AT&T Inc. 5.35% GLB NTS 66 Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Customer Focus: Launched the AT&T Inc. guarantee, focusing on connectivity, deals, and service. On fiber expansion, AT&T is on track to pass 30 million locations by mid-2025 and aims for 50 million+ by 2029.
• Financial Performance: Consolidated service revenue and adjusted EBITDA grew. Adjusted EPS was $0.51, and free cash flow was $3.1 billion. Capital investment in Q1 was $4.5 billion, with expectations of $4.5 billion to $5 billion in Q2 and full-year free cash flow of ~$16 billion.
• Strategy: Focus on fiber and 5G playbook, with converged customer penetration climbing. Commencing share repurchases under a $10 billion authorization this quarter.

Segment Performance

• Mobility Business: Total mobility revenues increased 4.7% year over year, with service revenues up 4.1%. Postpaid phone net adds were 324,000, and postpaid phone ARPU grew 1.8%. Mobility EBITDA rose 3.5% year over year, though margins decreased 50 basis points due to increased marketing spend.
• Consumer Wireline: Broadband subscriber growth was strong, with 261,000 AT&T Inc. Fiber net adds and 181,000 AT&T Inc. Internet Air net adds. Consumer wireline revenue grew 5.1% year over year, driven by fiber revenue growth of 19% and EBITDA growth of 18.6%.
• Business Wireline: Revenues declined approximately 9% year over year, primarily due to legacy services, but fiber and advanced connectivity services grew 4.5%. EBITDA declined less than 2% year over year, benefiting from pricing actions and cost-saving initiatives.

Guidance

• Financials: Consolidated total revenues up 2%, service revenues up 1.2%, and adjusted EBITDA up 4.4%. Q2 capital investment expected to be $4.5 billion to $5 billion, with free cash flow of approximately $4 billion. Full-year free cash flow projected at ~$16 billion.
• Share Repurchases: Commencing share repurchases under the $10 billion authorization this quarter, with at least $3 billion completed by year-end.

Risks

• Tariffs: Announced tariffs could increase costs of smartphones, devices, and network equipment. The impact depends on vendor pass-through and consumer/business demand, but management believes it can be managed within 2025 guidance.

Question and Answer

Q: Impact of tariffs on phones and growth environment expense reduction A: John Stankey discussed adjusting to tariff impacts on handsets, focusing on customer needs and creative plans. Pascal Desroches noted Q1 launch expenses but organic expense performance was good.

Q: Inorganic investments and FCC orders A: John Stankey is open to inorganic opportunities but focused on strategic thrusts. FCC orders are enabling faster cost reductions in wire centers, allowing quicker execution.

Q: Churn, gross adds, upgrades A: Pascal Desroches said Q2 churn would be similar to Q1 with back half seasonality. John Stankey noted focus on high-value customers and converged customer lifetime value.

Q: Confidence in mobility guidance, fiber target risk A: Pascal Desroches cited cost actions and acceleration of cost savings. John Stankey is confident in fiber investment as a long-term structural bet.

Q: Consumer health, capital allocation A: John Stankey saw no major consumer behavior shifts. Confident in share repurchase execution, independent of inorganic activities.

Q: Macro environment, property commissions A: John Stankey focused on share of service revenues, with steady progress in infrastructure. Property dispositions are factored into guidance, with possible incremental opportunities.