AT&T’s big bet on fiber broadband has continued to bear fruit. This trend continued into the second quarter of 2023 as the provider reported an uptick in fiber subscribers, revenue and ARPU.
During the quarter, AT&T reported that broadband revenues grew 7%, due to 28 percent fiber growth, partly offset by a 13.7% decline in non-fiber revenues.
As has been the trend at AT&T, broadband net losses, excluding DSL, were 35,000, reflecting AT&T Fiber net adds of 251,000, more than offset by losses in non-fiber services. AT&T Fiber can now serve 20.2 million customer locations and offers symmetrical, multi-gig speeds across parts of its entire footprint of more than 100 metro areas.
Notably, AT&T did not talk about the Gigapower fiber joint venture with BlackRock, which closed earlier this quarter. AT&T’s earnings release said Gigapower had expanded fiber to eight new areas but did not specify the exact markets.
“Our fiber revenues are outpacing our legacy revenues, and this separation will continue to grow over time,” said Pascal Desroches, SVP and CFO of AT&T.
John Stankey, CEO of AT&T, told investors its latest results support its fiber-based broadband plan. “Our investment thesis about fiber started with the understanding that people needed better and faster broadband connectivity than what was available and that those needs would grow exponentially,” he said. By providing the best access technology, we could transform our consumer wireline business into a fiber-fueled sustainable growth franchise.”
He added, “Our results have strengthened our confidence as returns exceed our initial expectations.”
Consumer wireline revenues were $3.3 billion, up 2.4% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services.
During the past three years, AT&T has had more than 3.4 million fiber net ads, which Stankey said: “boosted our subscriber base by 80 percent, and our average penetration rate is about 38%.”
Driving up ARPU
As AT&T has signed up more fiber broadband customers, the service provider also sees its average revenue per user (ARPU) rise.
Since the second quarter of 2020, AT&T doubled its quarterly fiber broadband revenues, reaching more than $1.5 billion this quarter.
Also, over the past three years, the accretive mix shift to fiber has driven our broadband ARPU up more than $10, a 20% increase. Fiber ARPU of $66.70, up 8.2%, with intake ARPU of about $70.
“The ARPU increase shows that customers are voting with their dollars,” Stankey said. “We also have plenty of room to run because we’re still less expensive than competitive offerings in the market.”
Desroches said more speed choices are also driving ARPU. “Customers are increasingly choosing faster speed tiers which are also supporting ARPU growth,” he said.
AT&T’s fiber business drives four main trends: new build penetration, growing ARPU, lowering churn, and improving margins.
“This is the formula for sustainable top-and bottom-line results, and we're confident the success will be sustainable over the next three years,” he said. “As industry convergence accelerates, our owners' economics in both fiber and wireless provide AT&T with a strategic advantage that will be hard to match.”
Residential move impact
Like Verizon, AT&T also acknowledged that its fiber broadband growth came up against a segment that saw slowness in recent quarters due to lower move activity.
Stankey said that the seasonal movement in fiber and broadband is due to two factors: less moving activity and college students going home for the summer or graduating.
“As you probably heard from others in the industry, there is less move activity going on in general, and that has had a degree of impact,” he said. “There is the seasonal dynamic that occurs and somebody out for college and university work as well.”
He added, "I expect that things are probably going to continue to be a bit softer in the market because I don't expect that we're going to see housing movement necessarily recover.”
Still, Stankey maintains that AT&T is confident about its broadband growth prospects. “I feel comfortable about our ability to continue to add along the clip that we're adding right now because, you know, we're more dependent on share take than we are on mover activity,” he said. “I don't think you're going to see further slowing on what we've witnessed in the second quarter, and I think you will see a little bit of a seasonality uptick that's going to come with what typically happens in the third quarter. But it'll be a bit muted because I expect less movement activity in the housing market.”
AT&T’s overall revenues were for the second quarter totaled $29.9 billion versus $29.6 billion in the year-ago quarter, up 0.9%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues.