AT&T's 5G and Fiber Network Expansion Drives Growth and Shareholder Value

2024-01-30

AT&T recently held its fourth quarter 2023 earnings call, where key executives discussed the company's performance, strategy, and future plans. During the call, important business questions were raised, providing valuable insights into AT&T's accomplishments, growth areas, capital allocation, and market outlook.

In terms of accomplishments, AT&T highlighted its success in the full year, including the addition of over 1.7 million postpaid phone subscribers, strong service revenue growth, and historically low postpaid phone churn. The company also emphasized its improved wireless position, transitioning from losing wireless share to gaining subscribers over the past three years. AT&T's focus on capital allocation was evident, with deliberate investments in expanding and enhancing its networks to drive incremental shareholder returns.

AT&T has made significant investments in expanding and enhancing its networks, particularly its 5G and fiber networks. The company's mid-band 5G network now covers more than 210 million people, and it has expanded its fiber network to pass over 26 million consumer and business locations. In 2023, AT&T added 1.1 million fiber net additions, resulting in over $6.2 billion in fiber revenues, more than double compared to 2020. Expanding its fiber footprint has led to faster subscriber growth, higher revenues, expanding margins, and improved energy efficiency and maintenance.

In terms of financial performance, AT&T's fourth quarter results were driven by wireless service revenue, broadband revenues, and its operations in Mexico. However, adjusted earnings per share decreased due to higher noncash pension costs, lower capitalized interest, lower equity income from DIRECTV, and a higher effective tax rate. Despite this, the company generated $16.8 billion in free cash flow for the full year and strengthened its balance sheet by reducing net debt, completing a pension liability transfer, and reducing vendor financing obligations.

AT&T expressed optimism about the overall health of the wireless industry and highlighted expected growth areas in the mobility business for 2024, including customer base, service revenues, and EBITDA. The company also emphasized the importance of regulatory structures in ensuring access to the internet and the need for subsidies to keep up with industry changes. AT&T stressed the importance of smart policies and a coherent approach to ensure affordable internet access for all Americans.

When it comes to capital allocation, AT&T's approach involves making decisions that align with its commitments and deliver sustainable returns. The company considers factors such as incremental homes with fiber, efficiency gains, pricing changes, and results on the Gigapower side when making decisions. The CEO emphasized the importance of delivering on commitments and making decisions within the context of those commitments. AT&T aims to balance capital investment and free cash flow while deploying fiber, taking into account factors such as stock performance, interest rates, and growth opportunities.

Overall, AT&T's fourth quarter 2023 earnings call provided valuable insights into the company's performance, growth areas, and future plans. The call addressed important business questions, covering topics such as network expansion, financial performance, market outlook, and capital allocation. AT&T's focus on delivering on commitments, enhancing its networks, and driving shareholder value was evident throughout the call.