AT&T's Stock Price Surges Following Q3 Report

AT&T continues to grow its subscriber base, adding a net 708,000 postpaid phone customers in Q3, the company reported Thursday. AT&T was the first of the big three wireless carriers to report. The company also said its 5G mid-band spectrum now covers 100 million POPs, with 130 million expected year-end. AT&T’s stock price rose 7.72% Thursday to close at $16.74, the company's best day on Wall Street in two years.

“Our consistent results are being driven by an improved value proposition, better network experience and our ability to meet our customers where their needs are,” CEO John Stankey told investors: “We're creating efficiencies through our distribution, and acquisition costs are improving.” Stankey said: “Demand for fast and reliable 5G and fiber is at an all-time high, and our disciplined and consistent go-to-market strategy continues to resonate.”

AT&T is also approaching 1 million AT&T Fiber net adds for the year, to bring total customer locations covered to 18.5 million, Stankey said. “This keeps us on track to achieve our target of 30 million-plus locations by the end of 2025,” he said. AT&T teams “are deploying our mid-band 5G spectrum quickly and efficiently, and the spectrum assets we're rolling out are performing even better than our high expectations,” Stankey said.

Stankey said it’s difficult to get a handle on what 2023 will look like for AT&T. “I don't know exactly what the environment is going to be, and I'm not going to announce anything today,” he said: “When I look at the reality of the inflationary environment and understanding that in this kind of a rapid inflation environment, you need to manage the revenue side of the equation as well as you manage the cost side of the equation.”

Revenue was $30 billion, down from $31.3 billion a year ago. Operating income was $6 billion compared with $6.2 billion in the year-ago quarter. Postpaid churn climbed to 1.01% versus 0.92% a year ago.

All the wireless carriers will eventually need a terrestrial network and “AT&T has an advantage, with the largest terrestrial network among the three national carriers,” New Street’s Jonathan Chaplin wrote investors. On the call, “management didn’t back off their fiber strategy at all -- if anything, they are more bullish on the prospects for fiber than ever (they claim improving returns from a faster ramp in penetration to 20%),” he said: “Supply chain issues could still be impacting the Company, but our conversations with others in the industry haven’t surfaced this as a growing issue.”

After the last quarterly report, AT&T took a hit on Wall Street after reporting lower than expected free cash flow (see 2207210059). “Today’s Q3 reported free cash flow of $3.8B is clearly an improvement … but is it enough of an improvement?” asked MoffettNathanson’s Craig Moffett: “Yes, they’re back to comfortably covering the dividend, but they’re still well short of achieving a run-rate of $10B for the second half as required to meet guidance.”

Moffett said AT&T appears to be looking for financing partners to help fund a consumer wireline fiber build: “AT&T has made building fiber a foundational part of their strategy.” But the capital expenditure required “is enormous, and the payback periods are dreadfully long.”

Next Up 5G-Advanced

During a TelecomTV virtual summit Thursday, experts said as carriers like AT&T deploy 5G, 5G-advanced and 6G are moving forward.

“Clearly, the No. 1 priority is energy efficiency, or green networks,” said David Boswarthick, European Telecommunications Standards Institute director-new technologies. “Even in 5G-advanced, we’re already seeing power saving initiatives,” he said. 6G will be “efficient by design,” he said. “6G will be a network … that connects everything to everything,” he said. “6G will be there to connect gaming, health, education,” he said: “We talk about holographic communications and 3D communications -- the requirements capture is going to be very key for 6G. It’s the diversity, the reach.”

Boswarthick said some are already talking about 12G. Industry needs to “link up the research” and get it “into the standards as quickly as possible,” he said.

Jose Antonio Aranda, Cellnex Telecom global innovation director, predicted 5G-advanced will mean an “explosion” of cellular vehicle-to-everything and connected car technologies.

“All the enabling blocks, building blocks for 6G, are based on what we are doing on 5G-advanced,” said Narothum Saxena, UScellular vice president-technology strategy and architecture. AI and machine learning will be “a foundational part of designing and creating intelligent 6G networks,” he said. Low-and mid-band spectrum will continue to play an important role, with some interest in THz spectrum for some applications, Saxena said.

C-band and other 5G spectrum is playing a big role in fixed wireless deployments, said Joe Barrett, Global Mobile Suppliers Association president. “Operators are really seeing 5G as a viable solution for fixed wireless access,” he said. In more built-up areas, fiber will always be the first choice for broadband, he said: Fixed wireless has a role to play as a back-up option “but also as you get more into the suburbia and rural [markets]. Sometimes you need additional capacity.”