AT&T Inc at Bank of America C-Suite TMT Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Barden - BofA Securities - Analyst : So Pascal, obviously business is doing well. I want to get to that. But maybe before we kind of jump into the nuts and bolts, just talk about some of the headlines that have been coming out of AT&T of late or maybe relevant to AT&T of late. The first one I just want to talk about real quick is last month you announced a commercial relationship with a small satellite company called AST SpaceMobile. And actually, Verizon actually announced agreement, I think last week, with that company as well. And the role of satellite in the kind of mobile broadband world is getting a lot more attention these days. We've got SpaceX, we've got Kuiper, a number of other companies. Could you kind of give us a little bit of a sense is to how relevant is all this space talk to the mobile business today? Some people see it as a potential threat.

Question: David Barden - BofA Securities - Analyst : And just a quick follow-up, with respect to its importance slash/relevance, AST SpaceMobile has one test satellite in space, kind of circling the Earth, that I think only touches somewhere in rural Texas at the moment. And there's going to have to be a whole constellation of these things eventually put up. So is this really not a priority? Because it's going to be years and years and years before this really becomes a thing. If it wasn't a thing, you might want to do something with a company that has a constellation like SpaceX today. Could you kind of talk about its importance in the grand scheme?

Question: David Barden - BofA Securities - Analyst : Thank you for that. So kind of shifting gears to another topic in the headlines. Recently, the Carlson family, who own and control TDS and US Cellular, agreed to divest their customer base and a small portion of their spectrum to T-Mobile. And as a result, they're going to have a portfolio spectrum remaining that they would obviously want to monetize. What is kind of AT&T's wallet to buy more spectrum, desire to buy more spectrum, thoughts about the regulatory environment to buy more spectrum, and your views on whether leasing spectrum is a reasonable alternative? -- Sorry for the next 10 questions already there.

Question: David Barden - BofA Securities - Analyst : What do you think the regulatory landscape is for AT&T? Acquiring more spectrum? And is leasing spectrum an option? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Barden - BofA Securities - Analyst : Another kind of topic for AT&T, kind of unique to AT&T, is that you guys made an announcement that you wanted to migrate to an open RAN architecture. The idea was to kind of maybe take Nokia base stations out of the network, put Ericsson base stations in, put new Fujitsu radios up on the towers. No one else is doing that right now. Could you kind of talk a little bit about why you're doing it and what benefits it'll generate and when those benefits kind of start to accrue?

Question: David Barden - BofA Securities - Analyst : And so when does that start to happen? Is the build happening now? Are you in kind of full swing at this moment?

Question: David Barden - BofA Securities - Analyst : So another question related to some of the headlines, I think it was yesterday, we had the Apple WWDC, they launched their Apple AI. I have to say I was flying here to London, so I didn't get to see the whole thing. But I know that there's a lot of excitement in the tech world about the evolution of AI and handsets and what kind of upgrade cycle that could drive. And by extension, if it creates an switching -- elevated switching environment, there's risk of elevated competition among the wireless carriers. Could you kind of speak to how you think an AI iPhone alters the current kind of competitive balance and overall nature of the market right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Barden - BofA Securities - Analyst : So thank you for that. So you were here a year ago physically and it was an interesting time to be with you because at the fourth quarter 2023 result in January. -- I'm sorry, that was, yeah, fourth quarter 2022 result in January 2023, you guys had guided to about $16 billion or greater in free cashflow. And in the first quarter of 2023, you surprised the market by putting up only one. And people kind of freaked out because they were worried that we might be looking at another free cashflow guidance cut the way we did in the second quarter of 2022. So you came out here to London and said, don't worry, we've got this. And you gave us a guidance for the second quarter free cashflow number of about $2.5 billion. And you actually, you ultimately went on to beat your guidance in 2023 for cashflow. And so John Stankey, the CEO kind of came out and said he recognized that the relative imbalance of free cashflow recognition was a liability and that it was going to be AT&T's initiative to smooth that out. And so you guided for 2024 free cashflow to be maybe 40% weighted in the first half of the year, 60% in the back part of the year. That would suggest that second quarter free cashflow should be something just shy of about $4 billion. Is there a reason to believe that that's either wrong or is it right?

Question: David Barden - BofA Securities - Analyst : Okay, so the cadence is part of the guidance as well. So we can kind of look at that.

Question: David Barden - BofA Securities - Analyst : The last thing I want to talk about just before we delve into the wireless business itself was any kind of lingering impacts from the network outage you experienced earlier in the year or any of the data breaches, which are a sad part of our daily reality now that the systems get hacked. But anything that we should be aware of that might impact the optics of either the income statement or the cashflow statement?

Question: David Barden - BofA Securities - Analyst : So kind of shifting gears then to the wireless business, in the release last night, you said that the wireless industry is healthy, albeit normalizing, which is an active verb, which suggests that things continue to change in normalizing, meaning less growth available for the industry. When you say that, what should we understand that to mean? I guess what -- I would, my knee-jerk reaction is to say, look at your first quarter 2023, for instance, postpaid phone net ads around I think it was {430,000}. Look at your first quarter 2024 net ads, and I see a year-over-year difference. Should I be thinking that it's roughly the same difference in the second quarter? Or is there a reason to believe it's a lot better or worse?

Question: David Barden - BofA Securities - Analyst : So before I ask the next question just, could you talk about from your perch, your ability to kind of gauge the health of the US consumer market and also the US business market in terms of the inflation pressure that we felt last year? Just because inflation is down doesn't mean that prices aren't up for everybody on all sorts of goods and services. How do you feel the US consumer is holding up? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Barden - BofA Securities - Analyst : Great. So then that kind of leads into my next question, which is taking advantage of that. And I think that John was early, maybe at the beginning of last year, maybe even the beginning of the prior year, talking about cost inflation, the utility and the improvement and the network quality and the desire and the need to kind of pass some of those costs and some of that value onto the consumer with higher prices. Can you talk a little bit about two things? One is kind of AT&T's philosophy on pricing. And second, whether the industry can continue to support rising prices or does the presence of cheap cable alternatives create a gravity that limits your power to raise prices?

Question: David Barden - BofA Securities - Analyst : I wanted to start, I want to talk a little bit about fiber, but before we go there, you've made it clear fiber is your go-to strategy for connectivity. We'll talk about that in a second. But in the meantime, you've launched this Internet Air Fixed Broadcast Access program. It was really started really in the middle of the fourth quarter. So we don't really know kind of where it's run rating, kind of what your goals are for it. Could you talk a little bit about, for the benefit of the audience, the Fixed Broadcast Access strategy and what is the goal to be achieved with that product?

Question: David Barden - BofA Securities - Analyst : So your peers have not been shy in kind of throwing out some targets. You know, T-Mobile's comfortable these days with about $400,000 fixed gross as a quarter. Verizon's comfortable suggesting the $300,000 to $350,000. What is AT&T's objective here on a quarterly basis?

Question: David Barden - BofA Securities - Analyst : Okay, so let's talk about the consumer fiber business. And I want to talk about it as it relates first to the wireless business. Because there's been this big conversation about convergence and obviously being here in Europe, there's a lot of negative experiences with, the race to the bottom of bundling products together, mobile, and fixed. And there's the success to date to the cable industry putting wireless and cable broadband together, generating roughly 16 million customers over the last five years or so. Begs this question, like, do you have to have two products bundled together? I think your answer is you don't have to, but if you can, it would be great. And I think the market would love to hear more about if it is great, how great is it? What kind of difference does having fiber and mobile together bring to AT&T?

Question: David Barden - BofA Securities - Analyst : Do you believe that the MVNO wireless business that cable has built their bundle on has a long-term future? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Barden - BofA Securities - Analyst : And so just in terms of the consumer fiber business kind of growth, you have pivoted to revenue growth. You've pivoted to EBITDA growth in that business. For the last couple of years, if you kind of look at the data, the number of fiber net ads has been roughly equal to the number of copper net losses. And that's been improving a little bit recently. The footprint's been expanding. You've got a target of 30 million consumer locations or business and consumer locations by next year. You're nearly there already, should we be looking for even better growth coming out of that fiber business? Not just converting copper to fiber, but actually winning share in the market?

Question: David Barden - BofA Securities - Analyst : So the wireless business is healthy. Prices are going up. You're launching new fixed wireless products. The fiber business is doing well, expanding. If there's one kind of spot where there is work to do, it's in the business. Could you talk about how do we kind of characterize the losses in that side of the, that small corner of AT&T?

Question: David Barden - BofA Securities - Analyst : One of the new product use cases, green shoots that people talk about with the 5G networks is private 5G networks. Is that something you're seeing have any traction at all in your business today?

Question: David Barden - BofA Securities - Analyst : And so we only got a couple of minutes left, but I guess my last question would be just on this topic and probably wrapping it up together is given the topicality of AI, a lot of people are talking about the connectivity opportunity in all the new data centers that are going to get built, especially training data centers that get built in probably remote locations where power is available and lands available, but maybe not connectivity at the margin. I guess two questions on kind of the AI question. One is what kind of revenue opportunity does it present to an AT&T, if any, and when? And then looking inside AT&T, what are you taking advantage of? And is this part of your big cost-cutting initiative for the next couple of years?

Question: David Barden - BofA Securities - Analyst : All right. Look forward to seeing it all happen. Pascal, thank you. We've run out of time. Thank you so much for joining us again. Hopefully next year, we'll see you here in person, but we appreciate the time. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Barden - BofA Securities - Analyst : Thank you, everybody DISCLAIMER Refinitiv reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes. In the conference calls upon which Event Transcripts are based, companies may make projections or other forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES REFINITIV OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.