Oppenheimer analyst Timothy Horan had a Perform rating on AT&T Inc
Horan noted that the tone was upbeat, highlighted by continued network and operational improvements driven by the company's strategic shift to a bundled connectivity provider.
Desroches touched on the company's new agreement with Ericsson
T has passed peak CapEx spending levels and is guiding a step down in capital to $21 billion to $22 billion next year (inclusive of the Ericsson deal) while signaling more confidence in its ability to drive healthier FCF. It reiterated its FWA strategy as a niche service.
The analyst noted that T has a unique position as the nation's largest and fastest-growing fiber provider, unlocking the ability to converge with mobile to drive ARPA growth and customer stickiness. It is still in its early days, but T will also have a significant opportunity to earn government subsidies under the bipartisan infrastructure bill to expand its fiber footprint further.
AT&T CFO attributed T's record-low phone churn to its improving network, increased fiber penetration, and consistent go-to-market/promotional offers. He noted that the holiday competitive environment is essentially on par with last year and is going after seasonal adds in a disciplined manner. T guided a sequential uptick in phone net adds to the 500K range for 4Q.
The analyst noted that T has reached a critical inflection point in its wireline business. Customer losses from its legacy products that have been in secular decline for several years are now offset by new, high-margin fiber additions. Desroches acknowledged T's underperformance in the SMB broadband market, where it will likely get more aggressive and can do so through FWA now.
The expected steady fiber net adds in 4Q, around 250K, adjusted for typical seasonal softness. Overall, its fiber business performs well and exceeds internal ARPU and penetration targets. It is on pace for ~$6 billion in consumer fiber revenue for the year, doubling its result from 2020.
T has a target leverage of 2.5x by 1H25, at which point it will consider adjusting its capital allocation strategy. Desroches pointed to the importance of creating optionality to drive customer and shareholder value. It plans to consider share repurchases, adjusting dividends, or reinvesting in its network.
Price Action: T shares traded lower by 1.18% at $16.42 on the last check Tuesday.
