According to a transcript of AT&T’s investor event last week, the word “fiber” was mentioned over 100 times. The company wanted to make clear that it’s going to aggressively build fiber and take advantage of government subsidies for fiber builds.
Aside from its fiber message, the company shared a few other items of interest to the wireless community.
AT&T has recently acquired quite a bit of mid-band spectrum. It participated in Auction 110 for 3.45 GHz spectrum. And it also participated in Auction 107 for C-band spectrum.
The CEO of AT&T Communications Jeff McElresh said, “As we deploy mid-band, we're installing two radios per tower that provides the necessary bandwidth and power to achieve the full performance of our entire 120 megahertz of mid-band spectrum.”
AT&T is able to deploy a total of 80 megahertz of mid-band spectrum this year with more to come in its phase 2 deployment. “During this phase, our network will remain competitive as we deploy this first tranche of spectrum, and we'll be positioned for efficient deployment of the remaining mid-band holdings going forward,” said McElresh.
AT&T is projected to spend $70 million on its 5G mid-band spectrum deployment this year. “All of our tower touches at the back half of this year will be lifting the full 80 megahertz of spectrum deploying the two radios, one for both bands,” said McElresh.
Retention of mobility customers
Jenifer Robertson, general manager for AT&T Mobility, talked about the company’s efforts to prevent churn of mobility customers. She compared AT&T’s situation now to where it was in 2019.
“We started by listening to our customers,” she said. “And you know what they told us, their biggest pain point was that we didn't value existing customers as much as new ones. And that alone made them want to leave.”
She said customers were angry they didn’t have access to new promotions. “Our long-tenured, most loyal customers didn't feel valued or appreciated. In 2019, we added 483,000 net adds in an industry that added about 6 million. That's only 8%. Our promotional spend was weighted almost entirely toward acquisition. We underperformed in upgrade rate and in postpaid voice churn at 0.95%, and we were a distant third place in Net Promoter Score.”
Since then, AT&T has raised its total promotional investment “to match industry levels,” and it’s focused on retention by offering its best deals to existing customers.
“Why focus on retention? asked Robertson. “Look, aside from the fact that customers told us it mattered, we all know it costs less to retain a customer than acquire a new one.” Retention strategies also give A&T the opportunity to upsell customers to higher value plans and to upgrade their devices and keep them on installment plans.
Robertson said about 80% of AT&T’s postpaid voice base is on an installment plan.
AT&T Business
Rasesh Patel, chief product & platform officer for AT&T Business, said, “The foundation of our transformation is expanding our fiber footprint, using our market-leading position in enterprise to drive fiber and 5G adoption and increasing penetration in the small business and mid-market segments."
He said AT&T’s fixed wireless broadband offering for businesses now counts 130,000 subscribers.
In order to reach new business customers Patel said AT&T is expanding its direct sales coverage and enabling its AT&T retail stores and digital distribution to serve this segment.
“The next area of opportunity is private 5G,” said Patel. “We are deploying private cellular networks for businesses, universities and public sector organizations. And although a lot of players are entering the space, the advantage AT&T brings is the ability to seamlessly integrate to our nationwide macro network and deploy our spectrum assets when necessary.”
Patel also teased some news for later this year. He said AT&T Business will provide a secure lane to directly connect employees to their corporate network. “We expect to offer this both on our network and over the top.”
Cost savings
Company executives touched on cost-saving measures.
McElfresh said the company is reorienting its internal systems and back-end platforms to save money and be more efficient.
“As we transition the customer journeys, it allows us to reorient our internal operating model and make material reductions in our infrastructure requirements,” he said. “We are consolidating back-end platforms, reducing energy costs and technical space occupancy enough to consolidate 20 of our data centers that are not deemed strategic or part of our Network Edge compute architecture.”
In addition, AT&T’s work with Microsoft has allowed it to migrate 1,500 applications to the cloud. “This not only allows us to decommission servers once again, but the process of migration alone forces a harmonization of these applications so that our product and platform teams can efficiently code enhancements allowing for the launch of new product capabilities in record time,” said McElfresh.
In addition, the work-from-home phenomenon has enabled AT&T “to reduce real estate by nearly 15 million square feet.”
AT&T CFO Pascal Desroch said the company expects mid-single-digit declines in its legacy copper business this year, but he said cost savings will help. “In total, we expect incremental transformation savings of $1 billion in 2022 and $1.5 billion in 2023. We expect this transformation savings to be driven primarily by the optimization of our field dispatch and customer service,” said Desroch. And he also reiterated energy and real estate savings and consolidation of back-end platforms.
Capital expenditures
Desroches said the company expects $24 billion in capital investments in 2022, its highest level ever. “It reflects in part a shift in our orientation from paying a high dividend at the expense of making investments that deliver sustainable earnings growth,” he said.
In 2022 the company is spending around $6 billion in 5G deployment. It expects to continue to spend at similar capital investment levels in 2023, which should be the peak year for its mid-band 5G spectrum deployment. In 2024, AT&T expects it capital investments to begin tapering to around the $20 billion range as it surpasses peak levels of its 5G investment.
Much of the rest of its capex will be focused on its fiber deployment. It’s currently spending in the range of $3 billion to $4 billion per year to target its goal of 30 million plus fiber locations by 2025.