AT&T expects unlimited plan uptake thanks to 5G bump

ATT logo
AT&T's COO said that reducing wireless churn by 1 basis point across its customer base is worth about $100 million to AT&T annually.

As AT&T reported fourth quarter earnings on Wednesday, executives said they expect more customers to sign up for high-value unlimited plans in the second half of 2020, getting a bump from 5G to help grow wireless service revenue.

“[We] expect a higher adoption of our unlimited plans,” said AT&T COO John Stankey, speaking on AT&T’s fourth-quarter earnings call to investors. “We’re at a little more than 50% penetration today, but we expect the 5G device upgrade cycle will bring into our stores lots of customers not on unlimited plans today.”

The anticipated bump in unlimited plans coincides with an expected uptick in handset upgrades as both 5G coverage and smartphones become more widely available in the second half of 2020.   

Sponsored by Nokia

Webinar: Capture customer value with agile operations in 5G

This webinar looks at how CSPs can gain the agility to port use cases and services from one customer or segment to another, quickly and seamlessly. In the webinar we will examine what agility means for concrete services and use cases, how we can quickly adapt a service for multiple different industries, how catalog based service orchestration and DevOps priniciples bring agility to operations and more.

RELATED: AT&T overtakes rivals for fastest download speeds – Opensignal

Stankey said AT&T’s postpaid upgrade rate of 4.8% in the most recent quarter was record-low for any fourth quarter in the company’s history, which follows the industry the trend of customers holding onto smartphones longer.

However, fast-forward to the second half of the year when popular devices, like an expected 5G iPhone, are on the market and AT&T’s 5G coverage is nationwide, and the carrier expects to have more customers coming through the door.

AT&T’s low band 5G service currently covers 50 million people and is targeting nationwide 5G coverage in the second quarter of 2020. The carrier also plans to deploy its 5G+ service, which uses high-band millimeter wave spectrum, in additional cities.

“The timing for this upgrade cycle couldn’t be more perfect when you consider we’ll be offering HBO Max on our highest ARPU wireless plans with features tuned for premium media consumption and at a time when people are coming into our stores to upgrade,” said Stankey. “It’s a natural opportunity to further the distribution of HBO Max, while adding new mobility subscribers and improving our wireless ARPUs.”

AT&T added 229,000 net postpaid phone subscribers in the fourth quarter, and reported postpaid average revenue per user (ARPU) of $55.52. In late October the carrier revamped unlimited plans and bumped up the data cap on its highest-level Unlimited Elite plan to 100GB before consumers are throttled. That plan costs as low as $50 per month for four lines or $85 per month single line.

RELATED: AT&T updates unlimited plans, top tier sports 5G-ready data cap

HBO Max, meanwhile, is slated to launch in May, and subscribers to AT&T’s Unlimited Elite plan will get the $14.99 per month service at no additional cost.

AT&T is investing heavily in HBO Max and in addition to distribution, the carrier expects the combo of wireless and HBO Max will help keep mobile subscribers or reduce churn.

“Increasing the adoption of our best unlimited plans is obviously an ARPU growth opportunity for us, when you add into the mix customers on select unlimited plans will get HBO Max for free, it’s a great opportunity to also improve our overall churn,” Stankey said, reiterating that AT&T has seen that result with unlimited subscribers who currently get a free HBO subscription.

Stankey said that reducing wireless churn by 1 basis point across its customer base is worth about $100 million to AT&T annually.

Reducing churn and generating higher revenue from wireless customers plays into AT&T’s larger three-year financial plan, including growing wireless service revenues by more than 2% annually, which the carrier outlined after it was targeted by activist investor Elliot Management last year.

RELATED: Elliott trashes AT&T management and its execution in wireless

AT&T’s efforts involve paying down debt, including through asset sales like its mobility operations in Puerto Rico and the U.S. Virgin Islands for $1.95 billion, and a capital allocation plan that calls for no material M&A transactions.

It also involves reducing costs. On the earnings call AT&T executives said they’re targeting an additional 4% reduction in labor-related costs including benefits and contract employees in 2020 alone. AT&T said they expect that will deliver $1.5 billion in additional cost savings.

Following the release of fourth-quarter results the Communication Workers of America (CWA) union, which represents more than 25,000 AT&T workers, said that AT&T continues to cut jobs and reduce capital expenditures while announcing more than $5 billion in stock buybacks over the last four months as it caters to the demands of Elliot Management.

CWA said that last week AT&T notified it of plans to cut an additional 200 technician positions in California next month, and claims the company is relying on lower wage subcontractors to build its 5G network.

Suggested Articles

Vodafone U.K.’s head of networks said if the government decides to strictly ban Huawei it would cost Vodafone “low-single-figure billions."

A new NTIA report determined 100 MHz in the 3.1-3.55 GHz band looks most viable for near-term sharing with commercial wireless services.

Instead of running on virtualized machines, Verizon is changing its underlying software architecture to run using cloud-native container-based tech.