AT&T continues to weather headwinds in its wireline business services segment as customers transition from legacy technologies to next-gen services.
At the recent Deutsche Bank Conference, AT&T’s CFO Pascal Desroches said that while the company is reworking how it serves the business services segment, the telco sees potential to further penetrate the somewhat forgotten small to medium business (SMB) segment.
“In Business Wireline, we're still transitioning,” he said. We need to do better there. Regarding Business Wireline, the growth vectors there will be fixed wireless, principally focused on small and medium-sized businesses.”
Revenue headwinds
AT&T continues to face revenue headwinds in Business Wireline, a trend that continued into the fourth quarter.
In the fourth quarter, AT&T reported that Business Wireline revenues were $5.1 billion, down 10.3% yearly due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services.
EBITDA declined about 19% in the quarter. The service provider’s wireline business segment was impacted by about $100 million of items, primarily discrete intellectual property transaction revenues in the fourth quarter of 2022 that did not repeat in the fourth quarter of 2023.
“It's declined in the last few years, but we've managed to grow the overall business,” Desroches said. “I think we are committed to continuing to do that, and I'm confident we can.”
While the company sees growth potential in fiber-based services and wireless, AT&T is still in what Desroches said is the “middle innings of legacy declines.”
“It's [massive] revenue, legacy voice and data, and [BPM],” he said. The revenue base will continue declining, but we think we can manage that and still grow the company.”
Ramping fiber, wireless
As part of turning around the fortunes of its business wireline segment, AT&T is enhancing the reach of its fiber network and providing more wireless service packages.
A particular focus is on SMBs. Although AT&T is a well-known commodity in the sizeable multinational business sector, the provider continues to look to make a bigger splash in the mid-market business segment. Like small businesses, the medium-sized business segment has been continually poached by aggressive cable operators that have built out sizeable networks to businesses.
AT&T is providing broadband wireless and leveraging and extending the fiber network it is building for consumers to SMB customers.
“As you think about Business Wireline, the growth vectors there will be fixed wireless, principally focused on small and medium-sized businesses,” Desroches said. Also, we're increasing our fiber locations, which creates a natural entry point to expanding the TAM on small and medium-sized businesses.”
He added that the ongoing fiber drive enables AT&T to more effectively battle aggressive cable competitors that have continually enhanced their offerings for SMBs with incremental costs. “It comes down to how we take the fiber that we are laying and lead it into small—and medium-sized businesses in those communities,” Desroches said. “Our TAM will expand, and we'll bring a better product than cable at a much more attractive price point.”
In tandem with ramping up fiber, AT&T continues to expand its wireless presence and revenue mix with business customers.
Like earlier quarters, AT&T’s business segment continued to see wireless growth in the fourth quarter. AT&T Business Solutions wireless services grew 5.9%, and FirstNet added over 260,000 connections.
“Mobility business relationships continue to perform very well,” Desroches said. “On average, we've grown Mobility on the business side, with 7% of the service revenue, for the last two years.”
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