AT&T’s CFO: We’ve Reached a Major Inflection Point in our Consumer Wireline Business

For AT&T, fiber broadband is fast becoming a savior for the company’s wireline segment as it once again offset legacy DSL losses in the second quarter.

Broadband revenues were $3.1 billion, up 2.9 percent year over year due to gains in broadband more than offsetting declines in legacy voice and data services and other services. Additionally, broadband revenues increased 8.3 percent, which reflects fiber subscriber growth and higher ARPU resulting from increases in fiber customers and pricing.

AT&T added a total of 28,000 broadband and DSL subscriber net adds in the second quarter, reflecting what the telco said was growth in fiber subscribers offsetting losses in slower-speed services. 

Pascal Desroches, CFO for AT&T, told investors during its second-quarter earnings call that it has “reached a major inflection point in our consumer wireline business.”

“Broadband revenue growth now surpasses legacy declines,” he said. “This helped drive consumer wireline revenues up 2.9 percent. We expect broadband revenues to continue to outpace legacy decline.”

A key part of AT&T’s wireline broadband growth engine was its fiber-to-the-home (FTTH) service. During the quarter, AT&T Fiber, which is marketed to nearly 15 million customer locations, reached an additional 246,000 customers.

“The story with fiber remains much the same,” Desroches said. “We continue to see solid subscriber growth with most of those customers new to AT&T.”

Long-Term Fiber Vision

While AT&T’s focus has been on expanding the subscriber base in its existing fiber continues to grow its fiber broadband base, the next stage is to expand it into more homes and business locations.

Previously, the company set a goal to build out fiber to another 3 million consumer and business customer locations this year. By the end of 2025, AT&T has set an ambitious goal to more double its FTTH footprint to 30 million customer locations.

“The first two quarters of this year have essentially been built selling into our fiber footprint from the prior build,” said Jeff McElfresh, CEO of AT&T Communications. “We are currently deploying some of the early stages, our next 3 million build-out plans that we've disclosed for this year. As we cited earlier at analyst day, the bulk of that inventory is going to come online toward the back half of the year.”

A large majority--80 percent—of its net performance first half of the year was new customer relationships.

“This has allowed us to move into those households with the best-in-class fixed broadband service, as well as offer up some of the other products and services like wireless,” McElfresh said.

McElfresh added that “this is not a quarterly game,” but rather “a long-term plan where we're just building momentum quarter to quarter.”

DSL Migration Options

As its DSL subscriber base continues to slide, the next question is about what it will do to migrate its DSL customers?

In October 2020, AT&T announced that it had discontinued selling DSL service. In a message sent out to customers, AT&T said that the company will no longer take new orders and current DSL customers will not be able to make changes to the speed of their service or move service to a new location.

A key concern about this plan is that it could leave a lot of lower-speed customers that are not eligible to get its FTTH service.  

For its part, AT&T maintains it has the choice of upgrading legacy DSL subscribers with FTTH or 5G-based broadband wireless

“We have not made the choice or decision to launch wide-scale fixed wireless Internet but rest assured that the strength of our wireless network is providing options for us as we migrate some of our legacy wireline DSL customers off of that technology over to a better technology, served up with fiber or wireless,” said McElfresh. “And where it doesn't make sense for us to invest in fiber for the long term in certain demographic areas or market areas, we choose to serve that with wireless, and we'll leverage the 5G existing network that we've got with our sub-six spectrum strength.”