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'Very Effective' Quarter

AT&T Adds 526K Postpaid Wireless Phones During Q4's 'Resilient' Economy

AT&T had 526,000 postpaid phone net adds and 273,000 AT&T Fiber adds in Q4, the company reported Wednesday. AT&T bested Verizon, which reported Tuesday (see 2401230071), on wireless adds. But AT&T’s adjusted earnings outlook for 2024 fell short of Wall Street's expectations and the company said its $14 billion deal with Ericsson to build an open radio access network would accelerate the depreciation of other equipment (see 2312050049). AT&T closed down 2.97% Wednesday at $16.68.

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AT&T showed again in Q4, and throughout 2023, “that we're delivering consistent, positive operating and financial results, including sustained margin expansion and annual free cash flow growth,” CEO John Stankey said on an analysts' call. AT&T invested in 5G at “historic levels” to “deliver the best network to more customers in more places,” he said. “We've invested a heck of a lot in our networks,” he said.

Stankey said AT&T, Verizon and T-Mobile each likely had “very effective quarters” in Q4. “We all understand how to run our business,” he said. Wireless growth is at a “more normalized level” after a slowdown in 2023, he said. The economy is “resilient” and that trend will probably continue, he said.

The CEO highlighted AT&T’s wireless growth since the start of 2021. “We went from losing wireless share to growing our share of subscribers,” he said.

Stankey urged policymakers to focus on universal service beyond the pending expiration of the affordable connectivity program. “The editorial comment I'll make is, it's unfortunate that we're at this moment,” he said. Current subsidies “unfortunately, in many cases, were set up and structured many years ago, and they've been funded under constructs that have kind of run their time as industry and products have shifted and changed,” he said.

AT&T forecast adjusted earnings per share of $2.15 to $2.25 for 2024, versus the $2.42 to $2.47 consensus estimate. AT&T reported free cash flow of $6.4 billion, $16.8 billion for the year, which exceeded previous guidance. Overall revenue was $32.0 billion versus $31.3 billion a year ago. Operating income was $5.3 billion versus a loss of $21.1 billion a year ago. Postpaid phone churn was 0.84%, the same as last year. Prepaid churn was 2.97%, up from 2.87%.

The carrier said its mid-band 5G spectrum now covers more than 210 million POPs. FirstNet connections hit more than 5.5 million across some 27,500 agencies.

AT&T’s recently unveiled fixed wireless offering gained 67,000 subscribers in Q4, for a total of 93,000 subscribers, the company reported. Verizon posted 375,000 fixed wireless adds in Q4.

"One potential unknown for AT&T is how much it will be able to scale its fixed wireless product, Internet Air,” Third Bridge analyst Jamie Lumley told investors: “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."

AT&T reported 132,000 prepaid phone losses. New Street’s Jonathan Chaplin noted that 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.”