AT&T Inc. Q4 FY2024 earnings call

• AT&T finished 2024 strong, achieving full-year results in-line or better than consolidated financial guidance. They drove durable 5G and fiber subscriber growth. Mobility had 1.7 million postpaid phone net additions in 2024 with 3.5% service revenue growth, and added 1 million or more AT&T Fiber subscribers for seven straight years.
• Established a new $3 billion plus run rate cost savings target through the end of 2027. Plan to further integrate AI throughout operations, evolve technology stacks, and exit legacy copper network operations by the end of 2029.
• Received FCC approval to begin the process of stopping selling, transitioning, and discontinuing legacy voice services in some wire centers. Will make detailed filings with the FCC to stop selling legacy products in about 1,300 wire centers.
• Anticipate capital investment in the $22 billion range again in 2025. Expect to achieve net debt to adjusted EBITDA in the 2.5 times range in the first half of 2025 and then commence common stock repurchases.
• Introduced the AT&T guarantee for the wireless and fiber network, a bold promise to deliver reliable connectivity, good deals, and prompt service.

Mobility:

• In the fourth quarter, AT&T had 482,000 postpaid phone net additions. Mobility revenues increased by 3.3% for the quarter, with service revenues also up 3.3%. For the full year, Mobility EBITDA grew by 6.3%. The postpaid phone ARPU in the fourth quarter was $56.72, up nearly 1% year-over-year. Postpaid phone churn in the fourth quarter was 0.85%, a 1 basis point increase compared to the prior year.

Consumer Wireline:

• The fourth quarter saw 307,000 AT&T Fiber net additions, the highest ever in a fourth quarter. AT&T Internet Air added 158,000 consumer subscribers in the quarter, with a full-year total of more than 0.5 million net adds. Fourth quarter broadband revenues grew by 7.8% driven by a 17.8% growth in fiber revenue. The fiber ARPU in the fourth quarter was $71.71, up $1.35 sequentially and 4.7% year-over-year. For the full year, Consumer Wireline EBITDA grew by 10%, exceeding the mid to high-single digit range guidance.

Business Wireline:

• In the quarter, Business Wireline revenues declined by 10% and EBITDA dropped by 22% primarily due to secular declines in legacy services. For the full year, Business Wireline EBITDA declined by 18%, in line with the high-teens range guidance. For full year 2025, Business Wireline EBITDA is expected to decline in the mid-teens range

• 2025 outlook remains unchanged from the Analyst and Investor Day. Beginning in the first quarter of 2025, plan to report adjusted EPS and free cash flow excluding DIRECTV. Adjusted EPS guidance for 2025 is $1.97 to $2.07, assuming slightly higher depreciation and amortization expense, lower interest expense, and an effective tax rate around 23%.
• Free cash flow guidance for 2025 is $16 billion plus, assuming lower cash interest, absence of network termination fee payments, and lower working capital impacts. Expect adjusted EPS to grow at a double-digit CAGR from 2027 driven by annual adjusted EBITDA growth of 3% or better and share repurchases reducing share count.

• Secular declines in legacy business wireline services present challenges. Regulatory processes related to legacy copper network decommissioning and service transitions may take time to realize cost savings and face uncertainties. Uncertainty around tax reform and its impact on capital investment and operational plans.

Q: John, quick regulatory questions on legacy products filing and tax reform. Any direct cost savings in '25 if legacy products filing successful? View on tax reform chance and CapEx acceleration?

A: Legacy filings are factored into cost savings objectives, but processes take time. Hopeful on tax reform, could accelerate fiber build and other CapEx areas but in a graceful, incremental manner.

Q: David Barden asks about home games and away games benefits for mobile business from fiber, and Reign real estate deal impact on cash flow.

A: Don't overemphasize the information value of net add dynamics; Reign deal is a financing transaction not running through cash flow; free cash flow driven by EBITDA growth, interest, and working capital.

Q: Michael Rollins asks about wireless market normalization, mix of volume growth and ARPU, and reseller subs growth.

A: Similar to last year, expect normalization; manage both volume and ARPU; reseller growth due to DISH migration and other MVNO accounts.

Q: Benjamin Swinburne asks about fiber pent-up demand, fiber ARPU growth confidence, and Mobility gross adds inflection.

A: Pent-up demand not substantial; fiber ARPU growth driven by effective management; Mobility gross adds expected to be managed with balance of volume and ARPU.

Q: Peter Supino asks about phone upgrade average age and immigration sensitivity.

A: No fundamental shift in phone upgrade age; less sensitive to immigration downward trend but aims to be more effective in that space.

Q: Jim Schneider asks about broadband competitive trends and Business Wireline outlook.

A: No shift in broadband tactics; fiber well-positioned for scaled households; Business Wireline recovery driven by fiber and high bandwidth products with legacy base transition.

Q: Sebastiano Petti asks about business wireless service revenue growth and share opportunity.

A: Business success driven by better distribution; expect improvement in segment through effective deployment of fiber and partnerships.

Q: Tim Horan asks about AI use in improving customer relationships, product, expenses, and infrastructure for AI.

A: AI used in call centers and operations for efficiency; early in AI technology cycle, expect continued improvements in code effectiveness and customer support.