AT&T mines for business services opportunities in wireless, mid-market segments

AT&T’s CEO John Stankey told investors during the Goldman Sachs Communicopia Conference that while the company has continued to progress in repositioning it as a dominant broadband and wireless provider, it admits it still has more work to go to improve its business services segment.

“We still want to see some improvement in our business segment,” he said.

During the second quarter, AT&T reported that business segment revenues were $5.3 billion, down 5.6% year over year due to what AT&T said was lower demand for legacy voice and data services and product simplification, partly offset by growth in core connectivity services.

Stankey said that there are various dynamics that are affecting the business services segment, including customers refreshing technology and services. “There’s a variety of things that are going on in the business segment,” he said. “Part of it is there's a secular technology change that's occurring. We’ve delivered more bandwidth to customers with more features for less money.”

He added that a majority of its big customers are migrating to next-gen services.

“We’re seeing the largest customers take advantage of that dynamic and self-performance,” Stankey said. “When you have businesses largely built on data centers that don't have distributed assets, there's undoubtedly an opportunity to self-perform.”

Mobile growth dynamics

While the wireline side of the AT&T Business Solutions segment saw struggles in the second quarter, it saw an upswing in the wireless component. The company’s second-quarter business wireless service revenues grew 9.1%.

Stankey said that not only is the demand for connectivity increasing amongst its business customers, but also greater adoption of wireless services. “One of the things that we should all step back and realize is that businesses today are getting more innovation on mobile than in fixed,” he said. “Their fixed networks are important for them to get to the cloud. But we're now seeing large businesses say, "I can innovate my business when I think about mobile differently."

He added, “When you think about how we do in the business segment, I think it's probably shortsighted to say, "Well, the wireline business is declining at this rate."

When AT&T talks to its largest customers, its sales team will ask these clients how the telco can satisfy wireline and wireless needs as new applications emerge. “When you call on a Bank of America or a Target, you don't want to just be in there selling fixed infrastructure,” Stankey said. “You want to sell fixed and mobile. And that's what we can do on a consolidated basis and have very efficient distribution.

Pursuing medium business opportunities

Being one of the largest telcos, AT&T has traditionally focused its business services solutions efforts on large enterprises. However, AT&T sees opportunities to take a share of the medium and small to medium-sized business markets.

Stankey said that to target these types of businesses with cloud and virtual services, AT&T will have to take a different approach by trying to understand how these segments purchase services.

“AT&T was not well suited to the mid-part and the low end of the market based on how customers are buying today two segments that use cloud-based services and SDN,” he said. “Those customers buy in different ways: sometimes they use integrators and sometimes they buy from online communities. We've been retooling the business to ensure we're present in those areas to win and build the right distribution partnerships.”

AT&T maintained its focus on the large enterprise market, enabling the cable industry to gain a share of these segments with a partnership approach that can offer an array of wireline and wireless services.

“Cable has done this very well,” Stankey said. “It wasn't a place we were hunting because we worked in the more complex upmarket, high-performance networking business. The shift that's occurred now within the business is a reorientation to balance our business, maintain a relevance high end, and penetrate more aggressively in the mid-part of the market with the combined offer we have, both fixed and wireless, through partners and through direct.”

While this opportunity could be compelling for AT&T, Stankey cautioned that while we are “now starting to see that turn, it’s going to take a little bit more time to get there.”

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