AT&T Business Wireline Poised For Revamp As Carrier Hits ‘Major Milestone’ In Company Repositioning

The carrier says that thanks to its WarnerMedia spin-off, it can now ‘focus intensely’ on 5G and fiber-based connectivity growth and on revamping its declining business wireline segment.

AT&T now has the balance sheet to aggressively expand its fiber internet and 5G services as the slumping business wireline segment is readied for a reposition, according to CEO John Stankey.

Stankey said that AT&T has reached a “major milestone” in the repositioning of the business this quarter as AT&T spun off its WarnerMedia unit, which offered entertainment, sports and news assets, to television company Discovery Inc. earlier this month. Four years ago, AT&T closed on its acquisition of global entertainment and media powerhouse Time Warner for $85.4 billion in the hopes of becoming a media giant, but the carrier has since pivoted its focus back to its core connectivity business.

The carrier has freed up more than $50 billion in assets since the beginning of 2021.

“Our transaction marks a critical step in the repositioning of our business. We’re now able to focus intensely on what we believe will be multiyear, secular tailwinds in connectivity. We now have the right asset base and financial structure to devote our energy to becoming America’s best broadband provider,” Stankey said during AT&T’s first-quarter 2022 earnings call Thursday.

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Business wireline services revenue fell 6.7 percent during first-quarter 2022 to $5.64 billion compared with $6.05 billion a year ago, which the carrier attributed to the decision to de-emphasize noncore services and its impact on short-term financial results. Business wireline services decreased to $5.48 billion compared with $5.87 billion in first-quarter 2021 and equipment sales fell to $162 million during the quarter from $174 million a year ago.

“As we move through this year, we plan to accelerate the pace in which we reposition the business as we focus our energy on repeatable, core connectivity and transformation solutions … at the same time, we’ll continue to rationalize reselling low-margin, third-party products and services,” Stankey said.

AT&T’s Business Solutions segment dipped 1.6 percent to $8.67 billion in first-quarter 2022 compared wirh $8.81 billion during 2021’s first quarter.

AT&T CFO Pascal Desroches said that the company doesn’t expect business wireline revenue to grow in the short term, but that losses will be moderated as AT&T continues to rationalize its low-margin products and emphasizes connectivity and 5G and fiber integrated solutions.

Business wireless services, on the other hand, climbed 8.4 percent to $3.03 billion compared with $2.76 billion a year ago.

On the wireless side, AT&T saw a record-breaking 691,000 postpaid phone net adds and 965,000 postpaid net adds overall in the first quarter of 2022, which excludes the impact of the 3G network shutdown. Stankey said the results represented AT&T’s best first quarter for postpaid phone net adds in more than a decade, breaking 2021’s then-record first-quarter results.

Stankey said that one of AT&T’s strengths in the business wireline segment is its ability to add new, value-added services to customer accounts when speaking with existing businesses and new customers, such as adding on wireless services.

AT&T Business currently serves about 2.5 million customers, including enterprises and SMBs, a market that AT&T is aggressively courting. The carrier said that more than 675,000 U.S. business buildings are lit with fiber from AT&T, reaching approximately 3 million U.S. business customer locations. Nationwide, more than 9.5 million business customer locations are on or within 1,000 feet of AT&T’s fiber footprint.

The Dallas-based carrier’s mobility segment revenue totaled $20.08 billion during first-quarter 2022 compared with $19.03 billion in the same quarter a year ago. The overall communications business, which includes high-speed internet, video and legacy voice services, climbed 2.5 percent to $28.88 billion during the quarter compared with $28.18 billion in first-quarter 2022 due to increases in mobility and consumer wireline. In mobility, AT&T said its service revenue grew 5.5 percent due to higher services and equipment revenue, which was up 4.8 percent and 7.3 percent year over year.

Diluted earnings per share during AT&T’s first quarter, which ended March 31, 2022, was 65 cents, down from $1.02 one year ago. Total revenue was $38.11 billion, a 13.3 percent decrease from $43.94 billion in the same quarter one year earlier, which the carrier attributed to the impact of its divested businesses and lower business wireline revenue. Net income was $4.76 billion for the quarter compared with $7.50 billion in first-quarter 2021.