AT&T grew its fiber base by 1.1 million net adds in 2023, marking the fifth consecutive year where the carrier has generated more than 1 million subscribers. During fourth-quarter earnings CEO John Stankey said that growth reflects new customer wins and lower churn, trends that he sees as sustainable for the company.
Over the past three years, AT&T fiber subscribers have increased by 3.4 million (or by nearly 70%) to more than 8.3 million. Compared to 2020, the company more than doubled its fiber revenues to over $6.2 billion in 2023.
Following a slowdown from the previous year's activity, Stankey told investors the market has reached a “more normalized level” that will continue into the new year. He said AT&T intends to improve its performance by targeting under-penetrated segments like small to medium sized businesses.
In less positive news, AT&T's Business Wireline segment was down 10.3% year over year, which Stankey attributed in part to about $100 million in intellectual property transaction revenues the company saw in the fourth quarter of 2022 that did not repeat in 2023. Adding to that, wholesale revenues were “weaker than expected.” Those are important revenues in the segment because they tend to be higher margin, more resilient, subscription-based services.
AT&T has been impacted by “a fair amount” of restructuring going on in the industry relative to access services and wholesale, according to Stankey, driven by M&A activity and consolidation, as well as changes in technology.
AT&T’s Business Wireline troubles come amid Verizon indicating last week that it would take a $5.9 billion impairment charge in its Verizon Business wireline group in the fourth quarter of 2023. Recon Analytics analyst Roger Entner said he thinks the impairment charge stems largely from the fact that businesses have, for several years now, been replacing their MPLS lines with software-defined wide area network (SD-WAN) technologies. Following AT&T's Q4 earnings report, Entner told Fierce Telecom that the same trend is impacting AT&T's Business Wireline segment.
However, Stankey said AT&T’s visibility for the segment heading into 2024 is “better than where we have been,” with plans to execute differently. “We’re really shifting into the mid-market and trying to be a much more effective provider into the mid-market, and we are in fact, seeing the green shoots of that occurring,” he added.
That shift might move slowly, as it requires AT&T to open up entirely new distribution channels, cultivate new relationships and possibly re-bundle, reprice and repackage its products “a bit differently to be effective in that space."
AT&T remains on track to pass 30 million consumer and business locations with fiber by the end of 2025. Stankey touted “better-than-expected returns” on its fiber investments that could potentially expand the opportunity to go beyond that initial target by roughly 10 to 15 million additional locations.
While fiber remains its focus, the carrier also will push its nascent AT&T Internet Air fixed wireless access service. Stankey said AT&T is “well positioned” to grow its networking portfolio that combines fiber, mobile, fixed wireless and satellite technologies.
AT&T Q4 financials
AT&T’s fourth-quarter revenue of $32 billion was up 2.2% from the same quarter last year. Revenues for the full year totaled $122.4 billion, up 1.4% from 2022, driven by higher revenues from Mobility, and to a lesser extent, Mexico and Consumer Wireline revenues. Although, those were partially offset by the lower Business Wireline revenues.
In total, broadband revenues grew more than 8% year over year.
The company came in above its guidance with $16.8 billion in free cash flow, an improvement of $2.6 billion year over year, or up 19%.
Last year AT&T lowered net debt by about $3.3 billion, which was also burdened by $1.7 billion increase year over year for changes in foreign exchange rates related to debt overseas.
In July, the carrier achieved a $6 billion cost savings target ahead of schedule, and set a new target for $2 billion of cost savings by mid-2026. Stankey said it is “making strong early progress on this target,” in part by reducing vendor financing obligations by $3.3 billion in 2023.
In 2024, AT&T expects to dedicate more cash to debt reduction, but it will also see higher spend on capital projects.