AT&T’s Lumen fiber deal could boost its converged business services outlook

Speaking to investors during its fourth-quarter earnings call, John Stankey, CEO of AT&T, said the company will increase its annual fiber build, enabling it to deliver wireless and wireline bundles to more consumers and businesses.

“Beyond 2026, we plan to expand our fiber reach by approximately 5 million locations annually through the end of this decade,” he said. “We expect this to drive rapid expansion of our opportunity to sell fiber and 5G together, to both households and businesses at unmatched scale.”

Capitalizing on convergence

AT&T’s fiber network has become a catalyst for its wireless and wireline convergence strategy, which focuses on providing bundled service packages for consumers and businesses.

In markets where AT&T has fiber, the service provider estimates its share of postpaid phone subscribers is 10 percentage points higher in areas where it offers fiber.  

“We estimate that our share of postpaid phone subscribers is 10 percentage points higher in areas where we offer fiber and in areas where we don't,” Stankey said. “The power of our converged offers is evident across our business. In areas where we offer converged services, we rank #1 in brand love and #1 in Net Promoter Score with consumers and small businesses in both wireless and Internet connectivity.”

He added that “we're #1 or #2 with medium-sized businesses and enterprises. Scores for our converged offers are not simply better than our stand-alone services; they're improving in most categories.”

Legacy to next-gen tangles

As in earlier quarters, AT&T continued to contend with the growth of fiber, wireless, and IP services, while its legacy business lines continued to erode.

AT&T’s Business Wireline revenues declined 7.5% year-over-year due to what the company noted was continued declines in legacy and other transitional services of 17.5%, partially offset by 6.8% growth in fiber and advanced connectivity services.

Operating expenses were down 8.2% year over year, driven by lower personnel costs, savings from transformation initiatives, and lower network costs.

Pascal Desroches, CFO of AT&T, said its business customers are leveraging a range of wireline and wireless services, including Internet Air.

“Our business customers continue to use a range of fixed connectivity services across different stages of their life cycles,” he said. “Over the past few years, growth in our business fiber and advanced connectivity services, which include fixed wireless, has been more than offset by declines in business transitional and other services, which include mature product categories such as VPN.”

Looking forward, Desroches expects business service revenues from wireless, fiber, and fixed wireless to surpass legacy losses.

“Our outlook anticipates that service revenues from business customers across wireless, fiber, and fixed wireless will accelerate over the next several years and more than offset expected continued declines in transitional and other services,” he said. “Altogether, we expect that total business service revenues within the Advanced Connectivity segment will grow at a low single-digit CAGR through 2028.”

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