AT&T’s fiber business posted its highest net add figure since Q3 2020, bringing in 338,00 new subscribers in the recent quarter. However, AT&T came away from Q3 2022 with a net loss of 50,000 broadband subscribers as copper losses piled up to the highest level in more than two years. Additionally, the pace of the operator’s fiber expansion slowed, as it added fewer new passings in Q3 than in the previous four quarters.
The fiber net add figure was up substantially from 289,000 in the year-ago quarter. But non-fiber broadband losses also rose year on year from 261,000 to 367,000. The company also posted 21,000 DSL losses.
AT&T’s total number of fiber passings hit 18.5 million in Q3, a sequential increase of 500,000. But that figure came in well below previous quarter-over-quarter increases ranging from 600,000 in Q3 2021 to 1 million in Q2 2022.
On an earnings call, though, AT&T CEO John Stankey noted it is achieving 20% penetration in new fiber build areas twice as fast as it expected when it originally formulated its build plan.
“Now, what we’ve managed to do is effectively take a year off the cycle to get to the 20% mark. That has a huge impact on accelerating cash flows to the front end of the business case, and it has a meaningful impact on the characterization of returns, even if you don’t increase the ultimate assumption of what the terminal penetration is,” he said.
While Stankey declined to say how many of its new fiber customers are internal transfers from its non-fiber broadband, he noted its gains wouldn’t be possible without a substantial number of subscribers coming from competitors. And the share it is taking is coming from “in almost all cases the embedded cable provider.”
Joint venture
Shortly before AT&T’s earnings dropped, Bloomberg reported the operator was seeking a partner for a joint venture which would allow it to undertake additional fiber builds. Stankey declined to address the report directly on the earnings call. However, he did note AT&T’s history of partnering to build up its wireless business.
“We certainly used that kind of an approach before,” he said, adding “it’s been a means for us to think differently about how footprint expansion could be done.” He concluded that as a leader, “I’ve got to keep an open mind to those things moving forward.”
In a note to investors, MoffettNathanson noted a joint venture would allow AT&T to “share the capex burden” of additional fiber builds with a partner. But on the flip side, “it would obviously also sacrifice a proportionate amount of the future growth.”
“What would remain entirely AT&T’s in this scenario would be any bundling benefit that would accrue to their wireless business,” MoffettNathanson continued. “How large that benefit might be, however, is unclear. AT&T’s Cable competitors are, in our view, far better positioned for a bundled future – they are able to offer a bundled offering everywhere while AT&T can today offer a bundle in just 13% or so of the country.”
Financials
Consolidated revenue fell 4.1% year on year to $30 billion, primarily due to the separation of AT&T’s video business in July 2021. Excluding this impact, AT&T said revenues would have been up 3.1% from $29.1 billion in the year-ago quarter. Net income of $6.4 billion was up from $6.3 billion in Q3 2021.
Consumer broadband revenue of $2.4 billion included fiber revenue of nearly $1.3 billion. Overall consumer wireline revenue rose to $3.2 billion while business wireline revenue fell to $5.7 billion.