AT&T CFO says its enterprise business is early in its growth transition
As an incumbent telco serving businesses, AT&T faces the typical dilemma: returning to profitability amidst ongoing legacy service declines.
Pascal Desroches, AT&T's CFO, told investors during the Bank of America Media, Communications, and Entertainment Conference that the company's experience in developing complex network solutions has put it on a growth path for wireline and wireless-based business services.
“If you look inside enterprise business, there’s lots of things that are growing,” he said. “However, there are more dollars in legacy decline.”
Legacy challenges continue
While AT&T has laid out a solid plan to transition to profitability in its enterprise services business, the service provider continued to see challenges in the second quarter.
AT&T’s second-quarter Business Wireline revenues were down 9.9% year over year to $4.8 billion, primarily due to lower demand for legacy voice and data services and product simplification, partially offset by growth in connectivity services. Results also reflect the second-quarter 2024 contribution of its cybersecurity business to a new joint venture.
The service provider’s second-quarter Enterprise business was in line with its expectations, with revenues down slightly as the decline in business wireline service and low-margin mobility equipment revenues offset growth in higher-margin wireless service and fiber revenues.
Desroches noted that AT&T is further along in its revenue transformation in its consumer business, which sells wireless and fiber-based broadband services.
“We are earlier in the transition for the enterprise business than we are in our consumer business,” Desroches said. “It’s only a matter of time before you reach that inflection point, and I have confidence that our growth products will continue to grow.”
5G, fiber opportunities
A crucial part of AT&T’s growth strategy for the Enterprise business is a two-pronged approach to expanding its 5G and fiber network to more markets, which would improve its position.
In terms of fiber and IP-based services, AT&T remains a top provider. The service provider currently tops the industry in terms of on-net fiber lit buildings and U.S. Carrier Ethernet services.
“While near-term declines in legacy voice revenues are likely to weigh on business wireline EBITDA trends for the remainder of the year, our 5G and fiber expansion continue to present attractive growth opportunities in Business Solutions,” he said during the second-quarter earnings call. “This includes sustained growth in FirstNet, which now has more than six million total connections.”
AT&T also sees potential in emerging growth products, such as its fixed wireless Internet Air for business service, which was launched nationwide.
It is also seeing potential Dynamic Defense. Dynamic Defense is a self-service security solution that AT&T Business does not manage. The service supports AT&T Dedicated Internet bandwidth speeds from 10 Mbps to 10 Gbps.
Being in the business of serving consumers and businesses for connectivity, Desroches said that it can “still grow the overall company and still expand our fiber footprint that will benefit enterprises, so I have confidence we’ll navigate this transition.”
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.