AT&T delivered what some on Wall Street called a “mixed bag” this morning, even though many of the metrics the carrier reported were good.
It reported fourth quarter 2023 revenues of $32 billion, up 2.2% year over year. Full-year Mobility service revenues were up 4.4%, which was above guidance.
AT&T reported 526,000 postpaid phone net adds in the fourth quarter and more than 1.7 million for the full-year. Postpaid phone churn was low at 0.84%.
However, it reported 132,000 prepaid phone losses, and some analysts are speculating that AT&T’s and Verizon’s good postpaid phone net adds may be coming at the expense of their prepaid businesses. Analyst Jonathan Chaplin with New Street Research wrote, “Verizon and AT&T missed prepaid expectations by a combined 337,000. It appears, based on results so far, that postpaid is cannibalizing prepaid at a faster pace than expected. This requires further investigation.”
AT&T reported prepaid churn was 2.97%, with Cricket substantially lower, versus 2.87% in the year-ago quarter.
The one major down-note on its earnings was that AT&T guided for 2024 adjusted earnings per share (EPS) of $2.15-$2.25, which is below the $2.42-$2.47 Wall Street analysts had estimated. And this is what appears to have caused AT&T’s stock to drop about 3% in early morning trading.
Other metrics
In 2023, AT&T achieved more than $6 billion in cost savings, and it said it’s making strong early progress on achieving an incremental $2 billion+ run-rate cost savings target by mid-2026.
The company’s mid-band 5G spectrum now covers more than 210 million people, achieving its 2023 year-end target.
For the full year, AT&T expects:
- Wireless service revenue growth in the 3% range,
- Capital investment in the $21-$22 billion range, and
- Free cash flow in the $17-$18 billion range.
Asked about capital intensity, AT&T CEO John Stankey mentioned open RAN. The carrier had announced in December that it will work with Ericsson to introduce open RAN technologies in its network.
Stankey said today, “The fact that we’re moving to O-RAN will give us another way to kind of manage some of our capital intensity. It will be one of the tools that we do to manage our portfolio of capital investment between fixed and mobile services.
And AT&T has previously indicated that it will scale back its capex moving forward. CFO Pascal Desroches said, “We expect to operate at mid-teens capital intensity long term. We’re committed to that.”
Fixed Wireless Access (FWA)
AT&T’s FWA product is called AT&T Internet Air. The product gained 67,000 subscribers in Q4, ending with a total of 93,000 subs.
Stankey is often asked about the product, and he consistently gives the same answer: that AT&T prefers fiber for fixed broadband, but it will use FWA in certain types of circumstances.
Today he said, “I don’t expect that we are going to be pushing the product in those same ways that some others in the market are pushing it.”
But he said there are a lot of small businesses that have usage profiles that fixed wireless is well-suited for. “It’s something that we’ll lean into this year,” said Stankey. “We have places that because of our spectrum profile and our share position in particular markets, we can maybe lean in a little bit more aggressively.” He also said, “We will continue to use it very, very actively in our transition away from legacy assets as we begin to shutter our copper footprint.”
Third Bridge analyst Jamie Lumley wrote, "One potential unknown for AT&T is how much it will be able to scale its fixed wireless product, Internet Air. We’ve heard from our experts that the company could ultimately gain about 3% share of the residential broadband market, though competitors Verizon and T-Mobile have a considerable head start."