AT&T(US:T)2024-07-24 16:30Financial Data and Key Metrics Changes - Second quarter revenues were slightly down due to declines in Business Wireline service revenue and low-margin mobility equipment revenues, offset by growth in higher-margin wireless service revenues and fiber revenues [11] - Adjusted EBITDA increased by 2.6% for the quarter, with first half adjusted EBITDA growth at 3.4%, and expectations for full-year adjusted EBITDA growth in the 3% range [11][12] - Free cash flow for the second quarter was $4.6 billion, up nearly $400 million year-over-year, driven by sustained growth in adjusted EBITDA and lower capital investment [12][24] Business Line Data and Key Metrics Changes - Mobility business added 419,000 postpaid phone net adds in Q2, with a 5.3% increase in Mobility EBITDA, driven by a 3.4% growth in service revenues [5][15] - Consumer Wireline added 52,000 broadband subscribers, with AT&T Fiber subscribers increasing by 239,000 in the quarter, leading to a 7.1% growth in Consumer Wireline EBITDA [16][19] - Business Wireline EBITDA declined by 13.9% due to ongoing declines in legacy voice services, with expectations for mid-teens range decline for the full year [20][21] Market Data and Key Metrics Changes - Nearly four out of every ten AT&T Fiber households also choose AT&T as their wireless provider, indicating a strong convergence strategy [7] - AT&T Fiber now passes nearly 28 million locations, with a target to exceed 30 million by the end of 2025 [18][46] - The company expects to continue seeing strong returns on fiber investments, potentially expanding beyond initial build targets by 10 to 15 million additional locations [18][46] Company Strategy and Development Direction - The company is focused on becoming the leading provider of converged 5G and fiber services, leveraging its investment-led strategy to drive consistent results [4][10] - The convergence strategy is expected to drive greater returns on invested capital in both mobility and broadband businesses [8][9] - The company is actively exploring partnerships and capital-light arrangements to expand fiber availability and enhance its converged offerings [9][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year financial guidance despite ongoing challenges in certain business segments [10][12] - The company anticipates higher activity levels in the second half of the year, driven by new device availability and seasonal purchasing trends [6][15] - Management acknowledged the impact of external factors, including network outages and data breaches, but emphasized the company's commitment to reliability and customer trust [59][61] Other Important Information - The company has reduced net debt by about $2 billion year-to-date, with a target of achieving a net-debt-to-adjusted EBITDA ratio in the 2.5 times range by the first half of next year [22][24] - Capital expenditures for the quarter were $4.4 billion, with expectations for total capital investments in the $21 billion to $22 billion range for the year [13][24] Q&A Session All Questions and Answers Question: Concerns about upgrade rates with new iPhone and implications for churn and profitability - Management indicated that they are prepared to respond to customer needs and expect seasonal trends to influence upgrade activity, but the impact of new devices remains uncertain [26][28][29] Question: Update on Gigapower and potential partnerships with open-access providers - Management deferred detailed insights on Gigapower performance but expressed optimism about growth opportunities and partnerships in the fiber space [32][34] Question: Update on ACP and fiber passing targets - Management noted that the ACP impact has been manageable and that they are on track to meet fiber passing targets, with plans to provide further updates on capital allocation strategy [37][41] Question: Fiber build-out pace and Internet Air run-rate expectations - Management confirmed that they are well on track to meet fiber passing targets and expect continued growth in Internet Air, emphasizing a selective approach to deployment [45][50] Question: Race to convergence and market share advantages - Management argued that convergence leads to happier customers with lower churn and emphasized the company's unique position to capitalize on this trend [53][55] Question: Impact of network outages and data breaches on business - Management acknowledged the disappointment over recent issues but emphasized their commitment to reliability and transparency with customers [59][61]