8-K: AT&T Reports Consistent Growth in 5G and Fiber Subscribers in Third Quarter 2024

AT&T's third-quarter results show continued momentum in 5G and fiber subscriber growth, with the company reiterating its full-year 2024 financial guidance.

Summary

• AT&T reported third-quarter 2024 revenues of $30.2 billion, a slight decrease of 0.5% year-over-year.
• Diluted earnings per share (EPS) were $(0.03), while adjusted EPS was $0.60.
• Operating income was $2.1 billion, with an adjusted operating income of $6.5 billion.
• The company's net income was $0.1 billion, and adjusted EBITDA was $11.6 billion.
• Cash from operating activities was $10.2 billion, down $0.1 billion year-over-year, but consistent year-to-date compared to 2023.
• Capital expenditures totaled $5.3 billion, with a capital investment of $5.5 billion.
• Free cash flow was $5.1 billion, down $0.1 billion year-over-year, but up $2.4 billion year-to-date compared to 2023.
• AT&T added 403,000 postpaid phone net adds and achieved an industry-leading postpaid phone churn of 0.78%.
• The company added 226,000 AT&T Fiber net adds, marking 19 consecutive quarters with over 200,000 net adds.
• Consumer broadband revenues reached $2.8 billion, a 6.4% increase year-over-year.
• AT&T has passed 28.3 million consumer and business locations with fiber.

Sentiment

Score: 5

Explanation: The document presents mixed results. While there is positive momentum in subscriber growth and some financial metrics, there are also significant negative impacts from impairments and declines in certain segments. The reiteration of full-year guidance provides some stability, but the overall sentiment is neutral to slightly negative.

Positives

• AT&T's Mobility service revenues grew by 4.0% year-over-year.
• Consumer Wireline achieved strong broadband revenue growth with improving EBITDA margins.
• The company delivered positive broadband net adds for the fifth consecutive quarter.
• AT&T's free cash flow is up $2.4 billion year-to-date compared to the same period in 2023.
• The company is reducing debt and growing free cash flow year to date.
• Mobility EBITDA service margin expanded by 150 basis points year-over-year.
• Consumer Wireline EBITDA grew by 8.6% year-over-year.
• Latin America segment revenues increased by 3.0% year-over-year.

Negatives

• Consolidated revenues decreased by 0.5% year-over-year.
• Diluted EPS was negative at $(0.03).
• Operating income decreased significantly from $5.8 billion to $2.1 billion year-over-year.
• Net income decreased substantially from $3.8 billion to $0.1 billion year-over-year.
• Business Wireline revenues declined by 11.8% year-over-year.
• Business Wireline EBITDA is now expected to decline in the high-teens range for the full year, versus prior guidance of a mid-teens range decline.
• Free cash flow was down $0.1 billion year-over-year for the quarter.
• Operating expenses increased primarily due to a $4.4 billion non-cash goodwill impairment in the current quarter associated with the Business Wireline unit.
• There was accelerated depreciation on wireless network equipment associated with Open RAN network modernization efforts.

Risks

• The Business Wireline unit is experiencing faster-than-anticipated industry-wide secular decline of legacy services.
• The company is facing continued secular pressures on legacy voice and data services.
• There was a work stoppage in the Southeast and severe weather that impacted AT&T Fiber installations.
• The company is experiencing lower Mobility equipment revenues due to lower sales volumes.
• The company is facing higher depreciation expense from Open RAN deployment and network transformation.
• The company is facing increased marketing expenses in the Consumer Wireline segment.

Future Outlook

AT&T reiterates its full-year 2024 guidance, including wireless service revenue growth in the 3% range, broadband revenue growth of 7%+, adjusted EBITDA growth in the 3% range, capital investment in the $21-$22 billion range, free cash flow in the $17-$18 billion range, and adjusted EPS in the $2.15-$2.25 range. The company expects to achieve net debt-to-adjusted EBITDA in the 2.5x range in the first half of 2025 and is on track to pass 30 million-plus consumer and business locations with fiber by the end of 2025.

Management Comments

• We delivered another strong and consistent quarter, furthering our leadership in converged 5G and fiber connectivity, said John Stankey, AT&T CEO.
• We continue to grow our largest business Mobility the right way with what we expect will be industry-leading postpaid phone churn for the 13th time in 15 quarters.
• We are investing at the top of the industry, reducing debt and growing free cash flow year to date.
• These solid results give us confidence in reiterating our full-year consolidated financial guidance.

Industry Context

The results reflect the ongoing industry trend of increasing demand for 5G and fiber connectivity, with AT&T positioning itself as a converged provider. The company's focus on high-quality, converged customers aligns with the broader industry shift towards bundled services. The decline in Business Wireline revenues highlights the challenges faced by legacy services in the face of technological advancements.

Comparison to Industry Standards

• AT&T's postpaid phone churn of 0.78% is expected to be industry-leading, indicating strong customer retention compared to competitors like Verizon and T-Mobile.
• The company's consistent fiber net adds of over 200,000 for 19 consecutive quarters demonstrates a strong performance in the fiber broadband market, competing with companies like Google Fiber and smaller regional providers.
• The 4.0% year-over-year growth in Mobility service revenues is a positive sign, but it is important to compare this to the growth rates of other major wireless carriers to assess AT&T's competitive position.
• The $4.4 billion non-cash goodwill impairment in the Business Wireline unit is a significant event and should be compared to similar write-downs by other telecom companies to understand the broader industry trends in legacy services.
• AT&T's capital investment of $5.5 billion is a substantial amount, but it is important to compare this to the capital expenditures of other major telecom companies to assess AT&T's investment strategy.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net income and the goodwill impairment.
• Employees may be affected by the ongoing transformation and simplification efforts.
• Customers will benefit from the continued expansion of 5G and fiber networks.
• Suppliers may be impacted by changes in capital expenditures and vendor financing.
• Creditors will be monitoring the company's debt levels and free cash flow.

Next Steps

• AT&T will continue to focus on expanding its 5G and fiber networks.
• The company will work to improve performance in the Business Wireline segment.
• AT&T will continue to monitor and manage its debt levels.
• The company will continue to invest in network modernization programs.

Key Dates

Keywords

5G, Fiber, Broadband, Mobility, Postpaid, Churn, EBITDA, Free Cash Flow, Net Adds, Wireless, Wireline, Telecommunications