Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AT&T Inc (T, Financial) reported strong growth in its mobility business, with a 6% increase in EBITDA, positioning it well for the fourth quarter.
- The company added 403,000 postpaid phone net adds in the third quarter, demonstrating solid subscriber growth.
- AT&T Inc (T) achieved positive total broadband subscriber net adds for the fifth consecutive quarter, despite challenges such as a work stoppage and hurricanes.
- The company continues to lead in fiber, with more than 200,000 AT&T Fiber net adds for 19 consecutive quarters, driven by strong customer demand.
- AT&T Inc (T) is successfully reducing its net debt and increasing operating leverage, with a target to achieve a net debt to adjusted EBITDA ratio in the 2.5 times range by the first half of next year.
Negative Points
- Revenues were slightly down due to declines in business wireline service revenues and low-margin mobility equipment revenues.
- The business wireline segment continues to face challenges, with a 20% decline in EBITDA due to secular declines in legacy voice services.
- Adjusted EPS decreased to $0.60 from $0.64 in the year-ago quarter, impacted by various headwinds.
- The company faced a $4.4 billion noncash goodwill impairment charge for its business wireline unit.
- AT&T Inc (T) anticipates higher capital investment in the fourth quarter, which may impact free cash flow.
Q & A Highlights
Q: Can you provide context on the expected seasonally higher phone purchasing activity in the fourth quarter and the outlook for business wireline?
A: John Stankey, CEO, mentioned that while Apple phone sales are slightly down, the impact of new software releases remains to be seen. He expects a gradual increase in consumer interest rather than a sudden spike. Regarding business wireline, Stankey noted green shoots as the business shifts focus to connectivity-based services, although legacy revenue declines continue to pose challenges.
Q: Can you discuss the out-of-region fiber opportunity and the potential churn benefits in wireless from bundled services?
A: John Stankey, CEO, explained that AT&T's partnerships are designed to leverage their distribution strength and product offerings, with early results showing similar performance to in-region business. While it's too early to confirm churn benefits, the expectation is that bundled services will eventually yield similar advantages as seen in established markets.
Q: How do you view the potential for HFC assets to complement your fiber strategy, and what is your approach to capital allocation?
A: John Stankey, CEO, stated that while HFC has been resilient, the focus is on fiber as the long-term solution. AT&T is committed to its current fiber strategy, seeing it as a durable annuity stream with attractive returns, and is not pursuing HFC assets.
Q: Is there a possibility of AT&T becoming an open access provider for its fiber build, and what are the expectations for 2025 earnings growth?
A: John Stankey, CEO, indicated that while the focus is on maximizing owned and operated assets, there could be future opportunities for wholesale arrangements. Pascal Desroches, CFO, noted that while the DIRECTV transaction timing could affect reported EPS, organic growth in EBITDA and operating income is expected in 2025.
Q: Can you provide an update on the wireless competitive landscape and the drivers of postpaid phone ARPU growth?
A: John Stankey, CEO, described the wireless market as competitive but rational, with AT&T focusing on quality growth. ARPU growth is driven by customers upgrading to higher-value plans and additional services, with potential for further growth through strategic pricing adjustments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
