AT&T Inc. Q2 FY2024 earnings call

• John Stankey highlighted the converged 5G and fiber strategy, noting that the success of fiber drives growth in mobility and vice versa, with nearly 4 out of 10 AT&T Fiber households also choosing AT&T as their wireless provider.
• Mobility had 419,000 postpaid phone net adds in Q2, with EBITDA growth driven by service revenue and margin expansion.
• Consumer Wireline added broadband subscribers for the 4th consecutive quarter, with EBITDA growth driven by fiber revenue growth and operating leverage.
• AT&T is focused on capital allocation, balancing efficient growth, long-term investments, debt reduction, and shareholder returns, having reduced net debt by about $2B YTD.

Mobility

• Second quarter postpaid phone net adds: 419,000. Mobility EBITDA grew by more than 5% in Q2, driven by over 3% growth in service revenue and 100 basis points of service margin expansion.

Consumer Wireline

• Added 52,000 total broadband subscribers in Q2 (4th consecutive quarter of positive net gains), driven by AT&T Fiber growth. Consumer Wireline EBITDA grew by more than 7% in Q2, with approximately 18% growth in fiber revenues.

Business Wireline

• EBITDA down 13.9% due to legacy voice service declines, but 2Q decline improved from 1Q. Full-year expectation is mid-teens EBITDA decline.

• Adjusted EBITDA expected to grow in the 3% range for the full year.
• Adjusted EPS expected in the range of $2.15 to $2.25 for the full year.
• Free cash flow expected in the $17B to $18B range for the full year.
• Mobility outlook anticipates higher activity levels in the back half, including higher marketing spend in Q3 and benefits from pricing actions in 4Q.
• Consumer Wireline expects fiber subscriber growth trend to continue.

• Network outages and data breaches, which have impacted customer confidence.
• Challenges related to spectrum policy, affecting wireless network augmentation.
• Continued pressure from customers transitioning off legacy voice and data services.

Q: John, you talked about higher activity levels in the second half in wireless, and concerns about upgrade rates with the new iPhone. Any comments on typical seasonality and competition?

A: John Stankey mentioned seasonality, expected cycle continuation, and being positioned to handle customer account decisions. Pascal Desroches added AT&T is well-positioned regardless of the environment.

Q: Simon Flannery asked about ACP and fiber passings. Update on ACP and fiber build-out pace?

A: John Stankey said ACP impact was manageable, and AT&T is well on track to 30 million fiber passings by next year, with returns on fiber investment better than expected.

Q: Jim Schneider asked about fiber build-out pace and Internet Air for business. Insights on fiber build and Internet Air net-adds?

A: John Stankey stated fiber build-out is on track, with returns better than expected, and Internet Air for business is being offered nationally with potential for net-add acceleration in business market.

Q: David Barden asked about convergence race and network issues. Support for convergence and impact of network issues?

A: John Stankey emphasized converged strategy's benefits for customer retention and profitability, and AT&T has been responsive to network issues, learning from them and maintaining customer confidence.

Q: Sebastiano Petti asked about wireless transformation payment and spectrum issues. Color on transformation payment and spectrum planning?

A: Pascal Desroches said the transformation payment is expected and manageable, and John Stankey discussed spectrum policy advocacy and strategic use of spectrum for network growth.

Q: Michael Rollins asked about Mobility net adds and cost structure. Details on Mobility net adds and cost-cutting progress?

A: John Stankey said Mobility net adds came from intercepting customers profitably, and AT&T is making progress on cost-cutting with improved margin accretion and technology aiding efficiency.

Q: Bryan Kraft asked about wireless volume slowdown and pricing power. AT&T's view on market volumes and pricing?

A: John Stankey said AT&T is positioned to handle volume moderation, has share-take opportunities, and can differentiate through value delivery, maintaining pricing power through improved customer value.