AT&T CFO says demand tracking in line with recent trends

Pascal Desroches, AT&T CFO, spoke today at the Annual Deutsche Bank Media, Internet & Telecom Conference where he provided an update to shareholders. Desroches made the following points: 1) The company continues to focus its efforts on 5G and fiber services by growing customer relationships in a disciplined manner. While the company does not expect wireless industry growth levels to mirror those experienced in 2021 and the first half of 2022, Desroches indicated that demand levels are largely tracking in-line with recent trends. The company continues to add customers thanks to both its consistent go-to-market approach and continued success in targeting subsegments of the market where historically AT&T has underperformed. 2) AT&T remains committed to its strategy of becoming a scaled 5G and fiber provider. Desroches reiterated that he expects capital investment to peak in 2022 and 2023. The company remains on target to reach more than 200 million people with mid-band 5G by the end of the year and expects to pass 30 million-plus consumer and business fiber locations by the end of 2025. While AT&T has not provided annual fiber build targets – largely to maintain a level of flexibility as the market evolves – the company is currently focused on driving steady penetration rates while prudently expanding the company’s fiber footprint. 3) Desroches indicated that he expects 2023 free cash flow growth to be supported by wireless and fiber revenue growth as well as benefits from ongoing cost transformation initiatives, which are expected to increasingly support the company’s profitability. Similar to 2022, he expects free cash flow to be greater in the back half of the year due to the timing of capital investments and device payments as well as incentive compensation impacts, particularly in the first quarter of the year and moderating throughout the year. 4) Desroches said the company is maintaining a sharp focus on proactively reducing costs and deliberately allocating capital. The company is using free cash flow after dividends to help reduce debt as it seeks to achieve net debt-to-adjusted EBITDA in the 2.5x range by early 2025.