AT&T NYSE: T Chairman and CEO John Stankey said the company’s strategy remains centered on expanding fiber infrastructure, strengthening its wireless network and using the two services together to drive customer growth, lower churn and improve household economics.
Speaking at the Goldman Sachs Communacopia + Technology Conference, Stankey said AT&T has invested at an industry-leading level for roughly five years with the expectation that a stronger asset base would produce faster growth and a better profitability profile. He said the company began to see evidence of that inflection in its most recent quarter.
“The goal here is to make sure that we are a scaled provider in fiber and we lead in deployment of fiber infrastructure over time, strengthen our already strong wireless business, and carry it forward,” Stankey said.
Fiber-led convergence strategy
Stankey said AT&T’s fiber-led convergence strategy extends beyond offering discounts to customers who take both wireless and broadband service. Combining the services can improve churn, customer lifetime value and brand loyalty, he said, particularly because fiber broadband is a higher-performing product.
Over time, he expects convergence to become more focused on integrated features and a seamless connectivity experience across satellite, wireless, fixed broadband and Wi-Fi networks. He cited AT&T’s OneConnect offering as an example of an approach designed to simplify the process of connecting devices such as tablets and vehicles.
“It’s not just a discount,” Stankey said. “It’s a product that works better for the customer.”
The company is also adjusting its go-to-market plans to serve a broader set of customers, including value-oriented segments where it has historically been less competitive. Stankey said initiatives such as Build-A-Plan are intended to improve AT&T’s wireless penetration in underpenetrated segments, while lower-priced broadband options can help the company add customers after fiber infrastructure has been deployed.
He said the company recorded what he characterized as its best new-account growth in more than three years in the last quarter, supported by its ability to compete in more portions of the market.
Stankey said AT&T evaluates the value of a household rather than that of a single service. That could mean discounting one product to add a profitable wireless or broadband customer, provided the combined household relationship is accretive over time.
Excluding recently acquired Lumen assets that AT&T has not had much time to manage, Stankey said the company’s convergence rate was 45%, up five percentage points over two years.
Satellite, business and AI opportunities
On satellite connectivity, Stankey said satellite will have useful applications but is unlikely to replace the bulk of connectivity provided by terrestrial infrastructure. He said AT&T’s existing network addresses roughly 98% of use cases and described satellite as a means to address the remaining coverage needs.
He said AT&T’s joint venture with T-Mobile and Verizon is intended to support customer-friendly satellite connectivity, including by securing access from more than one satellite constellation and incorporating satellite service into existing plans.
In the business segment, Stankey said advanced connectivity service revenue returned to growth in the latest quarter. He attributed that progress to placing fiber in the right locations, selling into existing fiber inventory, expanding indirect distribution channels and pursuing new business customers rather than concentrating solely on longstanding enterprise relationships.
AT&T is also preparing products that would allow business customers to manage service quality, security and cloud connectivity across fixed and wireless networks, Stankey said. He said those capabilities could provide an advantage over providers with unmanaged offerings or without both fixed and wireless networks.
Artificial intelligence is contributing to demand for cloud access, bandwidth and data-center connectivity, according to Stankey. He said AT&T is participating in data-center-to-data-center and data-center-to-metro interconnection where it aligns with the company’s network routes, though he does not expect that business to become the company’s primary focus.
Internally, Stankey said AT&T is using AI in customer service, engineering, software development, churn management and pricing. He said AI-assisted call handling has produced high customer satisfaction and resolution rates, while software-development productivity has allowed the company to complete more projects and pursue additional cost-saving initiatives.
Copper retirement and capital allocation
Stankey said retiring legacy copper infrastructure is a major part of AT&T’s long-term transformation. The company previously identified $6 billion in legacy costs that it intends to remove, he said, including costs related to central offices, chillers, leases, mainframes and other infrastructure.
He also said AT&T plans to monetize copper removed from its network, with proceeds helping fund the work required to shut down legacy systems. By the end of the decade, Stankey said, AT&T aims to operate as a metropolitan fiber provider supported by a nationwide wireless network.
Stankey characterized the company’s investments in Lumen fiber assets and EchoStar spectrum as complementary. He said the Lumen assets provide access to markets where AT&T had been underpenetrated in wireless, while the company has already seen gross additions from converged customers in those markets rise by nearly 50% in the short period since it acquired the assets.
EchoStar’s spectrum, including low-band 600 MHz spectrum, is expected to strengthen AT&T’s network capacity for upstream traffic and potential applications such as autonomy, robotics and cloud-based video processing, he said.
Looking ahead, Stankey said AT&T plans to balance continued investment in growth with maintaining its dividend, repurchasing shares when management believes the stock is undervalued and reducing leverage to roughly 2.5 times net debt to adjusted EBITDA.
About AT&T (NYSE:T)
AT&T Inc NYSE: T is a telecommunications company that provides wireless communications, broadband internet, voice, and related connectivity services. Its offerings include mobile phone and data plans, fiber-optic internet, fixed wireless access, traditional voice services, and networking solutions for businesses and government customers.
The company serves consumers, businesses, and public-sector organizations primarily across the United States. AT&T also provides wireless services in Mexico and operates extensive communications networks that support mobile connectivity, internet access, data transmission, and enterprise communications.
AT&T traces its history to the development of the Bell System and has evolved through a series of reorganizations and acquisitions.
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