Jeff McElfresh, COO at AT&T, discussed the company’s key priorities and strategies at the Morgan Stanley Technology, Media, and Telecom Conference.
McElfresh first addressed the massive network outage on Feb. 22, saying it was due to an internal process error.
“It’s part of grooming the network and expanding it,” he said. “I mean, we do these kinds of things hundreds of times a night in the maintenance window. It was the incorrect application of a process that created this, at least based on our initial investigation, and we’ve already taken steps to address that, to prevent that in the future.”
While he would not comment specifically on the actions that regulators were taking in response to the outage, McElfresh did note that discussions with regulators are occurring.
Strong wireless performance
McElfresh relayed strong performance for the company, saying that the wireless industry is healthy and rational.
“Our growth in our financial results isn’t from just subscriber growth or just pricing actions and a growing ARPU,” he said, “it’s from both: growing subscribers and growing ARPU. And doing it with industry-leading churn, which means the service side continues to improve and get stronger and better, and that translates to really great EBITDA performance.”
Looking forward into 2024, McElfresh said, “My core priority is to deliver the operating plan that delivers the guidance in terms of customer subscriber growth and operating leverage…I couldn’t be more excited, couldn’t be more convinced that the changes that we’re making at AT&T are driving the right momentum in the direction of where customers want us to go.”
AT&T added more than 500,000 wireless subscribers in the fourth quarter, and when asked about the company’s fourth quarter guidance, McElfresh said nothing has changed and that AT&T still expects to see healthy business going forward.
“Our growth objective isn’t measured exclusively by raw net add numbers. We have been very disciplined in how we go to market, very disciplined in the subscribers that we seek to attract to the AT&T family. And I think we’ve demonstrated this now three years running. We’ve got the fastest-growing wireless service revenue.”
These numbers, McElfresh noted, are for pure wireless business, not accounting for any revenue from fixed wireless.
New opportunities with existing customers
McElfresh also laid out some opportunities available to AT&T, starting with expanding existing customer relationships over seeking new ones.
“Not every fiber customer of AT&T is a wireless customer of ours; not every wireless customer of AT&T that has access to our fiber is a fiber customer of ours,” he said. “I call that upside against a customer base that we already know. And in fact, they’ve been with us for a long time. And so the risk of expanding your book of business with that account is much safer than it is for a new prospect where you have no relationship.”
McElfresh also pointed out that, because AT&T is not the share leader in small to medium-sized wireless business, there is opportunity for growth in both enterprise business and mid-market. He also noted growth in the value segment—single line or two lines—an area which, in the past, AT&T has not focused much priority on.
Consistent customer offers
AT&T’s pricing dynamic has been well received by investors. When questioned on the durability of the strategy, McElfresh said the company and its strategy are customer-led.
“We listen to what customers expect,” he said. “They are willing to pay for services that are rendered to them the way they want it. And as we tune our pricing strategy broadly with our existing mobility base, we’re letting that guide us.”
He also described the value that AT&T hopes to offer to existing customers.
“We’ve got both fiber and wireless,” he said, “and we can make a very durable relationship with that household—really hardened against any competitive threat—when we lean in and invest like that. The customer gets what they want, and we’re able to walk the industry up an ARPU stack, which all investors should be pleased with. That’s why I say this wireless industry is healthy and rational. It will move. It will adjust. But by and large, all the plays that you see right now, I think, support that statement.”
Fixed wireless
AT&T is taking a targeted approach with its fixed wireless product.
“We’re very disciplined in how we take the fixed wireless product set and apply it geographically in the market and customer by customer,” McElfresh said. “And where we’ve got other products and services, having both networks under our care, we put our priority on fiber or our higher-speed fixed networks and serve our customers in that fashion.”
He noted other opportunities in fixed wireless.
“Fixed wireless for the mass market consumer was one track to think through,” he said. “There’s a complete parallel world in our business segment, even though this isn’t something that pops inside of our business wireline P&L: the use of fixed wireless for remote medium-sized businesses and small businesses is really a successful product. The consumption dynamics of that customer set are much lower than the average consumer.”
Fiber expansion
McElfresh reported that AT&T is on track to meet its commitment of 30 million fiber home passings by 2025 and foresees continued growth after that.
“We feel like we’ve got the right investments in our supply chains, in our delivery teams, in our construction and engineering organizations,” he said. “I mean the volume at which we’re bringing on new fiber locations in our footprint are fantastic.”
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