AT&T Touts AI, Fiber Edge and Business Growth at Citi Conference

Key Points

• AT&T says its multiyear strategy is paying off after more than $150 billion in investment, divestitures and debt reduction, strengthening its fiber and spectrum assets. The company expects double-digit EPS growth, 3%–4% EBITDA growth this year and to return about 100% of free cash flow to shareholders.
• Business connectivity is showing renewed momentum, with advanced-connectivity revenue growing nearly 2% year over year in the second quarter. AT&T is targeting small and midsize businesses, enterprises expanding AI workloads and public-sector customers, while investing in 400-gigabit capacity, security and network intelligence.
• AT&T is emphasizing converged wireless and broadband services to reduce churn and increase customer value, while raising some prices with limited churn impact. The company also expects to retire copper infrastructure by the end of the decade, reducing maintenance and operating costs.

AT&T NYSE: T executives said the company’s multiyear investment strategy has improved its network assets, reduced leverage and positioned its connectivity businesses for further growth, while highlighting opportunities in business services, artificial intelligence-related demand and converged wireless and broadband offerings.

Speaking at a Citi event, Chief Financial Officer Pascal Desroches said the company faced significant challenges when he and Chief Executive Officer John Stankey took their roles, including a weaker mid-band spectrum position, a predominantly DSL broadband footprint, declining DirecTV operations, the need to reposition Time Warner for direct-to-consumer distribution, and more than $150 billion in debt.

Desroches credited AT&T’s divestitures of DirecTV and Time Warner, along with a reduced dividend, with enabling the company to reinvest in its core operations. He said AT&T has invested more than $150 billion over the past five years and now has what he described as the nation’s largest fiber broadband network and its strongest spectrum position to date.

“We did all this while continuing to rightsize our cost base and take down our leverage,” Desroches said. He added that the company has guided for double-digit earnings-per-share growth this year and plans to return about 100% of free cash flow to shareholders through dividends and share repurchases.

Business Revenue Inflection

Melissa Arnoldi, executive vice president and general manager of AT&T Business, said the segment’s nearly 2% year-over-year advanced connectivity service-revenue growth in the second quarter marked an inflection point following more than two years of changes to its sales strategy and customer experience.

Arnoldi said the company found it was overly focused on indirect sales channels, which can serve large enterprises but left opportunities in the small and medium-sized business market. AT&T has since recalibrated its distribution approach to include digital channels, resellers and other indirect channels, she said.

The company has also sought to simplify product bundles and make itself easier to do business with, according to Arnoldi. She said the momentum is visible across fiber, fixed wireless, 5G, security and value-added services.

Strategic wireline and wireless products now account for 80% of AT&T Business’s portfolio, Arnoldi said, adding that the company reached that mix about a year ahead of the timeframe it had previously discussed with investors.

• Small and medium-sized businesses are seeking reliable, secure connectivity and easier customer service interactions.
• Enterprise customers are scaling AI workloads and seeking higher-capacity connectivity, including 400-gigabit services, advanced networking and security.
• Public-sector opportunities include defense and mission-critical communications through FirstNet.

Arnoldi said AT&T has launched a product called Product Fusion, intended to provide interoperability across devices and major carriers during disasters.

AI Demand and Network Investment

AT&T sees AI as both a productivity tool and a revenue opportunity, Arnoldi said. She identified three areas of focus: using AI to deliver predictable customer outcomes, automating operations to create operating leverage, and selling connectivity and related services needed to support AI workloads.

Customers deploying AI are asking for higher-capacity connections, resiliency, security, visibility into how AI agents operate, and controls over network performance and capacity consumption, she said. AT&T is investing in 400-gigabit capacity across multiple metro markets and in software and network-intelligence capabilities designed to provide customers with visibility and control.

Desroches said the company’s deep fiber network is important because future workloads may require infrastructure investments that some providers still need to make. “We don’t want to leave anything on the table because we believe that you have to be ready for the workloads that will exist in the future,” he said.

Arnoldi said dark fiber can be an opportunity where AT&T already has metro capacity, though she characterized lit services and network intelligence sold on top of dark fiber as potentially more attractive from a margin perspective. The company views hyperscalers and AI infrastructure providers as complementary customers but sees the broader opportunity as connecting business locations, metro aggregation points, data centers and cloud infrastructure.

Convergence, Pricing and Competition

Desroches said customers who take both wireless and fiber or fixed-wireless services tend to remain with AT&T longer, purchase more services and have higher lifetime value. He said the company’s strategy is to secure a larger share of the connectivity budget at homes and businesses, even if that means offering an attractive entry price for fiber in underpenetrated markets.

He said AT&T expects deeper convergence to support lower churn, reduced customer-acquisition costs and higher service revenue over time. The company has also raised prices on portions of its existing customer base, including wireless pricing actions reflected in second-quarter results. Desroches said AT&T saw a modest reduction in churn alongside those actions, better than the company expected.

For the full year, Desroches said wireless service-revenue growth should exceed the company’s prior guidance, while fiber growth may be somewhat lower. He said AT&T still expects to meet its overall advanced-connectivity service-revenue growth target of more than 5%.

On wireless competition, Desroches said device prices have risen while AT&T’s promotional budget remains relatively stable, which could cause consumers to pay more and eventually suppress device demand. Still, he said the company believes it can compete within its promotional budget.

Copper Retirement and Capital Allocation

Desroches said AT&T has reached a turning point in its copper-retirement efforts. By year-end, the company expects it will no longer be required to offer copper service across more than 85% of its footprint and will be able to discontinue copper service in about 30% of its footprint.

Retiring the infrastructure should reduce the burden of maintaining underutilized assets that consume power and personnel resources, he said. AT&T expects to exit the copper infrastructure by the end of the decade.

Regarding capital allocation, Desroches said AT&T’s acquisitions last year of Lumen’s consumer fiber footprint and EchoStar’s mid-band and low-band spectrum gave the company more flexibility through the rest of the decade. He said AT&T is not in a position where it “absolutely” needs to pursue further near-term spectrum opportunities.

Desroches reiterated AT&T’s guidance for 3% to 4% EBITDA growth this year, accelerating to more than 5% by 2028, alongside double-digit EPS growth and growing free cash flow.

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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