AT&T's Positive Outlook and Growth Drivers for 2023
2023-06-20
On June 20, 2023, the Bank of America C-Suite TMT Conference call featured Pascal Desroches, the Chief Financial Officer of AT&T Inc. During the call, Desroches and David Barden discussed the state of the industry, the key drivers of the business, the competitive landscape, and the company's outlook.
According to the management of AT&T, the industry is healthy, with growing subscribers, record wireless service revenues and profits, and low churn. They expected a normalization of industry growth in 2021 and 2022, although they anticipated challenges due to a government contract they walked away from and slightly elevated churn. Despite these challenges, they remained confident in the market and raised prices to signal this confidence.
The key drivers of the business discussed in the meeting were the fiber build and the enterprise side. The fiber build was expected to contribute to both top-line and bottom-line growth by taking out the copper network infrastructure, while the enterprise side had opportunities for growth through the addition of enterprise fiber footprint, new suite of services that would be unleashed by 5G, and massive opportunities to take cost out of the business.
The competitive landscape in the wireless industry seemed to be rational, with prices moving in the right direction. AT&T's peers had raised prices twice in the last year, indicating confidence in the industry. AT&T was looking for opportunities to move consumers up the value stack, such as through higher price plans and additional products and services. The wireless industry's interaction with the cable industry was also discussed, with AT&T stating that the cable industry's tools had taken a dent out of the market in the last couple of years. However, AT&T believed that the quality and economics of the subscribers added by cable companies were not as good as those of wireless companies.
The company's outlook for the quarter/year was positive, with a target of achieving $16 billion or better in earnings and cash, which was higher than the Street consensus. The capital investment would continue to moderate, and the company was on track to achieve their major objectives. They expected to deleverage between now and the first quarter of 2025 and were comfortable with their cadence to reach their deleveraging target of two and a half times.
The company's capital spending plans included deploying 200 million POPs for mid-band spectrum deployment, adding 2 million to 2.5 million fiber subscribers, and continuing with other plans as per their objectives. The capital investment would gradually step down in the back part of the year to get to their new run rate going into 2024. The company aimed to deleverage between now and the first quarter of 2025, and they had a deleveraging target of about two and a half times for 2025.
In conclusion, the Bank of America C-Suite TMT Conference call provided valuable insights into the state of the wireless industry and AT&T's position within it. Despite challenges, the company remained confident in the market and had a positive outlook for the quarter/year. The key drivers of the business, the fiber build, and the enterprise side, were expected to contribute to growth, and the company's capital spending plans were aligned with their objectives. Overall, the call provided a comprehensive overview of AT&T's strategy and outlook for the future.