AT&T looks to fiber for revenue growth

fiber
AT&T says its fiber footprint will support both its entertainment business and its wireless business. (Pixabay)

AT&T's recent fiber build-out may have been driven by a deal the company made with the federal government, but now management expects AT&T Fiber to be a solid contributor to revenue growth. 

 

"I think we'll see higher IP broadband, fiber-based broadband revenues," AT&T CFO John Stephens told investors at the Citi 2020 conference this week. Wall Street is paying close attention to AT&T's comments about revenue, since the company has projected anemic revenue growth in the coming years, and some analysts think that even these modest forecasts are probably unachievable.

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Stephens also highlighted the synergies his company expects to realize by offering entertainment packages to customers whose homes are served by AT&T Fiber. The company is banking on its planned May launch of HBO Max to boost subscriber numbers and revenues for its entertainment group. Stephens said AT&T's fiber-to-the-home customers "will be able to bundle HBO Max and any other streaming services that someone might have."

His remarks echoed those made late last year by John Stankey, AT&T president, COO and CEO of Warner Media, at the UBS Global TMT Conference. "We -- there's no reason why -- where we've deployed fiber that we can't be an equal share player to our competitor there," Stankey said. "We have a lot of room to grow there, and we're going to ride that aggressively and get the benefit out of that extensive investment we've made."

Last year, AT&T surpassed the 12.5 million customer locations that the FCC required it to serve with fiber as a condition of the company's DirecTV acquisition. AT&T Fiber now passes more than 14 million locations, and Stephens said this week that he foresees "great joint utilization between not only broadband-to-the-home, but also network backbone for our wireless network."

RELATED: While 5G is in the limelight, AT&T and Verizon's fiber builds are the roadies

Business wireline holding its own

AT&T is working hard to make sure that growth in fiber-to-the-home is not offset by declines in its business wireline unit. The company's legacy voice and data business has been in decline, but much of that decline has been offset by growth in strategic and managed services for business wireline customers. Strategic and managed services revenue was $11.5 billion for the first nine months of 2019, versus just under $7.0 billion for legacy voice and data services.

"Over 60% of our revenue on business wireline as strategic services is next-generation," Stephens said. "So, we're getting through that maturity process. We're getting through that transformation process pretty well and holding on to margins. And so as that continues to grow, we'll continue to be healthier and healthier."

Part of that growth, however, is likely to be a shift in the asset mix. AT&T is currently undertaking a comprehensive review of its assets and businesses under the direction of Bill Morrow, former CEO of Clearwire and Australia's National Broadband Network. Last year, Stankey predicted that the wireline business would be targeted for "rationalization."

"When you think about product rationalization in the wireline business that means geographic and footprint rationalization, and there’s a huge opportunity for us to look at our wireline business and how our customers are laid out and start thinking about what we do to take out layers of cost based on geography we serve and products that we support that maybe have run their course in a fairly mature business moving forward," Stankey said, adding that labor was "clearly an important part" of the rationalization picture. 

AT&T already announced plans to cut hundreds of jobs after it met the requirements set by the FCC for its fiber build-out. The Communication Workers of America said notifications of the job cuts, expected to total about 1,800, took place last summer.

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