AT&T adds 289K fiber subs in Q3, but supply chain issues resurface

AT&T executives hailed continued momentum in its fiber broadband business in Q3 as the operator added 289,000 fiber customers in Q3, but CEO John Stankey acknowledged deployments continue to be plagued by smattering of supply chain issues.

“Are we seeing some supply stress right now in certain places, as part of the reason why we guided down to 2.5 million this year? The answer to that is yes. It’s coming in interesting places,” he said during the operator’s earnings call. “The great news is when you’re the scale player in the market, we work through those faster and with the preferred position than others and we’re seeing that occur. Whether it’s chipsets for gateways in homes that are necessary to put a Wi-Fi infrastructure and a modem in place or it’s fiber components that are necessary or access to civil engineering, I think we’re working through all those in a respectable fashion.”

AT&T was originally targeting fiber to 3 million new locations in 2021, but warned in August it could miss the mark by 500,000 locations due to supply hiccups. In September, though, Stankey reassured investors the issues it encountered were largely resolved.

On the earnings call, Stankey reiterated it was able to work through an initial raw material shortage encountered by its fiber provider, but said it is now up against tight supply of a key connector component. Analysts at New Street Research noted the operator appeared to add between 350,000 and 55,000 fiber passings in the quarter, which they warned was “a bit shy of the pace needed to hit their 2.5MM target.”

“It’s one of those things where it’s going to be nip and tuck right up until the end,” Stankey said “We’re talking about missing a connector that has to be put in that can bring up a lot of houses every time we put one more of those in on the network. So, we feel good about the ramp.”

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Stankey urged investors not to fixate on the quarterly pace of deployments, but instead look toward annual figures. He said AT&T is initially targeting a rate of 3 million new passings per year, with an eye toward pushing that toward 5 million or higher. He declined to specify its timeframe for achieving that pace, however, AT&T Communications CEO Jeff McElfresh noted its network engineering teams “are getting the fiber laid into the ground, into customer homes in a cycle time that’s about 30% faster than our prior build.”

Metrics

AT&T added 289,000 fiber customers in Q3, down year-on-year from 357,000. CFO Pascal Desroches noted 70% of net additions were new to AT&T. It lost 261,000 non-fiber broadband customers and an additional 22,000 DSL subscribers, leaving its net broadband gain at 6,000.

The operator now has a total of 5.7 million fiber customers, up from 4.7 million in Q3 2020. Desroches said 3.4 million of these are on 1-gig connections.

Consumer broadband revenues increased 7.6% year on year from $2.1 billion to nearly $2.3 billion, while overall consumer wireline revenue (inclusive of legacy voice and data services and equipment) increased from $3.0 billion to $3.1 billion.

Business wireline revenue fell 5.2% year on year to $5.9 billion. Desroches and McElfresh both said trends in the segment are expected to improve in the coming quarters as the operator finishes working through a product mix shift.