we transition this business, we believe our 5G and fiber expansion presents plenty of growth opportunities. We're already seeing this in some of the parts of our broader business solution results today. A great example is FirstNet, where wireless connections grew about 320,000 sequentially. We're also pleased with early |
6,857 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | today. A great example is FirstNet, where wireless connections grew about 320,000 sequentially. We're also pleased with early demand for AT&T Internet Air for business, which we expect to benefit results in the second half of the year. Now let's move to Slide 11 for an update on our capital allocation strategy. Our approach to capital allocation remains deliberate. We're successfully balancing long-term network investment to fuel sustainable subscriber and service revenue growth, paying down debt and returning value to shareholders. We remain on track for full year capital investments in the $21 billion to $22 billion range versus approximately $24 billion in 2023. While our overall capital investment will be lower in 2024 compared to recent years, we continue to invest in key growth areas, given the compelling returns on these investments. In mobility, we are focused on modernizing our network through our Open RAN initiative and with fiber, we remain on track to pass 30 million plus consumer and business locations by the end of 2025. As we've stated before the better-than-expected returns, we're seeing on our fiber investment potentially expands the opportunity to go beyond our initial target by roughly 10 million to 15 million additional locations. This also assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure. It's important to note that as we continue to build out our network this year, we expect to have lower vendor financing payments, while increasing the total investment we make directly into our networks, as we continue to invest in fiber expansion and wireless network transformation. In other words, we expect our total capital investment and capital intensity to decline this year even as we boost investments in our network. We also remain laser focused on deleveraging. Over the last four quarters, we reduced net debt by about $6 billion. At the end of March, net debt to adjusted EBITDA was 2.9 times and we're making steady progress on achieving |
6,858 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | about $6 billion. At the end of March, net debt to adjusted EBITDA was 2.9 times and we're making steady progress on achieving our target in the 2.5 times range in the first half of 2025. As I mentioned last quarter, we expect to address near-term maturities with cash on hand, and this quarter, we repaid $4.7 billion of long-term debt maturities. Looking forward, our debt maturities are very manageable and we are in a great position with more than 95% of our long-term debt fixed with an average rate of 4.2%. In addition to paying down debt, we reduced vendor and direct supplier financing obligations by about $2.3 billion during the quarter. This was partially offset by $400 million in additional proceeds on our securitization facility. These efforts highlight the quality of the free cash flow we're delivering. DIRECTV distributions in the quarter were $500 million compared to $1.3 billion in the first quarter of 2023. For the year, and thereafter, we continue to expect DIRECTV cash distributions to decline at a similar rate to 2023 or by about 20% annually. With $3.1 billion in first quarter free cash flow, we've dramatically improved our free cash flow ratability just as we committed, we would last year. Looking forward, we still anticipate generating approximately 40% of our total 2024 free cash flow in the first half of the year and continue to expect full year free cash flow of $17 billion to $18 billion range. To close, I'm really pleased with our team's overall performance in the quarter. Despite managing through legacy declines, our strength in mobility and consumer wireline has us on pace to deliver on our full year consolidated financial guidance. Brett, that's our presentation. We're now ready for the Q&A. |
6,859 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thank you, Pascal. Operator, we're ready to take the first question.
Operator: [Operator Instructions] Our first question will come from the line of Simon Flannery of Morgan Stanley. Please go ahead.
Simon Flannery: Great. Thank you very much. Good morning. Good to hear the reiteration of the 2.5 leverage target for early next year. It would be great if you could just go through how you're thinking about the various capital allocation alternatives, buybacks, dividend growth, deleveraging, the 10 million to 15 million fiber adds BEAD investments. Any other considerations? And how we should think about the profile, presumably this time, next year, we will be having a more fulsome conversation. But anything more you could add around that would be great. And then just housekeeping on the outage. Maybe you could just size the credit for us? And was there any impact on net adds in the quarter? Thanks.
John Stankey: Good morning, Simon.
Simon Flannery: Good morning. |
6,860 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: So I don't know that I'm going to give you a whole lot more than what I previously said. I mean it's really good to have choices, and we clearly have choices coming up, and we've worked really hard to put ourselves in this position to do that. And I told you there would be a very deliberate process that the Board would go through to understand what they want to do, as those choices start to materialize, and we're in the middle of doing that. We are working through a pretty systemic process. And at the top of that, as you can well imagine, as we're very cognizant of a desire to ensure that we're treating our shareholders well and returning capital, where we can and doing it in a smart way. And so, as I've said before, we'll evaluate at that time where things like interest rates stand, we'll evaluate where we are on the dividend yield relative to the equity value, and where we have opportunities for reinvestment in the business and kind of understand what we think the right combination of those are. And we have a pretty deliberate approach to making that happen. I would give you some characterization right now, as we've worked really hard over the last couple of years to ensure we protect the dividend. And I think you've seen that we've done that, and we've put ourselves in a really strong financial position. That's paramount and important to us, as we move into this. You heard Pascal's comments that we feel pretty good about where the balance sheet sits today relative to what we're paying for the capital on the balance sheet and our abilities to manage that moving forward. I don't feel like we've got some immediate need to move differently than the trajectory we've been on. So if I was waiting, we'll be waiting against those other options that we think about and how we want to go and get the mix right. So I think you'll see more, as we get to the end of the year. As I said, the Board is working really hard on this issue and I don't want to take away any degrees of freedom and latitude they have to |
6,861 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | the Board is working really hard on this issue and I don't want to take away any degrees of freedom and latitude they have to debate it and figure out what they want to do, given what's going on in the market at the time we arrive. On the outage, look, I'm upset that we had it. It's unfortunate we had it. The entire team feels responsible for it. We know we can do better. We've put in place an awful lot of steps to ensure that we do better moving forward. I think I'm confident that we have done that and I feel like we can operate better than what we exhibited on that particular morning. Now having said that, I'm really proud of the way they responded to the circumstances when they occurred, and they managed through the situation as well as could be expected. And in fact I think you see that in the metrics. You see that we had a really, really good churn quarter. Obviously, that wouldn't happen if we didn't do the right things with the customer base. I'm pleased relative to what I've seen reported so far in the industry of our customer growth. I'm sure there were a couple of days of maybe some suppressed activity as a result of the outage. I think it's probably something that's measured in days. It wasn't measured in weeks and months. But we feel pretty good about where we stand right now. Certainly, as you might guess, we have a variety of survey methodologies that we use and research with our customer base and prospective customers. Those indicators don't show me anything that causes me to be concerned about what transpired or what occurred. I think some of our recovery methods that we use with our customer base was -- they were the right decisions. And you've seen most of that reflected in the first quarter financials. There's a little bit that will drag into the second quarter based on how bill rounds go, but you should expect that you've seen the bulk of that move through our numbers. And I'm satisfied that where we ended up on service revenue growth and margins that, that was a strong quarter in aggregate, |
6,862 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | And I'm satisfied that where we ended up on service revenue growth and margins that, that was a strong quarter in aggregate, inclusive of what we had to do in terms of the credits. |
6,863 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Simon Flannery: Excellent. Anything on BEAD? Yeah.
Brett Feldman: Go ahead. Go ahead, Simon.
John Stankey: Nothing that I think you know as I said last quarter, Simon, I think BEAD is a 2025 issue. It's not a 2024 issue. It doesn't feel like it's moving in any particular way. All that fast at the state level. And as I've also indicated, it's pretty clear to me that there's places, where we're going to be more energized about playing and places, where we're going to be less energized about playing based on how various states are approaching this. And I don't think there's anything right now, I can tell you point blank, we won't be coming back in with any revisions to our guidance or anything like that, that is relevant to 2024. I think as we through this year, there may be some incremental things that we talk about in 2025 in terms of how we choose to reinvest capital and where we choose to go. But it's not anything that I see right now that's front and center.
Simon Flannery: Many thanks.
Brett Feldman: All right. We'll take our next question now, operator.
Operator: Our next question will come from the line of John Hodulik of UBS. Please go ahead.
John Hodulik: Hey, thanks, again. Good morning, guys. First, it's sort of a follow-up to Simon's question on the data breach. That's a sort of a second quarter issue, but just want to make sure to see if there's any impact that you saw early in the quarter from the data breach. And then certainly, one of the themes that we're seeing here in the first quarter is the low upgrades and low churn environment. Do you expect that to continue despite the fact that we may have a sort of AI device launch later this year? And does that low churn environment give the industry and AT&T, in particular, pricing power as you look into the rest of the year? Thanks. |
6,864 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Good morning, John. I don't want to characterize this incorrectly, but there are a lot of things going on broadly beyond AT&T in the cyber environment. I'm sure you're all, obviously, consumers and -- are seeing the dynamics of what's happening. There's clearly -- the bad actors have stepped up a level in the last several months I think. And if I were to broadly step back and say, are we going to see more activity and more problems, partly because of just the activity level and how robust the business opportunities are for hackers and those that want to inflict bad act -- bad acts on folks. And partly, I think, because of reporting requirements, I expect you're probably going to see the noise level go up. What we have seen from our notification is very similar to the outage. I don't see anything in the customer metrics or anything that's going on that suggests that it creates a long-term issue on sentiment. That doesn't mean we don't take it seriously. That doesn't mean that we're not examining what happened back in 2019 and trying to understand what root causes are around that. Those actions are all underway. But it doesn't appear to me that it's doing anything to impact our business as we stand here today in 2024. But we'll continue to evaluate that and we'll continue to work through the dynamics that are occurring. I would tell you that on the upgrade rates and churn, we've seen, as I've said last quarter, a little bit of tapering in the industry. We expected that to occur. We expected upgrade rates to be a little bit more tempered than what we had seen last year. I don't see anything going on right now that suggests we're out of pattern to what our expectations were, as we set up plan for 2024. We'll probably see a little bit of ebb and flow each quarter. I'm not sure that I'm of the mindset that there's going to be something that occurs in the device portfolio that dramatically changes things in the latter part of the year. There'll be the usual holiday promotions. There'll be the usual |
6,865 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | dramatically changes things in the latter part of the year. There'll be the usual holiday promotions. There'll be the usual devices and opportunities for individuals to create something that's special during the holidays. But that's a seasonal pattern we're accustomed to. And I think we'll be seeing things on the margin adjusting left and right. I just don't believe we're going to be into a cycle that's what I would consider to be an out of pattern cycle in any way, shape or form. And I'm going to give you the same answer I always give on where we are in pricing power. Look, I think the industry is healthy. I think as I've indicated before, we're coming off of policies that drove record levels of investment in the industry. I think all players are mindful after record levels of investment to try to yield the appropriate returns that you would have to get after making those things and I see that kind of dynamic occurring. I think I know we're mindful of it that we want to make sure that we're getting reasonable returns off that level of capital. And my observations of what I see being reported over the last couple of quarters is that others are doing the same and we're providing tremendous amount more value to customers. They're using 30% more of our product, 35% more every year. The performance of these networks is increasingly better. There's choices that are coming in and how they apply the use of the technology for mobile to fix. So one would expect that maybe there's an opportunity to change that value equation and continue to take a little price in places and we're going to continue to do that. Where we think certain products have that kind of staying power, I think we've been pretty consistent over the last couple of years of saying there's opportunities to do that. I think we've tried to stress with you when we do it. We're very mindful of doing it intelligently. I believe our churn numbers reflect that we've executed pretty well on that front. And I feel good about the fact that we've been able to drive |
6,866 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | numbers reflect that we've executed pretty well on that front. And I feel good about the fact that we've been able to drive our ARPUs up, keep our margins in check, if not improve them, and continue to do some things that take some price in certain places, where we think we can keep the value equation in check. And I expect we're going to continue to do that, as we move through this year. |
6,867 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Hodulik: Great. Thanks, John.
Brett Feldman: Hi, operator, we'll take our next question, please.
Operator: Peter Supino of Wolfe Research. Please go ahead.
Peter Supino: Hi. Good morning, everybody. A question about the mobility side. Obviously, the consolidated or segment results were really good. And looking at the EBIT growth, it's similar to the rate of service revenue growth in a quarter when gross adds and churn were lower, a great thing, less cost. And I'm just wondering why -- what else is happening in the cost structure, so that EBITDA wouldn't outgrow service revenue in a quarter like this? And then a quick one on Internet Air for business. Is your intent to distribute that nationally? Or will that be a more regional strategy in the way that IA has been so far in residential? Thank you.
Pascal Desroches: Hey, Peter, Pascal. How are you? In terms of EBIT and you're talking about operating income, that's inclusive of the depreciation, correct?
Peter Supino: Yes, I am. Thanks.
Pascal Desroches: Remember, we guided that as a result of the Ericsson Open RAN deal, we would have accelerated depreciation associated with some of the equipment that was previously in our network that we were going to depreciate over shorter lines. That's a dynamic you're seeing come through there. I feel really good about the overall expense management and overall cost profile and you see that coming through in our EBITDA margin expansion in that business. |
6,868 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: And Peter, we broadly, as I indicated in my remarks that we see Internet Air for business being a national product. You probably maybe noticed that you may not be a golfer, but you noticed during the masters, we kind of previewed some of our advertising that will be coming out on the product that's geared toward the business market segment. And it doesn't mean that it's a product for every business, but it certainly is a product for every state is what I would say. We want to be mindful of making sure that we match the product to businesses that have the right usage characteristics that we think we can provide a quality level of service and right value. There are many businesses that match that, and there are many businesses that have usage characteristics and behaviors that are atypical to a typical single-family dwelling. And that's why we think it's a good place to invest time, energy, money. And I think that was consistent with what our expectations were from the founding of the product and where we thought we'd go to market with it.
Peter Supino: Understood. Thank you.
Brett Feldman: Operator, we'll take next question, please.
Operator: Bryan Kraft of Deutsche Bank. Please go ahead.
Bryan Kraft: Hi. Good morning. Thank you. John, can you talk about how you're balancing the marketing and sales budget today between customer acquisition and retention and how that's driving AT&T's performance relative to your competitors? I think one of the concerns we often hear from investors is that while churn has been great, gross adds have been down for several quarters, but I suspect this is at least partly a function of the strategy. So if you could shed some light there, that would be great? Thanks. |
6,869 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Good morning, Bryan. You've answered your question. It's intentional with the strategy. I'm more than happy to take gross in places, where I think I can drive gross profitably. And I think in some cases, we have to think about how much people are paying for growth, and then we also have to think about gross and we have to think about whether or not that gross really has yield on it, if it's what the end user is paying ultimately when they come on a network. And so, I think some of the numbers ultimately are what I refer to in my opening remarks, a bit low calorie. I don't really want to play in the low calorie space. I want to make sure I'm getting my fair share of the high calorie subscribers, and that's why we're focused on share of service revenues as maybe being a better benchmark of is the company balancing its growth in the right way? And when you think about how we balance our budget and what we do internally is we're pretty rigorous around asking ourselves those questions and the segments we attack, how we go after and the longevity. And look churn's a key driver when you're investing for that growth. And I'll take lower churn all the time. I don't think that's a bad sign necessarily. I'm perfectly okay with where we stand on that front. We've talked previously, Bryan, that one of the things I like about where we've been in the market and that I think is, frankly, sustainable probably 1.5 years ago or 2 years ago, most of the questions on this call is where's the growth coming from? And I kept saying the growth was balanced. It's coming from a lot of different segments. We're seeing it come from different parts of the business community, and we're giving you the fact that our business growth has been strong. We like what we're picking up in the residential environment, in the consumer environment, and where we see our growth coming from there in terms of what we're taking. So we have a pretty balanced approach to our distribution right now that I think that diversity is helpful. It |
6,870 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | we're taking. So we have a pretty balanced approach to our distribution right now that I think that diversity is helpful. It diversifies our portfolio. It diversifies the base. And that's one of the reasons why the churn numbers are as strong as they are. |
6,871 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Bryan Kraft: Thank you.
Brett Feldman: Operator, we're ready for the next question?
Operator: David Barden of Bank of America. Please go ahead.
David Barden: Hey, guys, thanks so much for taking the question. I guess, first, a follow-up question, if I could. John, thank you for your comments about kind of having digested the impact of the outage, but the postpaid phone ARPU was obviously down about a little over 1% in the quarter, and I'm assuming at least some, if not all, of that had to do with the credit and the GAAP accounting for that. And so, I was wondering if we could get a -- maybe Pascal, a jumping off point from where ARPU really is if we normalize for that credit. And then second, another kind of housekeeping question is, with the sale of Sky Mexico back to, I think Televisa, what happens now? Like how does that affect the reporting, as we think about the rest of the year? Thank you.
Pascal Desroches: All right. Hey, Dave, I can take both questions. First on postpaid phone ARPU, I'm assuming you're citing the sequential trend as opposed to year-over-year because we grew year-over-year. The sequential trend, a couple of things to keep in mind. Yes, the credit was a factor. But it was -- it's part of the mix and we told you at the time it was not significant, but it was still a factor in sequential trends. And the other thing to keep in mind, too, is there is seasonality associated with international roaming, that there are periods, where international roaming is going to be higher than not, and that impacts ARPU as well. Overall, we feel really good about the guidance we gave for modest ARPU growth for the year. So nothing substantive there. And your second question was remind me.
John Stankey: Sky Mexico.
David Barden: Sky Mexico.
John Stankey: It's a non-event.
Pascal Desroches: It really is a non-event, Dave. We didn't consolidate it. It was an equity method investee that it wasn't in the context of AT&T, not a significant item. |
6,872 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | David Barden: Great. And then just one follow-up, if I could. Pascal, you said that we should expect a 20% rate of kind of run rate decline in DTV cash contributions on an annual basis, on a kind of go-forward basis? Is that the?
Pascal Desroches: Yeah. That is our best judgment, yes. And that's the guidance we gave at the beginning of the year and that hasn't changed. In Q1, there was some -- last year there were some one-time items and that's probably why you saw some of the decline year-over-year, but we feel good about the guidance we previously provided, which should put us at an around.
Operator: [Operator Instructions]
Pascal Desroches: Hello? Dave, are you still there?
David Barden: I'm here. I'm listening.
Pascal Desroches: Okay.
David Barden: All of it.
Pascal Desroches: Yeah. All right. Yeah. So for the year, we expect to have overall $3 billion of cash distribution from DIRECTV.
David Barden: Appreciate it, guys. Thank you so much.
Brett Feldman: All right. We'll take the next question now.
Operator: Michael Rollins of Citi. Please go ahead.
Michael Rollins: Thanks for taking the question and good morning. When we look at the EBITDA growth for first quarter of the 4.3% year-over-year and compare that to the guidance of 3% range for the full year. Can you just frame some of the elements that may be changing, whether it's by segment or between revenue and cash expenses just to think about the differences there? And then this could be a related question. Can you review your exposure to the ACP program, your expectations on the program possibly being discontinued and potential impact to AT&T's financial results? Thanks. |
6,873 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Okay. Mike, thank you for the question. Good morning. So first, as it relates to our segment level guidance, one, relative to the start of the year, as I noted in my comments, I anticipate business wireline will be a little bit worse than we thought, principally because of an acceleration of legacy voice decline. So putting that down in the mid-teens. But look you saw the strong start to both our mobility business including the record low churn. And consumer wireline, I mean, we delivered over 14% of EBITDA growth. And the dynamics for both, we would anticipate -- what you saw in Q1, we would anticipate being there for the balance of this year. Those businesses are operating really well. The transformation work, we've done the last few years is really setting us up to have margin expansion in those businesses, and we feel really good about the trajectory of those two businesses. Business wireline is, at an earlier point, in the product transition. And while we are growing fiber revenues, and as John mentioned, AT&T Internet Air for business, that's going to grow. And of course, the wireless business relationships will also grow, but those will be offset by legacy declines and we're confident we can manage through that in the balance of the year and still deliver on around 3%. |
6,874 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Mike, I think we indicated last quarter, and is still no different position that we could work through the ACP sunset if, in fact, that occurs, then I would say it's probably more likely than not, that it does occur. And we could do so without any revisions or changes to what we guide you -- guided you to and we still feel that way. We've started the process, as you might guess, of notifying customers and working with them, and we're not just idly sitting by. I think we'll be successful in many instances, finding ways to continue relationships with customers and ease them into different constructs that make sense for them. But I feel good about how we went about using the program. I think we used it consistent with the way that policymakers probably would have liked to have seen it used, which is to over index more than anything else on fixed broadband capabilities. And I think we had a quality customer base relative to how the program was set up, and that's going to allow us to probably transition some of them into other approaches for how to use the service and those that we ultimately do lose because of the subsidy sunsets. I don't think it's going to be anything that impacts ultimately what we've given you in terms of our ability to operate the business and hit our financials.
Brett Feldman: Great. Thanks, Mike. We'll go ahead for the next question.
Operator: Sebastiano Petti of JPMorgan. Please go ahead. |
6,875 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Operator: Sebastiano Petti of JPMorgan. Please go ahead.
Sebastiano Petti: Thank you. A couple of quick housekeeping questions. John, I think you talked about the balance growth on the mobility side. You have cited those are some underpenetrated segments. I was hoping you can give us an update on the opportunity there, I think SMB value and fiber selling on the mobility side. When do you expect to see some of the share gains, I guess, within some of these segments? Is that more of a -- is that -- could we see that within '24? Does that take some time to build '25 and beyond? And then on the business wireline side, I think, obviously, some focus there on the EBITDA trajectory, but you mentioned you are accelerating some cost cutting initiatives. Would that be within the context of the $2 billion cost cutting program? Or should we maybe think of these as additive to that program? Thank you. |
6,876 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Good morning, Sebastiano. I would tell you that as we indicated, we've accelerated some of the work that we're doing. So this is things that probably would have occurred later in the cycle that we're moving forward. So we'll get some incremental run rate benefit to that, maybe and accelerating our forecast not necessarily changed endpoint, I guess, is the way I would describe that. And on our progress around, where we're trying to make sure that we're operating more effectively and how our channel distribution works within distribution, I would say that we've made some reasonable progress and have things in place around what we're able to do to penetrate fiber, where we don't have fiber on a wireless subscriber that is eligible to get fiber and the reverse of that. I feel pretty good about what we have lined up around that front. I think we're going to see progress in that regard, as we move through '24. We expected in our business plan and how we've communicated to you our performance that we would have progress in that regard. And I do think I'm starting to see the machine work the right way. We're working hard and trying to position ourselves in the value segment. I would say that it's been a little bit slower ramping in that space and specifically getting the right lineup and the right products in the right place. I do expect, as we move through this year, that we will make progress in that regard. Again, we expected we would make progress in that regard in terms of how we guided our expectations around the performance of the business and we'll keep pushing and working on it. And I would also say that it's probably the same statement and truth and where we see certain ethnic segments that maybe we could do a little bit better at than what we're doing right now and we'll continue to work those as well. |
6,877 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Sebastiano Petti: Following up quickly, just on Mike's question about the ACP. Obviously, access from AT&T program was a portion within the commitment that you made earlier in the month. Do you see this as an opportunity to leaning in perhaps on access from AT&T as an opportunity to gain some share from ACP subs, who may be churning from peers? Or do you see this is an opportunity to lean in a little bit into the low-income segments to drive greater adoption of broadband over time? |
6,878 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: So we intend to continue to keep the access from AT&T in the market and we'll continue to actively promote it and try to apply it where it makes sense. And I think we're going to continue to see the same segments we were attempting when ACP was live to find that an attractive place to go. I'm -- I don't know exactly how some of our competitors have used the ACP subsidy. I know how I've used it. I think we've used it in a way, where we believe we're catching the waterfront of what we think are the right customers to be putting the subsidy in front of, which are the right customers that should get access from AT&T. Does that mean that incrementally we should see more coming back our way? I don't know. I would have intuitively hoped that in the form of the competitive markets in which we operate, that our message is equally communicating to those who chose us and those who didn't choose us. So I don't know that just because ACP goes away that I'm going to dramatically see that equation change. And so I don't expect there's going to be a strong pivot over to AT&T. And I hope or expect that our competitors might continue to leave some kind of a discounted offer in place for those that qualify for it. So I'm not expecting huge shifts as a result of that. Sebastiano, I'm pretty proud actually and comfortable given the overall state of the -- what I'll call the fixed broadband market of our performance and how we've been growing in that space. It's a big deal. We just hit 40% -- about 40% penetration of our fiber base right now. And if you'd ask me two years ago that I think we'd arrive at that level given the number of households we're adding and building to and I probably wouldn't have said that we'd arrive that quickly. So I think our goal is to just keep operating as effectively as we have been and taking the good growth that's coming our way. And I think you see that reflected in the overall performance of the numbers.
Brett Feldman: Operator, we're going to take our next question. |
6,879 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Operator, we're going to take our next question.
Operator: Thank you. Frank Louthan of Raymond James. Please go ahead.
Frank Louthan: Great. Thank you. I want to delve in on the business side. First, can you give us your overall read on the economy and your outlook there? And then, secondly, what is sort of the endgame on the business wireline side? It continues to kind of decline. Is there a bottom there? And can you give us maybe a split between what's left in that revenue that's voice versus other data services to get an idea of where the weakness might be? Thanks. |
6,880 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Yeah. Frank, so first of all, look, I don't -- I'm not going to sit here and tell you that I think the shifts in the business segment are economic driven. I know there's been some discussion around what's happening in business investment and communication services. And I fully expect there are going to be businesses that look around and say, gosh, I need to find incremental money to invest in AI. And as we all know how our corporations that were part of work, sometimes it's -- you take from one to invest in another, and I expect we're going to see that happening. But I think the fundamentals under what's occurring in the business segment are largely technology driven. I think we've known for a long time that traditional voice had a shelf life. And ultimately it was going to get replaced with integrated communication services and as-a-service capabilities that run over the top of IP. I think what we saw is a bit during the pandemic, there was a suppression of change for whatever reason, people were out of the office. It wasn't a priority. People didn't want to mess around with their communications infrastructure, while they were working hard to accommodate a different hybrid work environment. And now we're kind of seeing that evolution kind of pick up with a degree of steam. There's probably some good business reasons that's occurring. People are rationalizing office space. They're moving things around. They're working differently. They're evaluating the kind of technology they want in place as a result of that. And that's, from my point of view, why we're seeing a little bit of that step-up in that voice transition and what's occurring. I think we're going to try to do some work with you broadly, not just specific to business, but we'll give you some transparency and visibility of what's left in the legacy businesses and what's going on around those things. As we move through this year, I think we're working on maybe some ways to schedule some of that for you, so you kind of get a sense of what's |
6,881 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | this year, I think we're working on maybe some ways to schedule some of that for you, so you kind of get a sense of what's occurring there. I understand your desire to want to understand it. I think what I would balance that with is, as we stressed multiple times this morning, those things that we're investing in right now, we've got a really good, strong, solid growth business, and those growth business are built on 5G and fiber and businesses endgame is really no different. We're shifting to build a company that is good at selling 5G and fiber into business, and selling 5G and fiber into business, not just at the top end of the market for the Fortune 1000, but across the continuum of the market. And that's a bit of a transition for AT&T because I would say, where we made our bread and butter over the last decade, rightly or wrongly, has been at the top end of the market. And so as we shift and generate more revenues and more share out of the mid-portion of the market, we're having to rebuild some muscle and some distribution and the right product mix to attack that and we can do that. And the endgame is we will catch this decline and we'll ultimately catch the decline with connectivity-based services both in fiber and 5G. We're just going through that transition to make that happen. And unfortunately, as you know, some of the historic voice services are really high-margin services. They're being replaced with good margin services, but not quite as high. And it's going to be a little bit painful for a couple of quarters, as we move through this transition. But I have ultimate confidence that the AT&T brand plays incredibly well in business. All of our research suggests that. I have very high confidence that we walk in and we talk to businesses of any size about using AT&T for either their wireless or fixed connectivity, we're high in the consideration set and can win that business. And I have confidence that there was another generation of incremental services that go on top of that connectivity, as I alluded |
6,882 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | I have confidence that there was another generation of incremental services that go on top of that connectivity, as I alluded to in my opening remarks and what we're doing with Dynamic Defense is a good example, which is overlay incremental service that comes on top of the basic transport that allows us to scrub traffic on behalf of the customer to improve their security posture. I think there's a lot more of those things that can come on in the middle market, given the lack of sophistication, the lack of ability to have a full-time staff dedicated to those things. And I think that's just natural for us to extend our capabilities into that space. And I'm long-term bullish that it's the right thing for us to be in both the fixed and the wireless market, given our brand presence, our distribution channel capabilities and how we build products. |
6,883 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: All right. Operator, we have time for one last question.
Operator: Our last question in queue will come from the line of Walter Piecyk of LightShed. Please go ahead.
Walter Piecyk: Thanks. John, I just want to get your kind of refreshed views on the fixed wireless market. If you look at Verizon, they've added a percentage point of overall wireless growth using fixed wireless. T-Mobile has added, I think, 160 basis points. We're seeing advertisements for, I guess, I think what you call free air or something like that. What do you think in terms of the growth opportunity here? And if you were able to get some additional spectrum or maybe even with your existing spectrum, as you've seen the usage from some of your early learnings, can this be as broad of an opportunity for you as it's been for Verizon and T-Mobile? |
6,884 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Good morning, Wal. I think the short answer to the last part of your question is I don't intend to promote it in the market in the manner that Verizon and T-Mobile are promoting at the market. And I just I said on the sideline and I observed, I also see them doing some things right now to try to manage the dynamics around those product sets that are reflective of what I believe the ultimate outcome was going to be and what I've been saying for a period of time, which is wireless networks aren't particularly the best place to take a single-family home that streams hours and hours of video a day and try to serve them with a kind of $50 a month product or service. And I just don't see that as long-term sustainable or healthy growth of returns for the business. And I've been pretty consistent in saying that and I'm still consistent in saying that. And that's why we're making a choice in our capital allocation to invest more heavily in fiber, as the basis of which to make an investment that we think has a long runway and a long annuity stream and as a technology that has flexibility to deal with what we know is going to be continuing calls and demands on growth for high-performance networking in homes and businesses. Now having said that, I've also been very, very clear that there is a place for fixed wireless in our portfolio. And I don't believe my point of view on this has changed in any way, shape or form nor our execution's any different than that. I've said from the start that there are many businesses that do not have the characteristics of single-family homes. And as a result of that, fixed wireless can be a really effective way of meeting their needs and doing so at a value proposition, price and performance that makes sense for them, especially when you start to think about those companies that have a convergence of both fixed and mobility needs. It's a natural in those cases. And I'd like to participate in that market aggressively and I will go after it as aggressively as my competitors and |
6,885 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | cases. And I'd like to participate in that market aggressively and I will go after it as aggressively as my competitors and picking up any of those business customers that I can on a national basis. And I think that's a margin accretive decision within the context of how we're allocating capital between spectrum investments and fiber investments. I've also said that in the consumer space there are places, where I would apply the technology. I gave a couple of specific examples. We have some places, where we have a good copper DSL base that we're in the process of deploying fiber and in some cases, fixed wireless can give better performance than what our copper network can deliver and we know that we'll be 12 months, 18 months from fiber deployment and we may want to hold some customers, offering them a better service, and we'll use it as a bridging or hold strategy for those customers that are high value to us. And we'll continue to use that technique, where we can. I've indicated that we will use it as an opportunity for us to turn down footprint. So where I've got small numbers of data customers in place, I need to get them off of fixed infrastructure that I ultimately want to shutter because that allows me to turn down a geography that is a low utilization geography and a low profitable geography on the fixed side. And I can turn out the lights, walk away, take cost out of business, I will do that. And I've also said we have some select markets, where our penetration levels in mobility are low and our spectrum position is high and we may choose in those markets to do some incremental marketing to do, as you indicated, to buy some incremental growth that we believe has a longer runway. So that's how the team is operationalizing around this. But in the end, when all those plays are put together, no, I don't think you're going to see us have the same posture that two of our competitors do because our posture is different. We're investing in fiber and I don't see myself moving into the market just to buy |
6,886 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | do because our posture is different. We're investing in fiber and I don't see myself moving into the market just to buy spectrum, so that I can change the operating posture I just described to you. |
6,887 | T | 1 | 2,024 | 2024-04-24 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: All right. Well, thank you, everyone, for joining us. Operator, you can go ahead and close out the call.
Operator: Ladies and gentlemen that does conclude our conference call for today. On behalf of today's panel, we'd like to thank you for your participation in today's earnings call and thank you for using our service. Have a wonderful day. You may now disconnect. |
6,888 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Welcome to AT&T Inc.'s First Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Following the presentation, the call will be open for questions. And as a reminder, this conference is being recorded. I would now like to turn the conference call over to our host, Brett Feldman, Senior Vice President, Finance and Investor Relations. Please go ahead. Thank you, and good morning. Welcome to our first quarter call.
Brett Feldman: I am Brett Feldman, head of investor relations for AT&T Inc. Joining me on the call today are John Stankey, our chairman and CEO, and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our Safe Harbor statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in AT&T Inc.'s SEC filings. Results may differ materially. Additional information as well as our earnings materials are available on the investor relations website. With that, I will turn the call over to John Stankey. John? |
6,889 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | John Stankey: Thanks, Brett. I appreciate everyone joining us this morning. And I am pleased to share that we followed a strong performance in 2024 with a solid start to 2025. In the first quarter, we reported growth in consolidated service revenue and adjusted EBITDA driven by strong postpaid phone and fiber net adds. We also grew adjusted EPS and free cash flow when excluding DIRECTV, with both metrics performing consistent with the outlook we provided in March. Pascal will run you through the details of our first quarter results and outlook. So I am going to use my time to cover two topics that are top of mind for our management team. First, I will review the core operating principles driving our strategy, This includes how our differentiated position as the largest converged provider across 5G and fiber is fueling growth in high-value customer relationships. After that, I will discuss why we expect to deliver on our 2025 financial guidance, and commence our planned share repurchases during the second quarter despite operating in a macro environment with diminished visibility. So let's start with the core operating principles that are enabling us to drive our long-term strategy forward. As always, we begin with a focus on the customer. This is why we launched the AT&T Inc. guarantee which is a promise to our customers that will provide them with connectivity they can depend on, the deals they want, and the service they deserve guaranteed or we will make it right. AT&T Inc. is the first and only carrier that offers a guarantee for wireless and fiber networks to both consumers and small businesses. A key reason we can make this promise is because of the significant fiber expansion and network modernization investments we are making to be the best connectivity provider in America. A little over three years ago, we set a target of passing over thirty million total locations with our fiber network by the end of 2025. I am proud to say that we expect to achieve that target before midyear as we continue to ramp |
6,890 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | fiber network by the end of 2025. I am proud to say that we expect to achieve that target before midyear as we continue to ramp towards our objective of reaching fifty million plus total locations with fiber by 2029, through a combination of our organic build, GigaPower, and other commercial open access agreements. We are also making great progress retiring our legacy copper network as we transition to modern 5G wireless and fiber technology. We have an opportunity to move even faster following recent FCC orders. We appreciate Chairman Carr and the FCC for their leadership to advance the tech transition and update requirements to better reflect today's technology and competitive marketplace. Our customer-focused, investment-led business model has positioned AT&T Inc. as a trusted provider of critical connectivity services. As a result, we are well-positioned to drive sustainable growth through a range of market and economic cycles. Our first quarter results present further evidence that our differentiated strategy is working. We came into the year with an expectation that the wireless industry would see further normalization in net adds and overall activity levels. So far, this has played out and to no surprise, we have seen shifts in offers and promotions as the major providers compete for a moderating pool of new customers. Despite a slow January, we were able to fine-tune our offers and competed very well against this backdrop for the balance of the quarter. This was especially true within our fiber footprint, which is the largest and fastest growing in the US. As we have said before, where we have fiber, we win. In fiber and 5G, this dynamic continues to drive growth as shown by our increasing rate of converged customer penetration, and significant wireless share gains within our fiber footprint. These trends continued and in some cases strengthened in the first quarter. For example, a significant portion of wireless gross adds that took our lead offers during the first quarter were with converged accounts. |
6,891 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | a significant portion of wireless gross adds that took our lead offers during the first quarter were with converged accounts. This is a key reason why we had more converged house gross adds within our fiber footprint during the first quarter compared to last year. As a result, our converged penetration continues to climb with more than four in ten AT&T Inc. fiber households also now subscribing to our mobility services. This is a key trend because accounts with both fiber and wireless services have lifetime values that are more than fifteen percent greater than customers with stand-alone services. The message here is that the primary driver of our growth is our success at executing our fiber and 5G playbook that our increased investments in customer acquisition and retention are driving sustained growth in high-value customer relationships. The fundamentals of our business are very strong, and we continue to feel confident that our strategy and plans for 2025 are on track. However, all companies in the US are now operating with less visibility as the administration pursues policies that are intended to facilitate its laudable goal of creating more equitable global trade and improved domestic manufacturing capabilities. Like others, we are closely monitoring this journey to rebalance global trade and its impact on the broader economy. The announced tariffs could potentially increase the cost of smartphones, and other devices as well as the cost of network and technical equipment. The magnitude of any increase will depend on a variety of factors, including how much of the tariffs our vendors pass on, the impact that the tariffs have on consumer and business demand. Based on the ninety-day pause on reciprocal tariffs, and our visibility into the supply chain, we believe we can manage the anticipated higher costs within the 2025 financial guidance we provided at the beginning of the year. Our expectations reflect our strong financial performance in the first quarter, the historical resilience of demand for our |
6,892 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | Our expectations reflect our strong financial performance in the first quarter, the historical resilience of demand for our critical connectivity services across economic cycles, and our decision to reduce discretionary expenses and accelerate cost actions that we had planned for later on in this year. That said, this environment remains fluid and will provide further updates based on the ultimate impacts of the reciprocal tariffs. The priorities we laid out at our 2024 analyst and investor day have not changed, and we continue to operate our business to achieve the financial plan and capital. As we shared during that presentation, these long-term plans are based on an outlook that assumes a macroeconomic environment, with low single-digit GDP growth and moderating inflation. If we ultimately face a lower growth environment over this period, we have the option to adjust our operating posture to prioritize cash flow. This gives us confidence in our ability to execute the expanded capital returns program announced at our Analyst and Investor Day. We plan on commencing share repurchases this quarter. We also continue to evaluate opportunities to deploy our financial flexibility towards strategic investments that complement our organic growth plan, additional capital returns, or further improvements to our balance sheet. So with that, I will turn it over to Pascal. Pascal? |
6,893 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | Pascal Desroches: Thank you, John, and good morning, everyone. Let's start by reviewing our first quarter financial summary on Slide five. At a consolidated level, total revenues were up two percent, service revenues were up one point two percent, and adjusted EBITDA was up four point four percent. The primary driver of this solid performance was growth in mobility and consumer wireline businesses, which continues to more than offset secular pressure on business wireline. As a reminder, beginning with our first quarter results, adjusted EPS and free cash flow exclude DIRECTV. Adjusted EPS was $0.51 in the quarter, which was $0.03 higher than the prior year when excluding DIRECTV. First quarter free cash flow was $3.1 billion, which was up more than $350 million on a comparable basis. First quarter capital investment of $4.5 billion was slightly lower year over year due to lower vendor financing payments reflecting the good progress made in reducing these balances for the past couple of years. For the second quarter, we expect capital investment in the $4.5 billion to $5 billion range, and free cash flow of approximately $4 billion. And we continue to expect full-year free cash flow of $16 billion plus. Now let's look at the trends we are seeing in our mobility business on slide six. Our mobility business delivered solid results to start the year, growing both revenues and EBITDA in a wireless market that remains both healthy and competitive. Total mobility revenues were up four point seven percent year over year with service revenues up four point one percent. Service revenue growth was primarily driven by strong customer growth, including three hundred and twenty-four thousand postpaid phone net adds as well as continued postpaid phone ARPU growth. Postpaid phone gross adds increased by about thirteen percent year over year, which more than offset a normalizing trend in churn. Postpaid phone churn of zero point eight three percent was up eleven basis points from the first quarter last year. This increase was |
6,894 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | phone churn of zero point eight three percent was up eleven basis points from the first quarter last year. This increase was primarily driven by the normalization of customers reaching the end of their equipment promotional financing periods in the fourth quarter, which is a trend we highlighted on our prior call. We also saw some shifts in competitive offers during the quarter that impacted churn. Importantly, involuntary churn remained low and consistent with our expectations. Based on the current market dynamic and the return to a more normalized cadence of promotional roll-offs, we expect postpaid phone churn to remain at a similar level in 2Q with typical seasonality in the back half of the year as we approach the holidays. First quarter mobility EBITDA grew three point five percent year over year. EBITDA margins of forty-three percent were down fifty basis points versus last year. This was due to increased advertising and marketing spend related to the launch of the AT&T Inc. guarantee as well as higher spending on customer acquisition and device upgrades. We are very pleased with the uptake rate of our offers among new and existing high-quality customer cohorts. This is evident in our postpaid phone ARPU, which grew one point eight percent year over year and in the continued growth of our base of converged accounts. Before I discuss our first quarter consumer wireline performance, I want to provide some insights into the trends we are seeing in our mobility business so far in the second quarter. Postpaid phone net adds remain solid, with both gross adds and churn broadly in line with our expectations. However, upgrades have trended higher than expected since the announcement of the reciprocal tariffs in early April, which we believe triggered an acceleration in consumer upgrade behavior. If upgrade rates remain elevated, this could represent a pull forward from the second half of the year. Now let's move to consumer wireline results on slide seven. In the quarter, Consumer Wireline performance was led by |
6,895 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | the year. Now let's move to consumer wireline results on slide seven. In the quarter, Consumer Wireline performance was led by solid broadband subscriber growth for both AT&T Inc. Fiber and AT&T Inc. Internet Air. We delivered two hundred and sixty-one thousand AT&T Inc. Fiber net adds up from two hundred and fifty-two thousand in the first quarter of last year. This was driven by growth in our consumer location served with fiber, which reached twenty-three point eight million at the end of 1Q. And growing contribution of net adds in regions served with GigaPower Fiber. We love the return profile of fiber and the lift it provides our mobility business only makes investing in fiber more attractive. AT&T Inc. Internet Air net adds were a hundred and eighty-one thousand in the quarter, which is a significant improvement from a year ago. Driven by broader availability across our distribution channels. Our combined success with these two services helped us deliver a hundred and thirty-seven thousand total broadband net adds in the quarter. This marks our seventh straight quarter of overall broadband subscriber growth and second consecutive quarter with more than a hundred thousand broadband net adds. We grew consumer wireline revenue by five point one percent versus the prior year. This was driven by fiber revenue growth of nineteen percent reflecting subscriber gains and solid fiber ARPU growth of six point two percent. Consumer wireline EBITDA grew eighteen point six percent for the quarter. Our first quarter results benefited from vendor settlements that positively impacted our total wireline operating expenses by approximately a hundred million dollars. Roughly fifty-five million dollars of the impact was in consumer wireline, with the rest in business wireline. This item has no impact on guidance as it was factored into our full-year plan. Now let's turn to business wireline on slide eight. Starting this quarter, we are providing more detail on the revenue components within Business Wireline to match the |
6,896 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | eight. Starting this quarter, we are providing more detail on the revenue components within Business Wireline to match the disclosures in targets we provided at our analyst and investor day. Business wireline revenues declined approximately nine percent year over year, primarily due to continued pressures on legacy and other transitional services which declined seventeen point four percent. This was partially offset by growth in fiber and advanced connectivity services, which grew four and a half percent. About one-third of these revenues are from value-added services, which are variable on a quarterly basis. The remaining two-thirds which is predominantly fiber connectivity, is growing at a faster rate and accelerated relative to the fourth quarter. Business wireline EBITDA declined less than two percent versus prior year. I want to call out a few factors that contributed to this improved trend. On the top line, we benefited from pricing actions on legacy services, which helped moderate revenue declines although we expect this benefit to diminish over the next few quarters. On the expense side, business wireline operating and support costs were down about four hundred million dollars year over year. This decrease is due to solid execution against our cost-saving initiatives, including lower force, contractor, and access costs. Lower expenses also reflect the vendor settlements I mentioned earlier as well as the prior deconsolidation of our cybersecurity business. While I appreciate that our first quarter EBITDA performance is pacing ahead of plan, some of the favorability was nonrecurring, and we are facing an operating environment with less visibility. So we expect to see a normalization in the trajectory of business wireline EBITDA during the remainder of the year. We also saw solid trends across business solutions, which includes the contributions from business mobility and FirstNet. As we announced earlier this month, we now have more than seven million FirstNet connections, which is a tremendous milestone. |
6,897 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | As we announced earlier this month, we now have more than seven million FirstNet connections, which is a tremendous milestone. We continue to grow connections because FirstNet is truly in a league of its own. Let's be clear. No matter if it's New York City Police Department, the Fire Department in New York City, the Federal Bureau of Investigation, or any of the nearly thirty thousand public safety agencies and organizations that use FirstNet, FirstNet continues its strong momentum and remains a first responder communication solution of choice. Now let's move to slide nine to discuss our capital allocation. Our capital investment is largely driven by our fiber deployment and wireless network modernization. These remain strategic priorities, and we expect these initiatives to remain on pace with the timelines we outlined at our Analyst and Investor Day in December. We continue to expect our full-year capital investment to be in the twenty-two billion dollar range. During the first quarter, we made further progress on strengthening our balance sheet and reduced net debt by about one billion dollars. This was driven by our strong free cash flow and net proceeds related to asset sales and strategic investments, partially offset by one point two billion dollars of currency headwinds related to the weakening of the US dollar. As a reminder, we fully hedge the FX impact on our debt with the offset reported in other liabilities. We ended the quarter with net debt to adjusted EBITDA of two point six three times versus two point six eight times at the end of last year. We have worked hard at strengthening our balance sheet and continue to operate the business with a net leverage target of net debt to adjusted EBITDA in the two and a half times range. Since the beginning of 2020, we have reduced our net debt by thirty-two billion dollars. Based on this improvement in our balance sheet, expected proceeds from the sale of our seventy percent stake in DIRECTV and our financial outlook for the remainder of the year, we are now |
6,898 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | from the sale of our seventy percent stake in DIRECTV and our financial outlook for the remainder of the year, we are now in a position to begin executing on the incremental capital returns we outlined at our Analyst and Investor Day. We expect to begin share repurchases under our ten billion dollars authorization this quarter with at least three billion dollars completed by year-end and the remainder during 2026. We are really pleased with the team's performance and our start to the year, and we are excited to continue to build on this progress. Brett, that's our presentation. We are now ready for the Q&A. |
6,899 | T | 1 | 2,025 | 2025-04-23 08:30:00 | AT&T Inc. | 100,231 | Brett Feldman: Thank you, Pascal. Operator, we are ready to take the first question.
Operator: Thank you. We will now begin the question and answer session. Today's first question comes from Peter Supino with Wolfe Research. Please go ahead. Hi. Good morning. |
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