AT&T is hopeful that the tax reform bill passed by the Republican-led Congress will drive business customers to invest in more strategic services like Ethernet and managed services.
John Stephens, CFO of AT&T, told investors during the UBS 45th Annual Global Media and Communications Conference that tax reform could fuel new growth and demand for strategic business services will rise.
“Business fixed investments have been pretty slow over the past few years,” Stephens said. “We expect that with the passage of tax reform, business fixed investments will step up and the demand for strategic business share will grow.”
However compelling that thesis is, the service provider was not immune to large telco growing pains in the third quarter.
AT&T reported third-quarter business services revenues of $17.1 billion, down 0.7% from $17.8 billion in the same period a year ago. However, legacy services pressure revenues as the structural transition of business wireline continues.
Unsurprisingly, new services like Ethernet and VPN drove gains in strategic business services. The service provider continued to make efforts to migrate more of its network functions to SDN. As of the end of the quarter, 45% of AT&T's network functions were virtualized. AT&T is beginning to generate significant cost savings from its NFV/SDN initiatives.
“We believe we continue to take market share in that space and we feel like the team is doing really well, but we do have some headwinds on voice,” Stephens said. “We’ll continue to face those headwinds as we go through that inflection point where strategic services growth outpaces voice, but we’re not quite there yet.”
In the near-term, AT&T will focus on two areas to bolster business revenues by offering businesses the ability to bundle wireless with strategic wireline services.
“We’re bundling wireless with those strategic services and that’s giving us a great answer for the overall business,” Stephens said.
Stephens reiterated how the ongoing SDN and NFV is also driving down costs within the business services segment. As of the end of the third quarter, AT&T had 45% of its network functions virtualized.
“The other piece is we’re having tremendous results from cost management of the business services segment by implementing SDN and NFV,” Stephens said.