AT&T Reports Best Postpaid Adds In a Decade

AT&T reported growth Thursday, adding 928,000 postpaid phone customers in Q3, more than double the 429,000 added by Verizon (see 2110200052). That was the highest number of adds in 10 years, the company said, with 4.4 million wireless postpaid subscribers added over the past year. AT&T also reached an “inflection point” in its wireline business, with broadband revenue growth surpassing legacy decline, executives said on a call with analysts.

AT&T closed its DirecTV sale and still expects its WarnerMedia deal with Discovery to close by mid-2022, CEO John Stankey told analysts: It shouldn’t be “months and months and months before we'd close” TimeWarner “because we obviously want some degree of regulatory certainty.” AT&T has “monetized or announced plans to monetize more than $55 billion of assets over the past year,” he said.

On the call, analysts voiced concerns. “I think everybody has been pretty impressed with the results of AT&T over the last year,” J.P. Morgan’s Phil Cusick told Stankey: “I would only follow up that the market is telling you that investors don’t believe it.”

“I'm actually much more bullish and optimistic about the markets in aggregate,” Stankey responded: “We are moving into what I would call the golden age of connectivity and ubiquity.”

Executives “seemed to endorse our view that federal income support and the [emergency broadband benefit program] are the major driver of low churn and strong adds for the industry,” New Street’s Jonathan Chaplin told investors: “They believe support is likely to continue with the infrastructure bill.” The combined adds of AT&T and Verizon suggest cable companies and T-Mobile, which report next week, won’t get big gains, he said: “It’s plausible that T-Mobile meets consensus.”

AT&T isn’t taking postpaid EBB customers, but executives said federal subsidy programs helped fuel subscriber growth in general.

“There's clearly a stronger consumer out there because of some of the things that the federal government has done with the pandemic to prop up household income,” said WarnerMedia CEO Jason Kilar. The outlook for an infrastructure bill isn’t clear, he said: “You work under assumption that there seems to be some bipartisan view that we need to do the right things around infrastructure, and then broadband and connectivity to the internet seems to come at the top of the list.”

“There's going to be some more federal money that moves into the industry next year,” predicted Jeff McElfresh, AT&T Communications Group CEO. “Some of it comes in the form of a direct subsidy to what's considered to be low-income households.”

AT&T’s Q3 revenue was $39.9 billion, down 5.7% from last year, mostly because of the DirecTV spinoff. Profit was $5.9 billion, a 112% increase.

WarnerMedia revenue increased 14.2% to $8.4 billion due to five Warner Bros. theatrical releases in the quarter, versus one a year ago. Advertising sales were down from last year, which had the delayed NBA season on TNT throughout the summer and benefited from political ads in the fall, the company said. HBO and HBO Max had 45.2 million U.S. subscribers and 69.4 million worldwide at the end of Q3, AT&T said. Domestic subscribership was down from 47 million in Q2.