AT&T’s CEO says it has strategies to attract more converged customers
AT&T’s bet on its wireless and wireline converged strategy continued to bear fruit in the third quarter as a growing group of customers purchased a service bundle that included wireless service.
As of the end of the third quarter, nearly 43% of AT&T’s Advanced Home Internet customers also had a postpaid wireless account.
John Stankey, CEO of AT&T, told investors during its third-quarter earnings call that the increase in converged customers spanned both its traditional territories and others it entered after completing its acquisition of Lumen’s FTTH assets earlier this year.
“We added approximately 350,000 customer relationships to our base of converged accounts in the third quarter, which is a faster pace of sequential growth than we achieved in the second quarter,” he said. “This includes momentum in territories we acquired from Lumen, where converged penetration has increased by 250 basis points since we closed the transaction in early February.”
But the telco is not standing pat. By leveraging its wireless spectrum and fiber assets, it plans to roll out new packages.
“We’re reaching into this large, underpenetrated opportunity with new plans and pricing strategies designed to bring more converged customers onto our network,” Stankey said. “As we expand our fiber reach, we're using tiered introductory pricing to build penetration and anchor the home early across a wide range of customer cohorts we can grow over time.”
Advancing fiber reach
AT&T's key priority is to expand the reach and growth of its fiber broadband network beyond its traditional wireline footprint.
The service provider recently announced an agreement with Global Infrastructure Partners, a part of BlackRock, and CPP Investments to form a joint venture that includes Gigapower and the fiber assets it acquired from Lumen.
The JV will operate as a leading wholesale fiber commercial open access company and will include Forged Fiber 37 – the newly created subsidiary holding the fiber build engine, network assets, and operations that AT&T recently acquired from Lumen, and Gigapower – AT&T’s existing wholesale fiber joint venture with GIP.
The telco is seeing its fiber customer base rise in the Lumen markets as it converts them to AT&T-branded fiber, a process it said is nearly complete.
“As we convert the Lumen markets to the AT&T-branded fiber, as we put the business processes in place that we have honed in our other operating regions and apply them to those markets, we're seeing penetration march up,” Stankey said. “That penetration is marching up in a manner that's consistent with the business case that we outlined in our goals.”
But it’s not stopping there.
AT&T also reached a multi-year agreement with Corning to supply the fiber it needs to support its goal of reaching 60 million-plus fiber locations by the end of this decade.
Pascal Desroches, CFO of AT&T, said the JV and the new fiber investments are part of a broader plan to help it meet its fiber expansion goals.
“As we continue to extend our industry-leading scale in fiber, we are becoming more effective in how we plan, build, install, and calibrate the pace of our network deployment,” Desroches said. “We believe this positions us to reach 60 million-plus locations with fiber by the end of the decade with annual capital investment that is roughly $1 billion lower than we previously planned.”
He added that for 2027 and 2028, this plan represents annual capital investment in the $22 billion to $23 billion range.
“Based on the attractive opportunity we see to grow fiber and converge customers as we expand our fiber reach, we expect to reallocate this capital into the business primarily through working capital in support of customer acquisition investments, as well as higher interest payments,” Desroches said.
Continued broadband gains
AT&T saw home internet broadband growth across both its fiber and wireless Internet Air platforms.
Advanced home internet revenue rose 6.1% year over year to $23.9 billion, including an impact from Lumen’s Mass Market Fiber business that closed in the first quarter, and reflecting increases in fiber and AT&T Internet Air revenues.
In all, AT&T added 769,000 total consumer and business Advanced Connectivity internet net adds, a record quarter, including 442,000 fiber and 327,000 fixed wireless subscribers.
“This was a record quarter for combined net adds across these services, driven by the significant increase in our Fiber reach, our deeper mid-band spectrum position, positive seasonal dynamics, and strong uptake of our introductory pricing,” said Desroches.
Looking to the fourth quarter, AT&T expects Advanced Home net adds will moderate as it typically sees lower demand in this category during the holiday season.
Fiber ARPU declined 4% year over year in the third quarter.
Desroches said the lower ARPU is related to several factors, including traction with its introductory pricing, the growing base of converged accounts that earn discounts, and growth in lower-ARPU fiber customers on the Quantum brand in territories it acquired from Lumen.
“In the near term, we expect fiber ARPU will continue to be impacted by these dynamics, including during the fourth quarter, when we anticipate a similar year-over-year decline compared to our third quarter results,” he said.
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Here’s other news on AT&T:
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· AT&T’s Lumen fiber deal could boost its converged business services outlook
· AT&T’s CEO says its scalability enables agility in its fiber build
Balancing next-gen gains, legacy losses
AT&T reported third-quarter revenues of $32.3 billion, up 5.3% from $30.7 billion in the year-ago quarter.
The company attributed the results to growth in Advanced Connectivity wireless service and equipment revenues, and fiber revenues, which include the impact of its first-quarter acquisition of Lumen’s mass markets fiber business.
However, AT&T’s gains with fiber and other advanced services were offset by declines in legacy revenues as it continues to decommission its copper-based network.
“In our legacy segment, service revenues declined approximately 25% year over year, consistent with our expectation for continued 20%-plus declines as we power down copper-based services and migrate customers to more advanced and reliable technologies,” Desroches said. “Copper retirement remains an integral part of our overall cost transformation, and we remain on pace to achieve our target of $4 billion in annual consolidated cost savings by the end of 2028.”
He added that “legacy EBITDA declined about 27% and we continue to make progress taking costs out of the business as we ramp the retirement of legacy wire centers” and that “our fourth-quarter results will be impacted by unfavorable vendor dispute settlements that will be primarily reported within the legacy segment.”
Looking ahead, AT&T expects service revenue to grow in the low-single-digit range annually.
AT&T also forecasts Advanced Connectivity service revenue growth in the mid-single-digit range annually, including expected growth of 5% in 2026, while legacy service revenues are expected to decline by 20% in 2026 and be immaterial by the end of 2029.
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About the Author
Sean BuckleySean Buckley
Sean is the Editor-in-Chief of Lightwave. He establishes and executes Lightwave's editorial strategy across its website, email newsletters, events, and other information products. Before coming to Lightwave in July 2023, he served as editor of Broadband Communities. Earlier, he served as senior editor of FierceTelecom and the editor of the former Telecommunications Magazine. He got his start in the optical industry in 1998 when he became the editor of enterprise and optical networks at Information Gatekeepers. He has a BA in English from the University of Massachusetts, Boston, and lives in Dracut, Mass, with his wife, two sons, and his cat, Dove.
