AT&T continues to increase fiber passings and doesn’t plan on slowing down

AT&T has continued to increase its fiber footprint, with 226,000 AT&T Fiber net adds in the quarter—and this comes despite a hurricane-induced 30-day work stoppage in the Southeast portion of the company’s footprint. The company estimates it had 50,000 fewer net adds from work stoppage related to the effects of Hurricane Helene and Milton and estimated a total financial impact of about $115 million.

Fiber revenues in the quarter grew nearly 17%.

“These consistent results make it clear that our fiber investment is generating attractive returns with improved operating leverage as we transition from legacy networks,” said Stankey. “Overall, the underlying momentum with 5G and fiber positions us to close the year strong.”

AT&T has also moved to sell its remaining 70% share of DirecTV, for which it expects $1.1 billion of pretax cash payments in 4Q. Stankey reported that the divestment will allow the company to hone its focus on 5G and fiber connectivity throughout the United States while further strengthening the balance sheet.

Total revenues for the quarter were $30.2 billion.

Penetrating the fiber base

Last quarter, AT&T reported that about four out of every 10 households with AT&T fiber also have AT&T wireless service, and the company plans to continue increasing penetration.

“While our 5G and fiber businesses are performing well on their own, it’s increasingly clear that customers prefer to purchase mobility and broadband together as a converged service,” said Stankey. “Only AT&T can offer this at scale with benefits from owners’ economics. This is driving a reinforcing cycle where the success of our fiber business drives growth in mobility and vice versa. Over time we expect this should drive higher returns on our invested capital in both our mobility and broadband businesses that neither could achieve as a stand-alone operation.”

GigaPower, AT&T’s joint venture with BlackRock, as well as recent agreements with commercial open access fiber providers will continue to spread AT&T Fiber high-speed internet to new geographies.

“These fiber-driven growth initiatives present attractive capital-efficient ways for us to provide both AT&T fiber and 5G wireless services to more customers,” said Stankey.

Bringing in broadband revenue

Third-quarter consumer broadband revenues were $2.8 billion, up 6.4% year-over-year thanks in part to solid fiber revenue growth of nearly 17%.

Business wireline revenues were down 20%, which CFO Pascal Desroches attributed to continued industry-wide declines in legacy voice services.

“The sustainable strength of fiber is driving consumer wireline growth and yielding strong returns,” said Desroches. “In the quarter, we added 28,000 total broadband subscribers.”

Desroches also reported that AT&T has passed more than 28 million consumer and business locations with fiber and remains on track to pass 30 million fiber locations by the end of 2025.

“The better-than-expected returns we’re seeing on our fiber investment potentially expand our opportunity to go beyond our initial build target by roughly 10 million to 15 million additional locations,” he said.

The company continues to see success with AT&T Internet Air as it migrates legacy copper-based internet customers to the service; 135,000 Internet Air customers were added during the quarter.

Desroches also reported that AT&T’s capital allocation strategy remains consistent and deliberate.

“We’re successfully balancing efficient growth with long-term investment as we deliver converged network services to more customers, pay down debt, and return value to shareholders,” he said.

Capital investment for the quarter was $5.5 billion, down about $150 million compared to the prior year.

“We expect higher capital investment in the fourth quarter as we ramp our wireless network modernization,” said Desroches. “We also expect to sustain strong cash conversion in the fourth quarter and anticipate using our improved liquidity to continue reducing our short-term financing, including further paydown of vendor financing in the fourth quarter.”

For the full year, AT&T expects broadband revenue growth of 7%.