AT&T expects to miss fiber target by 500k due to supply chain issues

ATT technician van
Desroches said AT&T remains focused on fiber despite the hurdle and aims to achieve at least 40% penetration on homes passed. (AT&T)

AT&T CFO Pascal Desroches warned investors supply chain issues would likely prevent the operator from reaching its goal of delivering fiber to 3 million new locations in 2021.

Speaking during an Oppenheimer conference, Desroches said that up through the second quarter AT&T “hadn’t really experienced any impact” from global supply chain disruptions, thanks in part to its status as a “preferred” customer. But he noted “since the start of the third quarter we are seeing dislocation across the board, including in fiber supply.”

Desroches estimated that as a result “we’re probably going to come in a little bit light” of the 3 million target set earlier this year, “probably around 2.5 [million].” He added AT&T doesn’t expect the shortages to impact it over the long term, but said highlighting its struggle was “really important for context because if we’re feeling the pain of this, I can only imagine what others in the industry are experiencing.”

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

AT&T recently set a target to double its fiber footprint to 30 million homes by the end of 2025, with several other broadband providers including Frontier Communications, Altice USA, Consolidated Communications and TDS Telecom all also scrambling to rapidly grow their fiber coverage.

While the CFO did not name AT&T’s fiber vendor, he noted it was a U.S. company which has both domestic and international locations. Both CommScope and Corning would fit that description. The latter recently highlighted an uptick in orders in its optical segment, but CFO Tony Tripeny warned on Corning’s Q2 earnings call it was already facing supply chain disruptions and expected “glass supply to remain short to tight in the upcoming quarters.”

RELATED: Corning on fiber momentum: We’ve ‘never seen anything like this’

Desroches said AT&T remains focused on fiber despite the hurdle, stating that “in a world where the demands for symmetrical speed are increasingly significantly, this is the technology to bet heavily in.”

As its buildout continues, the CFO said AT&T is aiming to achieve at least 40% penetration on homes passed and will have an opportunity to exceed that figure in certain markets. He also noted that its fiber builds will also boost its ability to reach nearby businesses, helping increase returns in its enterprise segment.

Public cloud play

Desroches also touched on AT&T’s recent decision to move its network core to Microsoft’s Azure hybrid cloud, stating “it really is a deal that makes sense. It’s no different from a lot of other areas. You go where there is the most scale, the best economics.”

He explained that AT&T has core infrastructure with a software layer on top. While cloud providers historically didn’t have the tools or capabilities to adequately serve operator needs, AT&T now believes “it is the right time to outsource portions of that software layer to third parties like Microsoft.”

“It provides a very economical way to drive innovation in the software layer without having to invest at the scale that the hyperscalers do,” he concluded.