28 Jan AT&T CEO: It’s the middle innings for fiber build out, but the pace is picking up
Despite the pandemic (or maybe because of it) AT&T added more than 1 million AT&T Fiber subscribers for the second year in a row in 2020. During AT&T’s fourth quarter and year-end earnings call, AT&T CEO John Stankey said the telco plans to build around two million fiber residential locations this year as the pace of its fiber builds accelerates. AT&T targeted one million homes passed last year.”That’s kind of what we’ve got the team tasked to do, and it gives you some sense of what that (fiber) increase will be,” Stankey said. “It’s two million this year. If the team executes well, we can do more than two million and start to ramp that up.”
In the fourth quarter, AT&T Fiber added 273,000 subscribers, driven in part by the 1-Gig service that comes with HBO Max as customers migrated to faster speeds during the pandemic. AT&T currently has a fiber market penetration of 34% across its footprint. In addition to the engineering teams’ ramping up their fiber deployments, AT&T Chief Financial Officer John Stephens said on the earnings call that the telco was increasing its sales capabilities this year.
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“Fiber is a long term game, and we’ve gone through the process many times and feel very good about the long term returns, and the efforts,” Stephens said. “So we’ll have some ability to manage there. The next piece, though, is we will see an increase in the fiber build and the opportunity to add some more sales opportunities to that inventory.”
Stankey compared AT&T’s fiber build-outs to a baseball game. The initial innings of the fiber deployments targeted the low-hanging fruit of the customer base several years ago.
“That is part of the customer base that you cut your teeth on, get your processes squared away on, get the vendor community at the first part of the cost curve,” Stankey said. “It’s like a no brainer economically. I would say we went through that first third in the investment we’ve made over the last several years.”
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As AT&T went up the learning curve and vendors started to scale their solutions, Stankey said AT&T gained confidence in its marginal economics and business processes, which led to the increase in AT&T Fiber subscribers over the past few years. AT&T is now in the middle innings of its fiber deployments, according to Stankey.
“It’s the next 30% to 60% of the customer base that we can work our way through and you look at the economics around it and it makes sense,” Stankey said. “Then you get into that last third and it’s always the hardest part. In many instances, you’re still sitting with the last third that is in parts of rural America that still really don’t have effective broadband options and oftentimes it’s policy. Sometimes it’s a technology breakthrough that gets that last third.
“If you wanted me to prognosticate on ‘Are you going to build fiber that last third?’ I don’t think I’d want to prognosticate. I actually believe, candidly, that even if there was a subsidy put in, it would be a better use of taxpayer money to do something that was more hybrid-oriented with the technologies that are applied, and not exclusively lean on fiber in that space.”
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For the near term for its fiber deployments, Stankey said AT&T’s focus would continue to be on the next 30% of its customer base. AT&T has built-out its fiber as part its 5G deployments and in greenfield environments.
“We have fiber to the neighborhood in many, many locations,” Stephens said. “And taking fiber-to-the-home is a second step. We haven’t done that yet. If you think about the neighborhoods next to the VDSL with respect to where we’ve got fiber to the prem, those are the opportunities and that VDSL footprint is 35 million. And when you add the fiber to it, it’s greater than that. That’ll give you a kind of a framework for something that we can officially do just beyond what John (Stankey) said about building out the two million this year.
“That’s where a lot of the focus is going to be. I think of that as the way to think about the opportunity for us. And yeah, we have that ability.”
When asked about the potential for using fixed wireless access to reach new areas, which Verizon is doing, Stankey said having a dense fiber network in place would provide a more robust infrastructure as multicast streams continue to move unicast across multiple devices.
“I think about hybrid access technologies as being important, but I don’t know that the most ideal way to build a network is going to be to use fixed wireless to take on the bulk of what occurs in the four walls of a business, or a home, given the consumer behavior trends we’re going to see over the next 10 years,” he said.
AT&T by the numbers
AT&T’s fourth quarter revenue was $45.69 billion—down 2.4% year over year—which slightly exceeded analysts’ expectations. Adjusted earnings-per-share, which factored in COVID-19 related impacts including the loss of theatrical revenue and a drop in international wireless roaming charges, was as 75 cents per share, which beat analysts’ projections of 74 cents per share. For 2021, AT&T forecast revenue growth of about 1% and wireless service revenue growth of 2%.