AT&T plans to use single tower climbs to more effectively deploy two bands of new mid-band spectrum for 5G, allowing the carrier later this year to simultaneously expand C-band and roll out its recently won 3.45 GHz.
AT&T just last week started C-band deployments in eight markets. Separately, it secured 40 MHz of mid-band spectrum on average nationwide in the 3.45 GHz range at FCC Auction 110, spending $9.1 billion.
Speaking on AT&T’s fourth quarter earnings call Wednesday, CEO John Stankey said the carrier was very pleased with auction results, with mid-band deployment efforts probably in the middle of the year.
“We received 40-megahertz of quality mid-band spectrum that we can begin to put into service this year and we plan to efficiently deploy it with our C-band spectrum using just one tower climb,” Stankey said. “We’re on track to cover 200 million PoPs using mid-band spectrum by the end of 2023 and our network is only going to get better as we effectively deploy our new spectrum holdings.”
Together with 40 MHz of the first available batch of C-band spectrum (known as A-block), AT&T will have 80 MHz of mid-band for 5G. Verizon is initially activating 60 MHz of C-band in 46 markets before its full 180 MHz becomes available and sat out of the 3.45 GHz auction. T-Mobile has its chest of 2.5 GHz spectrum and also spent $2.9 billion to scoop up 3.45 GHz licenses.
A one climb strategy isn’t new to AT&T – it’s been at play for its FirstNet dedicated public safety network rollout and LTE/5G upgrade. As the carrier deployed new Band 14 spectrum for FirstNet it took the opportunity to also upgrade those sites with additional AWS-3 and WCS spectrum and install 5G-ready gear, reducing the number of times it needs to touch a tower and associated activities.
As AT&T gears up for the new spectrum this year, the competition for 5G mid-band coverage is already underway, with T-Mobile hitting 210 million PoPs with 2.5 GHz and Verizon in less than a week hitting 95 million PoPs with C-band.
Stankey said capital spending on C-band and 3.45 GHz will start to get more aggressive after the middle of the year, noting it’s in a unique position to deploy 40 MHz in both bands. Those radios will become available in late spring or the early part of summer, he said.
“To do that together at one time with one tower climb that allows us to start really going what I would call ‘good guns’ on this, and scaling that up” with 80 MHz of mid-band covering 200 million PoPs by the end of 2023, he said.
Typically when there is a change in the air interface, such as 5G, Stankey said it’s taken around $8 billion to get through the transition over a number of years.
“I expect that will probably be the case as we work through the next 3-year deployment of this air interface change,” he continued.
It’s still the quiet period of Auction 110 and more details are expected at AT&T’s analyst day in March.
In a note to investors following release of AT&T’s latest financial results, New Street analysts suggested the carrier has some strides to make in terms of 5G competition.
“AT&T will need to invest aggressively in its wireless business in order to try to close a yawning 5G gap with Verizon and a chasm with T-Mobile. We think the threat from T-Mobile will intensify into year-end, and the narrative around who is leading the market on postpaid phone adds will shift too,” wrote New Street’s Jonathan Chaplin.
Q4 metrics show subscriber growth, higher churn
In terms of metrics, AT&T reported adding 884,000 postpaid net phone adds in Q4 – which it released earlier in the month – contributing to 1.2 million total postpaid net adds.
For the full year 2021 AT&T’s postpaid phone gains netted 3.2 million. On the prepaid side, it recorded 24,000 net phone adds.
AT&T brought in more net adds in Q4 than Verizon (which reported 558,000 net postpaid phone adds yesterday) or T-Mobile (which pre-released postpaid phone net additions of 844,000 earlier this month). It follows several quarters in a row where AT&T’s posted big subscriber gains.
However, AT&T’s postpaid phone churn of 0.85% was higher than Wall Street consensus expectations of 0.79%, according to New Street. It compares to churn of just 0.76% a year prior and was worse than Q3 churn of 0.72%.
“AT&T met expectations on net adds despite the higher churn, but it cost them,” wrote Chaplin.
Quarterly results in the mobility business didn’t stack up to expectations, New Street said, where postpaid phone ARPU, wireless service revenue and wireless EBTIDA were below analyst projections.
Wireless EBITDA was up 4.3% to $7.4 billion, missing both New Street’s and consensus expectations.
AT&T reported total Q4 mobility revenues of $21.1 billion, which were up 5.1% and include service revenues of $14.7 billion, up 4.6% year over year. Wireless service revenues saw a boost thanks to subscriber gains as well as the continued return of some international roaming, according to AT&T, which had taken a hit at the onset and continuation of the pandemic.
Equipment revenues were up 6.2% to $6.5 billion, with AT&T attributing it to more sales of higher-priced smartphones.
Postpaid phone ARPU (average revenue per user) of $54.06, was 0.7% lower than the fourth quarter of 2020. AT&T has been executing on a strategy to attract and retain customers with a simplified rate plans approach in the market and extending its most aggressive offers to new and existing customers alike.
That has been an ongoing effort for about a year and a half, and one that Stankey said continues to resonate with consumers.
In his view, the fact that they’ve been in the market for a while is a good thing and shows their strength.
“It’s basic, fundamental, easy for the customer to understand, and we see no evidence whatsoever that we’re losing traction in the value proposition that we have,” he said, noting it just introduced a simplified fixed broadband pricing structure this week based on what it’s learned from the wireless business. He said the straightforward structure allows AT&T to gain the right kind of momentum that’s sustainable and drives up customer satisfaction, alongside consistent messaging from AT&T.
Asked by analysts on the call about what the AT&T brand means to mobile consumers and how it will evolve, Stankey expects to start refining brand messaging and carry forward characteristics like reliability, consistency and, in the business sector, advanced networking, in a more direct way once the WarnerMedia-Discovery transaction closes.
“This isn’t an advertising campaign, this is about structurally what we do behind the business to operate in a way that we think is going to be relevant with the consumer,” he said, adding that the team has been working hard over the last year and still has some to do. “By the time you get into the mid part of the year you will see what that definition looks like and where we’re going.”
Moving forward Stankey wants a sharper focus of selling services from its owned and operated infrastructure in the business segment, whether that be a wired or wireless connection, particularly to the low- and mid-end of the market. He called out distributed networking as a strength and said converged offerings of bundling both fixed and wireless connections are already happening together in the upper part of the business space today.
- AT&T added 31,000 postpaid tablets and other devices in Q4.
- Operating expenses rose in the fourth quarter, up 5.1% to $15.8 billion due to higher equipment costs and HBO Max bundling, as well as about $130 million related to the carrier’s 3G network shutdown.
- Q4 Operating income of $5.4 billion was up 5.2%.
- AT&T’s consolidated revenues for the fourth quarter were down 10.4% to $41 billion, mainly from divesting its video business in Q3 and Vrio in Q4.