AT&T adds 246k fiber subs in Q2, tips momentum to accelerate in H2

fiber reel
CFO Pascal Desroches said 80% of net additions were customers that were new to AT&T. (Photo by Michael Smith/Getty Images)

AT&T executives hailed growing momentum in its fiber business after posting strong net additions in Q2 and predicted the pace of subscriber growth will pick up in the back half of the year as large swaths of new coverage come online.

During an earnings call, AT&T CFO Pascal Desroches said the operator reached a “major inflection point in our consumer wireline business,” with broadband revenue growth now surpassing legacy declines.

“We expect profitability trends to improve,” he continued. “We saw they improved from Q1 to Q2 and we expect that to continue as we make our way through the back part of the year.”

The operator added 246,000 consumer fiber customers in the quarter, more than offsetting non-fiber broadband and DSL losses to achieve 28,000 total consumer broadband net additions. The latter figure compared to a net loss of 102,000 in the year-ago period. Desroches said 80% of net additions were customers that were new to AT&T.

AT&T CEO John Stankey noted its consumer fiber subscriber base increased by more than 1 million customers since the same quarter a year ago. The operator ended the quarter with 5.43 million fiber customers, up from 4.32 million in Q2 2020.

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Jeff McElfresh, CEO of AT&T’s Communications division, reiterated on the call it expects to reach 3 million new locations with fiber in 2021 and tipped this new build to spur accelerated net additions in Q3 and Q4.

“The first two quarters of this year have essentially been built selling into our aged fiber footprint from a prior build," he said. "We are currently deploying some of the early stages of our next 3 million build that we disclosed for this year…the bulk of that inventory is going to come online towards the back half of the year. So my expectations are that our net add performance takes a step up as that inventory comes online.”

Consolidated revenue of $44 billion was up 7.6% year on year, with net income of $1.87 billion up from $1.56 billion. Though Consumer Wireline Revenue climbed 2.9% to $3.1 billion, Business Wireline sales slid 4% to $6.1 billion.

Business wireline decline

While AT&T emphasized progress in its Consumer Wireline segment, analysts at MoffettNathanson pointed out its Business Wireline division “will be its second largest business after upcoming divestitures.” And the outlook there isn’t exactly rosy.

New Street Research analysts branded the segment’s Q2 results as “weak,” a conclusion MoffettNathanson analysts agreed with.

“As with peers, AT&T’s Business Wireline business held up better than we would have expected, but like Verizon’s, now that the COVID crisis impacts are ebbing, results are getting worse instead of better,” they wrote. MoffettNathanson warned “the industry trend here is troubling. Verizon, AT&T, and Lumen (which has not yet reported Q2 results) have all shown deteriorating trends in this important segment.”