- 5 weeks ago
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00:00I want to talk about execution. There's so many issues to talk about with your company,
00:04but just execution. These numbers this morning, John, the street's looking for like 325,000
00:09and you deliver 432,000 monthly wireless phone subscribers in 2Q. What went right, John? What
00:16was the strategy behind a gain that big? Well, I think going into the break, Jonathan,
00:20you referred to the results as fantastic and I would agree with you and I think the team did
00:25an excellent job executing, as you said, and it's not just in our wireless business. It was nearly
00:31370,000 fiber net ads. That's a record for us in this quarter. Look, what went right is what we
00:39told people was going to happen this year as we gave guidance for the next three years.
00:44We said because of the investments we've been making in this business over the last five years
00:49at a sustained and targeted level and the M&A work that we had done acquiring more spectrum
00:55and picking up some additional footprint from Lumen, that you should see a step up in growth
01:00as a result of those things. The team had the asset base it needed to execute and drive growth at
01:05a
01:05faster level and you saw the manifestation of that starting to happen here in this quarter and it's
01:11showing up in an accelerated service revenue growth. It's showing up in accelerated EBITDA growth.
01:16I would even go into our business segment and point out that we had growth in our strategic services
01:22for business for the first time in a very, very long time. And as a result of that, we expect
01:28that
01:28that's going to sustain itself through 28. So we're executing well. We're hitting on all the cylinders
01:34and the engine. And when that happens, the business can deliver the kind of results you're seeing.
01:39And I'm pretty confident we can keep that moving going forward.
01:42John, there's a number that jumped off the page for me this morning as well. It's 42.5.
01:4542.5% of households that purchase the broadband service from you also buy mobile phone service
01:52too. How important has that convergent model been just behind the success you're having and how
01:56important will it be for the remainder of the year? It's extremely important. It's actually,
02:00that number is 45% if you were to normalize it for the Lumen footprint that we just recently brought
02:06in that's diluting the number a little bit. And as you see in our report, that's been ticking up
02:12steadily. And it's important because one, those customers are more lucrative customers when they
02:17buy multiple products and services from us. Two, churn goes down. And that's one reason why you're
02:23starting to see our churn numbers improve this quarter, because we're starting to get that benefit
02:29of that base that is buying both together from us. And three, brand affinity, the customer's happiness
02:36with AT&T and their impression of the brand is much higher as a result of that because the products
02:41are better together. So it's really important we continue down that path. And it's frankly,
02:46one of the most important things as you think about our competitive positioning moving forward,
02:51because we can provide world-class networks in both wireless and fixed that tackle 98%
02:58of what a customer needs to do on the internet. Occasionally, they walk off one of our networks.
03:04And as you look at our partnerships that we're working with the satellite industry,
03:08by this time next year, we'll be able to solve that problem. And so we're the natural place for
03:12people to come and meet their needs on the internet and do it easily on one bill with
03:17one set of services and one support infrastructure. We think we're in a great position as a result of
03:23that. And John, this is a reason why there has been really a price war between different
03:28providers, simply because everybody wants that package, right? They want to get everybody.
03:32How has the competitive landscape changed, though, over the past couple of years with the
03:37introduction of satellite services, of what we're seeing with Starlink, of what we're seeing
03:41elsewhere? You know, I don't characterize it as a price war. I think there's been a stratification
03:48of pricing for customers, depending on what kind of services they want to buy. There's the segment
03:53of the market that needs high-performing, symmetrical gigabit services, very robust wireless plans.
04:00That segment of the market is willing to pay for that. And they pay a premium as a result of
04:06that
04:06exceptional value that they get back. We've played very, very well in that space, given our asset
04:11base. But there's also a segment of the market that's more value-oriented. And I would say choices
04:17have come into the market because of good regulatory posture that have allowed investment that weren't
04:23there before. And those choices are putting more value-oriented products and services at more
04:29attractive price points. But the product and service maybe isn't as robust. And at AT&T, we've played
04:35really well upmarket, but not as well down on the value space. And we've been working hard to get our
04:40product portfolio so that it matches up across the entire continuum of the market. You saw that in
04:46the results this quarter because our account additions, new accounts to AT&T hit like a three-year
04:52high. And that's because we're doing a lot better job downmarket. And there's nothing wrong with
04:58having a more affordable product that's tuned to certain parts of the market. I don't consider
05:03that a price war. I consider that meeting market needs. As long as you're doing the things that
05:08you can do upmarket, which we've done very well. And I think when you see margins the way they are
05:13at
05:14AT&T, this is like a record for us. That's a good sign that we're getting that balance correct.
05:20Over the next five to 10 years, John, how do you see the breakdown of the mix of broadband and
05:25fiber
05:26on one hand, the wireless or the more budget sensitive areas and then satellite from the
05:32likes that you're seeing from Starlink? Look, my point of view is they have a fantastic product.
05:39There's great innovation that's moving in that space. And it fits part of the market that hasn't
05:44been well served, especially in less densely populated areas. And the interesting part about
05:50that is our investment has largely been an urban and densely populated suburban. We haven't pushed
05:57real hard in the rural and less densely populated areas that tends to be more the stronghold of cable
06:03companies. I think they'll do pretty well in that space, bringing an alternative and competition in
06:09there. I think it's going to be very hard to come into the more densely urban populated areas
06:14to compete with that bundle that I just talked about earlier of fiber that is the best product
06:20in the market, best performing. It's the lowest marginal cost. Our great wireless density that
06:27far outstrips what you can do from direct to device and satellite. Years of investment in the hard to reach
06:33places like stadiums. Everybody who went to a World Cup game knows how important being able to connect in a
06:40stadium is to experience what goes on socially and actually in the arena so that you can see a few
06:46replays
06:46that they're not showing there. We've been doing that for, you know, a long, long time. And it's going to
06:52be
06:52very, very hard to catch up on that infrastructure. And I think we're going to do really, really well
06:56competing in metro and suburban areas, which is where our investments have been.
07:00And John, you've talked a lot about how fiber puts you in a really good position in the AI era
07:05and how an increasing
07:06number of businesses really do need that kind of connectivity and the latency that's so important
07:12to improve. And I'm just wondering, aside from the demand side, from your actual corporate side,
07:19if you've been able to calculate any of the return on investment of your own uses of artificial
07:24intelligence. I know you've been really vocal about how it has improved efficiency dramatically.
07:29Has there been any ROI? Have there been any structural changes that you're able to disclose?
07:33Yeah, we've been really disciplined about this. And I'm satisfied that where we've been investing in
07:39places like in our software development organization, what we've been doing in our customer service
07:45channels, our applications into engineering, some of the things that we've been doing in building the
07:51right algorithms for pricing support, that we've gotten very strong returns. And as a result of that,
07:58I would almost argue people inside of our company maybe think we've been a little too judicious about
08:03how we've managed investment. We're trying to find that right balance of innovation and allowing
08:08things to run and the discipline of ensuring that what we're doing drives return. I would also say
08:14that I'm very well aware that a lot of this investment is a competitive necessity. When we improve
08:21operations like customer service and call centers, I don't know that that's necessarily sustainable.
08:25I think those are ultimately efficiencies that get competed away in the market. They go to the
08:31customer in the form of lower prices or better service. There are the things that we do that
08:36really give us strategic advantage, like maybe writing software for capabilities that we didn't
08:43have before that make us better at pricing or better driving yields on the network or more efficient.
08:48Those are the ones that maybe we get to keep some of the benefit on. And if I were to
08:53say that
08:53we need to do something better moving forward, we need more of the ones that drive strategic advantage
08:59to balance out some of the ones that we know are just the table stakes that we need to compete
09:03in
09:03the market and drive the great margin performance that you're seeing right now in the quarterly results
09:09we just published. John, I'd love to finish by talking about the stock as well. Just listening to
09:14you speak about the degree of investment you've put into the business to serve these areas,
09:18densely populated urban areas across this country. And when I think about other companies right now,
09:23spending a fortune, raising loads of capital and going through this massive capex cycle,
09:28I'm thinking of tech and what's happening there, you're in a different position. You've done some
09:32work already. Then I see this headline, you're accelerating the pace of planned share repurchases.
09:37Can you walk us through just the characteristic of what's on offer now, your stock and how well
09:42understood you think it is with investors at the moment? Well, you know, look, I think the markets
09:46eventually get things right. It doesn't mean that they get it right every month or that there isn't
09:51momentary dislocations and readjustments. And my point of view, obviously, I'm probably speaking my
09:57book. I think we're in a little bit of a dislocation right now. And there's certainly a desire to raise
10:03capital, to move to new opportunities in the AI space. And, you know, I think there's been some
10:09rotation out of our stock as a result of that. But here's what I know. We've built this business for
10:14the future. To your point, we're building symmetrical networks that have as much upstream
10:19bandwidth as they have downstream bandwidth. And we think that's going to be critical in the AI world,
10:23just like memory is critical, just like chips are critical, just like data center infrastructure is
10:29critical. And I do believe that the market will eventually understand that what we have built is
10:34indispensable for the kind of workloads we're going to see in this AI environment working forward,
10:40and that AT&T is uniquely positioned in the investments we've made over the last five years
10:45to serve more of those workloads more effectively than anybody else. And eventually, the market will
10:51figure that out. And when the cash shows up, valuation will ultimately correct itself. And I have the
10:57confidence that that's the case. Our job as a management team is to continue to execute and stay
11:03focused on the plan that we've laid out. And I believe this quarter is a testament that this
11:07management team is in fact doing that.
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