AT&T's Stephens: Enterprise market challenged by tepid economy, legacy service declines

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AT&T may have secured its business network future with its aggressive investments in fiber to businesses and next-gen Ethernet and cloud services, but a challenging economy and legacy service declines pose challenges to growing business revenues.

John Stephens, CFO of AT&T, told investors during the Wells Fargo Securities Technology, Media & Telecom event Wednesday that the telco’s growing array of strategic services is enabling it to keep and attract customers.

“What we’re seeing is that while the investment in business across the economy telecom carrier is very tepid, very slow, we’re getting good growth on a base that’s now getting close to $12 billion on an annual basis and growing near double digits,” Stephens said. “That’s pretty darn good in this economy and we believe we’re taking share.”

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Stephens added that when the economy starts to bounce back, AT&T “will be best positioned to grow it.”

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While it faces a less than stellar economy, AT&T reported that third quarter business solutions revenues grew slightly during the quarter, rising 0.4 percent to $17.8 billion. The service provider noted that more than 70 percent of revenues are wireless and strategic services.  

The telco reported that revenue shift to wireless and strategic services were 70 percent of total business revenues. Strategic services revenues were up $240 million, or 9.1 percent, year-over-year.

AT&T continues to be challenged by legacy service revenue losses, given its long line of TDM-based services that customers are in various stages of migrating to, such as next-gen IP Ethernet and cloud. As a result, AT&T’s strategic business services growth was offset by the decline in legacy services. Legacy data services declined 15.8 percent year-over-year to $1.8 billion, while legacy voice and other services declined 6.2 percent year-over-year to $3.2 billion.

“Like all companies looking to gain efficiencies and cost savings for some of our legacy products, we are facing real challenges,” Stephens said. “We’ll work through that just like we worked through that issue on the consumer side, which has become a much smaller percentage of our entertainment group.”

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