AT&T Inc. (T) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Strong Subscriber Growth: AT&T reported solid growth in wireless and broadband subscribers, with 419,000 postpaid phone net adds in Q2 and a total of 768,000 in the first half of the year.

• EBITDA Growth: Mobility EBITDA grew by over 5% in Q2, driven by service revenue growth and margin expansion. Consumer Wireline EBITDA also saw a 7% increase, fueled by fiber revenue growth.

• Fiber Expansion: AT&T continues to expand its fiber footprint, now reaching nearly 28 million locations, with plans to exceed 30 million by the end of 2025. The company also highlighted the success of AT&T Internet Air.

• Debt Reduction: AT&T is making progress in reducing net debt, aiming to reach a net-debt-to-adjusted EBITDA ratio in the 2.5 times range in the first half of next year.

• Free Cash Flow: The company generated $4.6 billion in free cash flow in Q2, up nearly $400 million year-over-year, and remains on track to meet its full-year guidance.

Pessimistic Highlights

• Business Wireline Pressure: Business Wireline EBITDA declined by 13.9% due to ongoing declines in legacy voice services, although the decline slightly improved compared to Q1.

• Market Normalization: Despite strong subscriber growth, the company acknowledged ongoing wireless market normalization, which could impact future growth rates.

Company Outlook

• AT&T remains optimistic about its full-year financial guidance, expecting continued EBITDA growth, adjusted EPS in the range of $2.15 to $2.25, and free cash flow in the $17 billion to $18 billion range. The company also anticipates higher activity levels in the second half of the year, driven by new device availability and seasonal trends.

Q & A Highlights

• Q: Can you discuss the expected higher activity levels in wireless in the second half and the potential impact on churn and profitability? (John Hodulik, UBS)

  A: John Stankey mentioned that seasonal trends and new device cycles typically lead to higher activity levels. The company is positioned to adjust to customer demand, whether it increases or not, and remains confident in its guidance.

• Q: What can you share about the Gigapower relationship and potential for more open-access relationships? (John Hodulik, UBS)

  A: Stankey deferred detailed updates to a future date but expressed optimism about AT&T's ability to grow profitably with fiber and convergence, highlighting the company's competence in selling both products together.

• Q: How is the Affordable Connectivity Program (ACP) impacting the third quarter, and what are your plans for fiber expansion? (Simon Flannery, Morgan Stanley)

  A: Stankey indicated that ACP impacts are largely managed and not material, with the company on track to meet its fiber expansion targets. Further expansion beyond the initial targets is being considered, with updates expected later in the year.

• Q: Can you elaborate on the $480 million one-time payment related to wireless network transformation? (Sebastiano Petti, JPMorgan)

  A: Pascal Desroches confirmed the payment is related to phasing out a vendor as part of a new agreement, and it was considered in their full-year commitments.

• Q: What are your thoughts on the potential for a volume slowdown in the wireless industry and the room for further pricing actions? (Bryan Kraft, Deutsche Bank)

  A: Stankey acknowledged the possibility of moderating volumes but emphasized AT&T's unique position to drive growth through share take and quality of growth, maintaining confidence in their strategy and the value delivered to customers.