Categories Concall Highlights, Earnings, Technology

AT&T Inc. Q2 2023 Earnings Conference Call Insights

Key highlights from AT&T Inc. (T) Q2 2023 Earnings Concall

Management Update:

  • [00:22:20] T said that by the end of 2023, it expects to reduce net debt by around $4 billion, excluding any potential FX impacts, which will put them at about the 3 times range for net debt-to-adjusted EBITDA.

Q&A Highlights:

  • [00:26:52] Brett Feldman of Goldman Sachs asked about some insights on the wireless business for 2H23, including any unique headwinds, market environment, and changes to T’s go-to-market strategy. John Stankey CEO said that the market is demonstrating more resiliently than expected, with good volumes and activity. Demand has been solid, and the industry is responding well to growth. T feels comfortable with where things are and don’t see any near-term concerns about demand.
  • [00:30:23] John Hudlick at UBS enquired if T is considering any promotional strategies to address the decline in gross adds, and what are the reasons for the decline. John Stankey CEO replied that AT&T is not planning to make any dramatic changes to its approach to acquiring customers. The company is confident in its current strategies and tactics, and it believes that these strategies are sustainable in the long term.
  • [00:30:58] John Hudlick at UBS also asked to comment on the pricing environment in wireless and whether AT&T plans to raise prices in the future. John Stankey CEO said that AT&T will continue to manage its pricing carefully, looking for opportunities to increase ARPU while maintaining low churn.
  • [00:34:56] Simon Flannery of Morgan Stanley asked if the capex would be about a billion lower in 2H23, and if the capital invested would be in the $23-23.5 billion range, lower than the previously stated $24 billion. Pascal Desroches CFO said AT&T is on track to spend around $24 billion in capex in 2023, with 1H23 already accounting for more than half of that amount. The company is confident in its ability to deploy spectrum efficiently and meet its goals for coverage and homes passed in fiber.
  • [00:35:26] Simon Flannery of Morgan Stanley enquired about an update on AT&T’s wireless network plans, including the 200 million mid-battle pops milestone, 3.45 GHz spectrum, and Internet Air fixed wireless product? John Stankey CEO said that AT&T is pleased with the performance of its Internet Air fixed wireless product, especially in the business segment. The product is expected to be key in helping AT&T reduce costs and retain valuable customers as it transitions out of some of its legacy infrastructure.
  • [00:38:32] Simon Flannery of Morgan Stanley asked about any thoughts on 2024 in terms of pop coverage and overall capex levels. Pascal Desroches CFO said AT&T has invested heavily in its networks in recent years, but the company expects to reduce its capital expenditures in 2024. The company will provide more specific guidance later this year.
  • [00:39:43] Philip Cusick at J.P. Morgan enquired about the status of AT&T’s deployment of 3 GHz spectrum for 5G across its cell sites. Pascal Desroches CFO said T is on track to reach its goal of 200 million POPs covered by the end of the year, with 175 million POPs covered as of the end of 2Q.
  • [00:39:55] Philip Cusick at J.P. Morgan asked about the seasonality in the fiber business in 2Q and if positive seasonality is expected in 3Q. John Stankey CEO replied that AT&T expects the fiber and broadband market to remain soft in 3Q due to lower housing movement activity. However, AT&T is confident in its ability to continue to add customers through share take.
  • [00:43:32] Michael Rollins at Citigroup asked about an update on the longer-term plans for fiber and broadband, and how programs such as ACP are influencing those plans. John Stankey CEO said AT&T has identified two-thirds of its footprint as being attractive for fiber investment, and the company is planning to compete for subsidies in the final third. The company expects the process to unfold in 2024, and awards will likely not impact AT&T’s business in 2024.
  • [00:48:04] Michael Rollins at Citigroup asked that does fixed wireless play a different role in AT&T’s broadband aspirations than it did previously. . John Stankey CEO replied that fixed wireless will continue to play an important role in AT&T’s broadband aspirations, especially in areas where fiber investment is not economically feasible. The company also sees fixed wireless as a good option for businesses that do not require high bandwidth.
  • [00:50:58] David Barden from Bank of America asked if any federal, state, or municipal organization ever flagged the lead issue at AT&T in the past 50 or 70 years. John Stankey CEO said AT&T has had a long history of working with federal, state, and environmental regulators on safety issues, including lead.
  • [00:51:10] How does the lead issue at AT&T affect the company’s financial situation, credit rating, capital allocation, and dividend? John Stankey CEO said the company has not had any material claims related to lead exposure, and it is currently working with its labor union to address the issue. AT&T has not disclosed anything material to credit agencies about the lead issue.
  • [00:55:52] Peter Supino of Wolfe Research asked about the long-term implications of legacy network shutdowns and other permanent differences between consumer wireline segment margins and SharePlay broadband margins. John Stankey CEO said AT&T is shutting down its legacy copper network in a rolling process, which will reduce costs and improve margins in the long term. The company is confident that it can operate the business profitably once it has moved out of some of the embedded cost structure.

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