AT&T Chief Says BEAD Buildout Won't Start Until Next Year

CEO John Stankey indicated on a call with analysts that he's closely watching the $42.5 billion broadband, equity, access and deployment program but expects only limited buildout this year. “I don't think you're going to see any substantial shovels in the ground and certainly, customers being served in any substantial way this year,” Stankey said of BEAD: “You're going to see projects and monies awarded before we exit this year, and you will see those volumes start to come online as we move into” 2024. Bigger states “will get the bulk of the funding” and are “pretty zoned in on this, and they're moving pretty aggressively to get the process underway,” he said. Bigger states also have more staff to move more quickly on BEAD, he said.

AT&T’s focus in 2023 will be the same as last year , Stankey told analysts. AT&T remains “solely focused on becoming the best connectivity provider with 5G and fiber,” he said. “We're confident we can achieve this because in wireless, we'll maintain our focus on building durable and sustainable customer growth in a rational, return-focused manner,” he said.

Similar to Verizon CEO Hans Vestberg Tuesday (see 2301240053), Stankey said the outlook for 2023 is complicated. “It is a tough environment to predict,” he said: There are “a lot of geopolitical things going on that I think anybody would have a hard time seeing and do a crystal ball on.” Inflation remains a concern, though the economy is “relatively stable” at this point, he said. “We're not seeing anything that's causing us to be extremely concerned,” he said.

AT&T had more than 1.2 million fiber net adds for the year, Stankey said. The company hit “an inflection point” where fiber subscribers outnumber non-fiber DSL customers, he said. It plans to reach more than 200 million POPs with mid-band 5G by the end of 2023, he said.

No Price War

Stankey said on CNBC that AT&T isn’t in a price war with other wireless carriers. “I don’t submit to the view that there’s a race to the bottom going on,” he said: “I actually think the industry is doing quite well.”

Stankey also addressed free cash flow (FCF) on the analyst call. In July, AT&T took a hit on Wall Street after noting a decline (see 2207210059). AT&T continues to “generate meaningful levels of free cash flow even with record levels of investment,” he said: “This gives us confidence in our ability to continue delivering an attractive dividend today and in the future, while also improving the credit quality of that dividend as we expect to increase our cash generation over time.”

Capital expenditure hit an all-time high of $24.3 billion last year based on record investments in 5G and fiber, the company said. Expect similar spending this year, as AT&T builds its 5G network, with declines to come in future years, executives said.

Revenue was $31.3 billion versus $31.1 billion in the year-ago quarter. AT&T reported a net loss of $23.1 billion due to a $29.4 billion pretax charge tied to the company’s legacy wireline network. Postpaid phone churn was 0.84% versus 0.85% a year ago.

FirstNet connections hit 4.4 million across more than 24,000 agencies. New Street said FirstNet appears to account for almost half of AT&T’s postpaid phone net adds in the quarter.

MoffettNathanson’s Craig Moffett questioned AT&T’s calculation of its FCF numbers. “The focus here really SHOULDN’T be on AT&T’s accounting gymnastics to get to a FCF number that nobody really believes,” Moffett told investors: “It should be on the basics of the actual business. How will AT&T convince subscribers to come to, or stick with, AT&T when Verizon is now offering promotions that are just as lucrative as AT&T’s, the cable industry is offering prices that are much cheaper, and T-Mobile has a clearly better 5G network?”