Q4 2023 AT&T Inc Earnings Call
Okay.
[music]. Thank you for standing by welcome to At&t's fourth quarter 2023.
Thank you for standing by. Welcome to AT&T's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.
Earnings call at this time, all participants are in a listen only mode.
If you should require assistance during the call, please press star then zero and an operator will assist you offline. Following the presentation, the call will be open for questions.
If you should require assistance during the call. Please press Star then zero and an operator will assist you offline. Following the presentation the call will be open for questions.
If you would like to ask a question, please press one and then zero, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing one and then zero. And as a reminder, this conference is being recorded.
If you would like to ask a question. Please press one and then zero and you will be placed in the question queue.
If you are in the question queue and would like to withdraw. Your question you can do so by pressing one and then zero and as a reminder, this conference is being recorded.
I would like to turn the conference call over to your host, Amir Roz Wadowski, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.
I would like to turn the conference call over to your host Amir Roswell Dow Ski senior Vice President of Finance and Investor Relations. Please go ahead Sir.
Thank you, and good morning, everyone. Welcome to our fourth quarter call. I'm Amir Rozbudowski, Head of Investor Relations for AT&T. Joining me on the call today are John Stanky, our CEO , and Pascal DeRoche, our CFO . Before we begin, I need to call your attention to our Safe Harbor Statement. It says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties described in AT&T's SEC filings. Results may differ materially. Additionally, additional information, as well as our earnings materials, are available on the Investor Relations website. With that, I'll turn the call over to John Stanky. John ?
Thank you and good morning, everyone welcome to our fourth quarter call <unk> head of Investor Relations for AT&T and joining me on the call today are John Stankey, our CEO and Pascal the Roche our CFO before we begin I need to call your attention to our safe Harbor statement. It says that some of our comments today may be forward looking.
As such they are subject to risks and uncertainties described in At&t's SEC filings results may differ materially.
Additional information as well as our earnings materials are available on the Investor Relations website with that I'll turn the call over to John Stankey John.
John T. Stankey: Thanks, Amir.
Thanks Amir.
John T. Stankey: I appreciate you all joining us today, and my best wishes for a productive and healthy year ahead to all of you.
John T. Stankey: I appreciate you all joining us today and my best wishes for a productive and healthy year ahead to all of you.
John T. Stankey: We finished 2023 with a strong fourth quarter as we made substantial progress on our strategy of being America's best high-performance network provider.
John Stankey: We finished 2023 with a strong fourth quarter as we made substantial progress on our strategy of being America's Best High performance network provider.
John T. Stankey: We showed again in the fourth quarter and throughout 2023 that we're delivering consistent, positive operating and financial results, including sustained margin expansion and annual free cash flow growth.
John Stankey: Showed again in the fourth quarter and throughout 2023.
John Stankey: That we're delivering consistent positive operating and financial results, including sustained margin expansion and annual free cash flow growth.
John T. Stankey: To do this, we work to grow the right way, invest at historic levels, invest in class 5G and fiber assets.
John Stankey: To do this we work to grow the right way invest at historic levels and best in class fiber and fiber assets.
John T. Stankey: and deliver the best network to more customers in more places.
John Stankey: And deliver the best network to more customers in more places.
John T. Stankey: all while simplifying our operations to drive efficiency while enhancing the customer experience.
John Stankey: All while simplifying our operations to drive efficiency, while enhancing the customer experience.
John T. Stankey: As a result, we're now positioned to provide our growing customer base with the best communications technologies to meet their ever-growing need for connectivity supporting sustainable growth.
John Stankey: As a result, we're now positioned to provide our growing customer base with the best Communications technologies.
John Stankey: To meet their ever growing need for connectivity supporting sustainable growth.
John T. Stankey: We are deliberately allocating capital to expand and enhance our networks and improve financial flexibility to drive incremental shareholder return.
John Stankey: We are deliberately allocating capital to expand and enhance our networks and improve financial flexibility to drive incremental shareholder returns.
John T. Stankey: Since Pascal will cover the fourth quarter results in detail later on, I'd like to highlight some of our full-year accomplishments.
John Stankey: Since Pascal will cover the fourth quarter results in detail later on I'd like to highlight some of our full year accomplishments and long term business trends.
John T. Stankey: and long-term business trend.
John T. Stankey: Let's start with wireless.
John Stankey: Lets start with wireless for the full year, we delivered more than one 7 million postpaid phone net additions with strong service revenue growth and continued historically low postpaid phone churn.
Trent: For the full year, we delivered more than 1.7 million postpaid phone net additions with strong service revenue growth and continued historically low postpaid phone churn, all while maintaining healthy ARPUs.
John Stankey: All while maintaining healthy <unk>.
Trent: Taking a step back.
John Stankey: Taking a step back.
Trent: clear how far our investment-led strategy has taken us from where we stood only three years ago.
John Stankey: It's clear how far our investment led strategy has taken us from where we stood only three years ago. Since the start of 2021, we substantially improved our mobility position and brand perception.
Trent: Since the start of 2021, we've substantially improved our mobility position and brand perception.
Trent: We went from losing wireless share to growing our share of subscribers.
John Stankey: We went from losing wireless share to growing our share of subscribers.
Trent: As a result, we increased our postpaid phone base by more than 10% to more than 71.2 million subscribers.
John Stankey: As a result, we increased our postpaid phone base by more than 10% to more than 71 2 million subscribers.
Trent: This represents our best three-year stretch of postpaid phone net ad growth in more than a decade.
John Stankey: This represents our best three year stretch of postpaid phone net add growth in more than a decade.
Trent: During the same three-year time span, we've added to our share of industry wireless service revenue growth,
John Stankey: During the same three year time span, we've added to our share of industry wireless service revenue growth.
Trent: increased our annual wireless service revenues by more than $7.5 billion, and grew mobility EBITDA by about $4 billion.
John Stankey: Increased our annual wireless service revenues by more than $7 5 billion.
John Stankey: And grew mobility EBITDA by about $4 billion.
Trent: This level of sustained success requires contributions from across the company, including our network team that continues to enhance and expand our 5G and fiber network.
John Stankey: This level of sustained success requires contributions from across the company, including our network team that continues to enhance and expand our <unk> and fiber networks.
Operator: Thank you for standing by. Welcome to AT&T's fourth quarter 2023 earnings call. At this time, all participants are in a listen-only mode.
Trent: Our mid-band 5G network is now available to more than 210 million people, offering faster speeds and an enhanced experience.
John Stankey: Our mid band <unk> network is now available to more than 210 million people operating faster speeds and an enhanced experience.
Trent: We're also bringing more fiber to Americans than anyone else.
John Stankey: We're also bringing more fiber to Americans than anyone else.
Trent: This excites me because where we build fiber, we win.
Operator: If you should require assistance during the call, please press star then zero, and an operator will assist you offline. Following the presentation, the call will be open to questions. If you would like to ask a question, please press 1 and then 0, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing 1 and then 0.
John Stankey: Excites me, because where we build fiber we win.
Trent: Over the past three years, we went from passing about 18 million consumer and business locations to now passing more than 26 million locations.
John Stankey: Over the past three years, we went from passing about $18 million in consumer and business locations to now passing more than 26 million locations.
Trent: As we continue to expand our reach,
John Stankey: As we continue to expand our reach.
Trent: We're growing our fiber base.
John Stankey: Growing our fiber base.
Trent: With 1.1 million AT&T Fibernet ads in 2023, we've generated more than 1 million AT&T Fibernet ads annually for six straight years.
John Stankey: With $1 1 million AT&T fiber net adds in 2023, we generated more than 1 million AT&T fiber net adds annually for six straight years.
Operator: And as a reminder, this conference call is being recorded. I would like to turn the conference call over to your host, Amir Rozwadowski, Senior Vice President of Finance and Investor Relations. Please go ahead, sir.
Trent: Over the past three years, we've grown AT&T Fiber subscribers by 3.4 million or by nearly 70% to more than 8.3 million.
John Stankey: Over the past three years, we've grown AT&T fiber subscribers by $3 4 million or by nearly 70% to more than $8 3 million.
Amir Rozwadowski: Thank you, and good morning, everyone. Welcome to our fourth quarter call. I'm Amir Rozwadowski, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our CEO, and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our Safe Harbor Statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in AT&T's SEC filings, and results may differ materially.
Trent: This success reflects new customer wins and lower churn, trends that we see as sustainable.
John Stankey: This success reflects new customer wins, and lower churn trends that we see as sustainable.
Trent: Financial benefits we continue to realize through our fiber focus are significant.
The financial benefits, we continue to realize through our fiber focus are significant.
Trent: compared to 2020.
Compared to 2020.
Trent: We've more than doubled our fiber revenues to over $6.2 billion in 2023,
John Stankey: We've more than doubled our fiber revenues to over $6 2 billion in 2023.
Trent: And our broadband ARPU climbed more than 20% as customers continue to seek higher value plans with faster speed.
Amir Rozwadowski: Additional information, as well as our earnings materials, are available on the Investor Relations website. With that, I'll turn the call over to John Stankey.
John Stankey: Broadband <unk> climbed more than 20% as customers continue to seek higher value plans with faster speeds.
Trent: In addition to delivering high margin revenue growth,
John T. Stankey: Thanks, Amir. I appreciate you all joining us today, and my best wishes for a productive and healthy year ahead to all of you. We finished 2023 with a strong fourth quarter as we made substantial progress on our strategy of being America's best high-performance network provider. We showed again in the fourth quarter and throughout 2023 that we're delivering consistent, positive operating and financial results, including sustained margin expansion and annual free cash flow growth. To do this, we work to grow the right way, invest at historic levels, invest in class 5G and fiber assets, and deliver the best network to more customers in more places. All while simplifying our operations to drive efficiency while enhancing the customer experience.
John Stankey: In addition to delivering high margin revenue growth.
Trent: Fiber is more energy efficient.
John Stankey: <unk> is more energy efficient requires less maintenance and customers keep the service longer there.
Trent: Requires less maintenance.
Trent: and customers keep the service longer.
Trent: Therefore, as we scale our fiber footprint, we expect to continue to drive margin expansion.
John Stankey: Therefore, as we scale our fiber footprint, we expect to continue to drive margin expansion.
Trent: This flywheel of faster subscriber growth, higher revenues, and expanding margins
John Stankey: This flywheel faster subscriber growth higher revenues and expanding margins.
Trent: gives us confidence in our ability to repeat similar levels of fiber fuel growth in the
John Stankey: It gives us confidence in our ability to repeat similar levels of fiber fueled growth in the future.
Speaker Change: Summary.
John Stankey: In summary.
Speaker Change: Our mobility and consumer wireline businesses are growing in a sustainable fashion.
John Stankey: Our mobility and consumer wireline businesses are growing in a sustainable fashion.
Speaker Change: We're now a highly competitive wireless brand and the leading fiber brand.
John Stankey: We're now a highly competitive wireless brand and the leading fiber brand.
Speaker Change: We've increased customer satisfaction, improved networks, and are in the best position to drive long-term returns as the convergence trend develops.
We have increased customer satisfaction improved networks and are the best positioned to drive long term returns as the convergence trend develops.
John T. Stankey: As a result, we are now positioned to provide our growing customer base with the best communications technologies to meet their ever-growing need for connectivity. We are deliberately allocating capital to expand and enhance our networks and improve financial flexibility to drive incremental shareholder return. Since Pascal will cover the fourth quarter results in detail later on, I'd like to highlight some of our full year accomplishments and Long-Term Business Trends. Let's start with wireless.
Speaker Change: Now let's shift to our second goal of improving efficiencies.
John Stankey: Now, let's shift to our second goal of improving efficiencies.
Speaker Change: Last July , we announced we achieved our $6 billion plus run rate cost savings target well ahead of schedule.
John Stankey: Last July we announced we achieved our $6 billion plus run rate cost savings target well ahead of schedule.
Speaker Change: We then set a new chart.
John Stankey: We then set a new target for an incremental $2 billion plus in run rate cost savings by mid 2026.
Speaker Change: for an incremental $2 billion plus in run rate cost savings by mid-2026.
Speaker Change: We're making strong early progress on this target.
John Stankey: We're making strong early progress on this target.
John Stankey: Importantly, we're seeing the benefits from these cost reduction efforts increasingly fall to the bottom line.
Speaker Change: Importantly, we're seeing the benefits from these cost reduction efforts increasingly fall to the bottom line.
John T. Stankey: For the full year, we delivered more than 1.7 million postpaid phone net additions with strong service revenue growth and continued historically low postpaid phone churn, all while maintaining healthy ARPUs. Taking a step back, it is clear how far our investment-led strategy has taken us from where we stood only three years ago. Since the start of 2021, we've substantially improved our mobility position and brand perception. We went from losing wireless share to growing our share of subscribers. As a result, we increased our post-paid phone base by more than 10% to more than 71.2 million subscribers.
Speaker Change: This is translating into improved operating leverage as evidenced by the adjusted EBITDA margin expansion we delivered in 2023.
John Stankey: This is translating into improved operating leverage as evidenced by the adjusted EBITDA margin expansion, we delivered in 2023.
Speaker Change: Going forward, we expect margin expansion to continue.
John Stankey: Going forward, we expect margin expansion to continue.
John Stankey: I'm proud of the progress the team has made in streamlining our business.
Speaker Change: I'm proud of the progress the team has made in streamlining our business.
Speaker Change: We now have further confidence in our ability to deliver on our promised goals.
John Stankey: We now have further confidence in our ability to deliver on our promise goals.
Speaker Change: Turning to our last key priority.
John Stankey: Turning to our last key priority the benefits from our capital allocation strategy are meaningful and evident in our results.
Speaker Change: Benefits from our capital allocation strategy are meaningful and evident in our results.
Speaker Change: We were again a top investor in America's connectivity through our 5G and fiber networks in 2023.
John Stankey: We were again, a top investor in Americas connectivity through our <unk> and fiber networks in 2023.
Speaker Change: Even with our elevated levels of investment, we delivered better than expected full-year free cash flow of $16.8 billion, which is above our previously raised guidance.
John Stankey: Even with our elevated levels of investment we delivered better than expected full year free cash flow of $16 8 billion, which is above our previously raised guidance.
John T. Stankey: This represents our best three-year stretch of postpaid phone net ad growth in more than a decade. During the same three-year time span, we've added to our share of industry wireless service revenue growth, increased our annual wireless service revenues by more than $7.5 billion, and grew Mobility EBITDA by about $4 billion. This level of sustained success requires contributions from across the company, including our network team, which continues to enhance and expand our 5G and fiber network. Our mid-band 5G network is now available to more than 210 million people, offering faster speeds and an enhanced experience. We're also bringing more fiber to Americans than anyone else.
Speaker Change: Furthermore, we achieved a significantly higher free cash flow while simultaneously reducing our short-term obligations.
John Stankey: Furthermore, we achieved this significantly higher free cash flow, while simultaneously, reducing our short term obligations.
Speaker Change: We reduced our vendor financing obligations by $3.3 billion in 2023, all while making more than $2 billion of non-recurring spectrum clearing payments.
John Stankey: We reduced our vendor financing obligations by a $3 3 billion in 2023, all while making more than $2 billion of nonrecurring spectrum clearing payments.
Speaker Change: with a year-end net debt-to-adjusted EBITDA ratio now below three times and the improved flexibility in 2024 to dedicate more cash to debt reduction.
John Stankey: With a year end net debt to adjusted EBITDA ratio now below three times and the improved flexibility in 2024 to dedicate more cash to debt reduction we.
Speaker Change: We are confident in our path to achieve the 2.5 times range in the first half of 2025.
John Stankey: We are confident in our path to achieve the two five times range in the first half of 2025.
John T. Stankey: This excites me because where we build fiber, we win. Over the past three years, we went from passing about 18 million consumer and business locations to now passing more than 26 million locations. As we continue to expand our reach... We're growing our fiber base. With 1.1 million AT&T FiberNet ads in 2023, we've generated more than 1 million AT&T FiberNet ads annually for six straight years.
John Stankey: So overall I'm proud of what our teams accomplished in 2023.
Speaker Change: Overall, I'm proud of what our team's accomplished in 2023.
Speaker Change: Our strong fourth quarter to end the year accomplished all of our stated 2023 objectives.
John Stankey: Our strong fourth quarter to end the year accomplished all of our stated 2023 objectives.
Speaker Change: We replicated our success in 2022 again in 2023, exactly like we said we would.
John Stankey: We replicated our success in 2022 again in 2023 exactly like we said we would.
Speaker Change: Moving to 2024.
Moving into 2024.
Speaker Change: It should be no surprise that our plan is to do it again.
John Stankey: It should be no surprise that our plan is to do it again.
Speaker Change: again
Again.
John Stankey: Here's how we'll build off our momentum in the year ahead and mobility, we expect to continue our success with adding quality customers on the strength of our go to market approach and elevated customer value proposition.
Speaker Change: Here's how we'll build off our momentum in the year ahead. In mobility, we expect to continue our success with adding quality customers on the strength of our go-to-market approach,
John T. Stankey: Over the past three years, we've grown AT&T Fiber subscribers by 3.4 million, or by nearly 70% to more than 8.3 million. This success reflects new customer wins and lower churn, trends that we see as sustainable. The financial benefits we continue to realize through our fiber focus are significant. Compared to 2020.
Speaker Change: Elevated customer value proposition.
Speaker Change: We also intend to improve our performance by targeting under-penetrated segments like value-oriented customers,
John Stankey: We also intend to improve our performance by targeting underpenetrated segments like value oriented customers.
Speaker Change: in small to medium-sized businesses.
John Stankey: Small to medium sized businesses.
Speaker Change: as well as better penetrating our expanding fiber customer base.
John Stankey: Well as better penetrating our expanding fiber customer base.
John T. Stankey: We've more than doubled our fiber revenues to over $6.2 billion in 2023, and our broadband ARPU climbed more than 20% as customers continue to seek higher value plans with faster speeds, in addition to delivering high-margin revenue growth. Fiber is more energy efficient, requires less maintenance, and customers keep the service longer. Therefore, as we scale our fiber footprint, we expect to continue to drive margin expansion. This flywheel of faster subscriber growth, higher revenues, and expanding margins gives us confidence in our ability to repeat similar levels of fiber fuel growth in the future. Summary: Our mobility and consumer wireline businesses are growing in a sustainable fashion. We're now a highly competitive wireless brand and the leading fiber brand. We've increased customer satisfaction, improved networks, and are in the best position to drive long-term returns as the convergence trend develops. Now, let's shift to our second goal of improving efficiencies.
Speaker Change: As we do this,
John Stankey: As we do this.
Speaker Change: We'll take the same disciplined approach by remaining steadfast on profitable growth.
John Stankey: We'll take the same disciplined approach by remaining steadfast unprofitable growth.
Speaker Change: where we build fiber
John Stankey: Where we build fiber.
Speaker Change: Customers love the value and service we offer.
John Stankey: Customers love the value and service we offer.
Speaker Change: And accordingly, we become the favorite to win.
John Stankey: And accordingly, we become the favorite to win.
Speaker Change: We'll continue to extend our lead as the company that reaches more homes and businesses with fiber.
John Stankey: We will continue to extend our lead as the company that reaches more homes and businesses with fiber.
Speaker Change: We remain on track to pass our $30 million-plus consumer and business fiber location target by the end of 2025.
John Stankey: We remain on track to pass our $30 million, plus consumer and business fiber location target by the end of 2025.
Speaker Change: I mentioned last month.
John Stankey: As I mentioned last month.
Speaker Change: The better than expected returns we are seeing on our fiber investments potentially expands the opportunity to go beyond our initial target by roughly 10 to 15 million additional locations.
John Stankey: Better than expected returns, we're seeing on our fiber investments potentially expands the opportunity.
To go beyond our initial target by roughly $10 million to $15 million additional locations.
Speaker Change: It also assumes similar build parameters
John Stankey: This also assumes similar build parameters in a regulatory environment that remains attractive to build an infrastructure.
Speaker Change: and a regulatory environment that remains attractive to building infrastructure.
Speaker Change: And in areas where we don't yet have fiber,
John Stankey: And in areas, where we don't yet have fiber.
Speaker Change: AT&T Internet Air allows us to better serve customers in select markets with fixed wireless internet access.
John Stankey: TNT Internet are allows us to better serve customers in select markets with fixed wireless internet access.
Speaker Change: We also expect 2024 to be the proving year for our gigapower initiative.
John Stankey: We also expect 2024 to be the proving here for our Giga power initiative that.
John T. Stankey: Last July, we announced we achieved our $6 billion plus run rate cost savings target well ahead of schedule. We then set a new target, for an incremental $2 billion plus in run rate cost savings by mid-2026. We're making strong early progress on this target. Importantly, we're seeing the benefits from these cost reduction efforts increasingly fall to the bottom line.
Speaker Change: We plan to explore other unique opportunities to extend the AT&T brand on a converged basis beyond our traditional footprint.
John Stankey: We plan to explore other unique opportunities to extend the AT&T brand on a converged basis beyond our traditional footprint.
Speaker Change: The good news is that no one is better suited to answer the call for converged connectivity than AT&T.
John Stankey: The good news is that no one is better suited to answer the call for converged connectivity than AT&T.
Speaker Change: We already have North America's largest wireless network and the nation's largest and fastest growing fiber network.
John Stankey: We already have north America's largest wireless network in the nation's largest and fastest growing fiber network.
Speaker Change: There is simply no debate that 5G and fiber are hands down the best connectivity technologies available. We're the only provider that benefits from owner's economics at scale on both technologies.
John T. Stankey: This is translating into improved operating leverage as evidenced by the adjusted EBITDA margin expansion we delivered in 2023. Going forward, we expect margin expansion to continue. We're proud of the progress the team has made in streamlining our business. We now have further confidence in our ability to deliver on our promised goals.
John Stankey: There is simply no debate with five gn fiber are hands down the best connectivity technologies available. We are the only provider that benefits from owner's economics at scale on both technologies.
Speaker Change: Why is this so important?
John Stankey: Why is this so important.
Speaker Change: Traffic on our network has continued to increase in excess of 30% each year over the past three years.
John Stankey: Traffic on our network has continued to increase in excess of 30% each year over the past three years.
Speaker Change: Our position with the most pervasive U.S. fiber footprint and the largest wireless network puts us in the unique position to grow at an advantage marginal cost rate.
John Stankey: Our position with the most pervasive use fiber footprint the largest wireless network puts us in a unique position to grow in an advantaged marginal cost structure.
John T. Stankey: Benefits from our capital allocation strategy are meaningful and evident in our results. We were again a top investor in America's connectivity through our 5G and fiber networks in 2023. Even with our elevated levels of investment, we delivered better than expected full-year free cash flow of $16.8 billion, which is above our previously raised guidance. Furthermore, we achieved a significantly higher free cash flow while simultaneously reducing our short-term obligations. We reduced our vendor financing obligations by $3.3 billion in 2023, all while making more than $2 billion of non-recurring spectrum clearing payments.
Speaker Change: At AT&T, we're making the right moves to deliver high-performance converged networking
John Stankey: At AT&T, we're making the right moves to deliver a high performance converged networking at a scale and breadth second to none in the United States.
Speaker Change: At a scale of breath, second to none in the United States.
Speaker Change: We're doing this by continuing our investment in scaled, flexible, and increasingly open networks that address customers' needs to get on the Internet no matter where or how they are situated.
John Stankey: Doing this by continuing our investment and scaled flexible in an increasingly open networks that address customers' needs to get on the internet no matter, where or how they are situated.
AT&T: our existing strength and presence in literally every market segment, from the largest multinational corporations to the most basic consumer.
John Stankey: Our existing strength and presence in literally every market segment from the largest multinational corporations to the most basic consumer.
AT&T: allows us to effectively scale and commercialize the right solution with the right technology at the right price.
John Stankey: How's us to effectively scale and commercialize the right solution with the right technology at the right price.
John T. Stankey: With a year-end net debt-to-adjusted EBITDA ratio now below three times, and the improved flexibility in 2024 to dedicate more cash to debt reduction, we are confident in our path to achieve the two and a half times range in the first half of 2025. Overall, I'm proud of what our team accomplished in 2023. Our strong fourth quarter to end the year accomplished all of our stated 2023 objectives. We replicated our success in 2022 and again in 2023, exactly like we said we would. Moving to 2024, it should be no surprise that our plan is to do it again, again.
AT&T: Accordingly, we're well positioned to grow high performance networking.
John Stankey: Accordingly, we are well positioned to grow a high performance networking seamlessly combines fiber mobile and fixed wireless and satellite technology and the most secure effective package desired by our customers.
AT&T: seamlessly combines fiber, mobile and fixed wireless, and satellite technology in the most secure and effective package desired by our customers.
Speaker Change: This is all part of orienting the company to put the customer first and prioritize simplicity in everything we do.
John Stankey: This is all part of oriented company to put the customer first and prioritize simplicity and everything we do to further our growth.
Speaker Change: further our growth and become more efficient in 2024.
John Stankey: Some more efficient in 2024.
Speaker Change: This includes enhancing our digital and self-service channels,
John Stankey: This includes enhancing our digital and self service channels.
Speaker Change: that are increasingly being supported by AI.
John Stankey: We're increasingly being supported by AI.
Speaker Change: This work will help shape the effortless and personalized customer experiences required for a truly converged future.
John Stankey: Work will help shape, the effortless and personalized customer experiences required for a truly converged future.
Speaker Change: AI-driven efficiencies are also another significant leg of our cost savings efforts as we make progress on achieving our announced incremental $2 billion-plus run rate savings target by mid-2026.
John Stankey: AI driven efficiencies are also another significant leg of our cost savings efforts as we make progress on achieving our announced incremental $2 billion plus run rate savings target by mid 2026.
John T. Stankey: Here's how we'll build off our momentum in the year ahead. In mobility, we expect to continue our success with adding quality customers on the strength of our go-to-market approach and Elevated Customer Value Proposition. We also intend to improve our performance by targeting underpenetrated segments like value-oriented customers and small-to-medium-sized businesses, as well as better penetrating our expanding fiber customer base. As we do this..., we will take the same disciplined approach by remaining steadfast on profitable growth where we build fiber. Customers love the value and service we offer, and accordingly, we have become the favorite to win.
Speaker Change: summary
John Stankey: Summary.
Speaker Change: We have the right formula to continue the improved operating momentum established over the last three years.
John Stankey: We have the right formula to continue the improved operating momentum established over the last three years.
Speaker Change: I'm pleased with our momentum exiting 2023 and remain optimistic about where AT&T is positioned in the broader industry as we enter a year that I suspect will shape the direction of our industry in the decade to come.
John Stankey: I am pleased with our momentum exiting 2023 and remain optimistic about where AT&T is positioned and the broader industry as we enter a year that I suspect will shape the direction of our industry in the decade to come.
Pascale: With that, I'll turn it over to Pascale. Pascale?
Speaker Change: With that I'll turn it over to Pascal Skol.
Pascale: Thank you, John , and good morning, everyone. As John shared, we've maintained our momentum across both 5G and fiber.
Pascal Skol: Thank you John and good morning, everyone as John said, we've maintained our momentum across both <unk> and fiber let's.
John T. Stankey: We'll continue to extend our lead as the company that reaches more homes and businesses with fiber. We remain on track to pass our $30 million plus consumer and business fiber location target by the end of 2025. As I mentioned last month...
Pascale: Let's start by reviewing our fourth quarter financial summary on slide seven.
Pascal Skol: Let's start by reviewing our fourth quarter financial summary on slide seven.
Pascale: Revenues were up 2.2% for the quarter and 1.4% for the full year, largely driven by wireless service revenue, broadband revenues, and Mexico. This was partly offset by declining business wireless.
Revenues were up two 2% for the quarter and one 4% for the full year largely driven by wireless service revenue growth.
Pascal Skol: Broadband revenues and Mexico. This was partly offset by decline in business wireline.
John T. Stankey: The better than expected returns we are seeing on our fiber investments potentially expands the opportunity to go beyond our initial target by roughly 10 to 15 million additional locations. Let's also assume similar build parameters, and a regulatory environment that remains attractive to building infrastructure in areas where we don't yet have fiber.
Pascale: Adjusted EBITDA was up 3.2% for the quarter and 4.7% for the full year as growth in mobility, consumer wireline, and Mexico were partly offset by a decline in business wireline.
Pascal Skol: Adjusted EBITDA was up three 2% for the quarter and four 7% for the full year as growth in mobility consumer wireline in Mexico were partly offset by a decline in business wireline.
Pascale: In the fourth quarter, adjusted EPS was $0.54, down 11.5% for the quarter due to a $0.10 impact from higher non-cash pension costs.
Pascal Skol: In the fourth quarter adjusted EPS was <unk> 54.
Pascal Skol: Down 11, 5% for the quarter due to a <unk>.
Pascal Skol: <unk> impact from higher non cash pension costs.
John T. Stankey: AT&T Internet Air allows us to better serve customers in select markets with fixed wireless Internet access. We also expect 2024 to be the launch year for our Giga Power Initiative. We plan to explore other unique opportunities to extend the AT&T brand on a converged basis beyond our traditional footprint. The good news is that no one is better suited to answer the call for converged connectivity than AT&T. We already have North America's largest wireless network and the nation's largest and fastest growing fiber network. There is simply no debate that 5G and fiber are hands down the best connectivity technologies available. We're the only provider that benefits from owner's economics at scale on both technologies. Why is this so important?
Pascale: lower capitalized interest, lower equity income from DirecTV, and a higher effective tax rate.
Pascal Skol: Lower capitalized interest lower equity income from Directv and a higher effective tax rate.
Pascale: For the full year, adjusted EPS from continuing operations was $2.41 in line with our previously stated expectations of the low 240s range.
Pascal Skol: For the full year adjusted EPS from continuing operations was $2 41.
Pascal Skol: In line with our previously stated expectations of the low <unk> range.
Pascale: Free cash flow for the quarter was $6.4 billion, including about $900 million in DirecTV distribution.
Pascal Skol: Free cash flow for the quarter was $6 4 billion, including about $900 million indirect TV distributions.
Pascale: For the full year, we came in above our already recently raised guidance with $16.8 billion in pre-cash flow.
Pascal Skol: For the full year, we came in above our already recently raised guidance with $16 8 billion in free cash flow.
Pascale: This is an improvement of $2.6 billion year over year or up 19%. We achieved this free cash flow growth even with about $1 billion of higher cash taxes and about $750 million of lower cash distributions from direct TV.
Pascal Skol: This is an improvement of $2 6 billion year over year or up 19%. We achieved this free cash flow growth, even with about $1 billion of higher cash taxes, and about $750 million of lower cash distributions from Directv dish.
Pascale: Additionally, and as previously mentioned, we reduced vendor financing obligations by $3.3 billion last year.
Pascal Skol: Additionally, and as previously mentioned, we had to spend the financing obligations by $3 3 billion last year.
John T. Stankey: Traffic on our network has continued to increase in excess of 30% each year for the past three years. Our position with the most pervasive U.S. fiber footprint and the largest wireless network puts us in the unique position to grow at an advantaged marginal cost structure. At AT&T, we're making the right moves to deliver a high-performance, converged network at a scale and breadth second to none in the United States. We're doing this by continuing our investment in scaled, flexible, and increasingly open networks that address customers' needs to get on the Internet no matter where or how they are situated. Our existing strength and presence in literally every market segment, from the largest multinational corporations to the most basic consumers, allows us to effectively scale and commercialize the right solution with the right technology at the right price.
Pascale: Cash from operating activities came in at $11.4 billion for the quarter, up $1 billion year over year. For the quarter, capital expenditures were $4.6 billion, with capital investments of $5.6 billion.
Pascal Skol: Cash from operating activities came in at $11 4 billion for the quarter up 1 billion year over year for the quarter capital expenditures were $4 6 billion with capital investments of $5 6 billion.
Pascale: Full-year capital investment was $23.6 billion as we continue to invest in 5G and fiber at historic levels.
Pascal Skol: Full year capital investment was $23 6 billion as we continue to invest in <unk> and fiber at historic levels. We also continue to strengthen our balance sheet last year, we lowered net debt by about $3 3 billion, which was also burdened by $1 $7 billion incur.
Pascale: We also continue to strengthen our balance sheet. Last year, we lowered net debt by about $3.3 billion, which was also burdened by a $1.7 billion increase year over year for changes in FX rates related to foreign debt.
Pascal Skol: Year over year for changes in FX rates related to foreign debt.
Pascale: We additionally completed an $8 billion pension liability transfer through the purchase of insurance annuities last spring. And we've done all this despite overcoming meaningful declines in the legacy wireline part of our business.
Pascal Skol: We Additionally, completed an $8 billion pension liability transfer through the purchase of insurance annuities last spring and we've done all of this despite overcoming meaningful declines in the legacy wireline part of our business now.
Pascale: Now let's look at our mobility segment operating yourself on slide eight.
John T. Stankey: Accordingly, we're well-positioned to grow high-performance networking that seamlessly combines fiber, mobile, and fixed wireless, and satellite technology in the most secure, effective package desired by our customers. This is all part of orienting the company to put the customer first and prioritize simplicity in everything we do, further our growth and become more efficient in 2024. This includes enhancing our digital and self-service channels, which are increasingly being supported by AI. This work will help shape the effortless and personalized customer experiences required for a truly converged future. AI-driven efficiencies are also another significant leg of our cost savings efforts as we make progress on achieving our announced incremental $2 billion-plus run rate savings target by mid-2026.
Pascal Skol: Now, let's look at our mobility segment operating yourself on slide eight.
Pascale: Our mobility business continues to deliver strong results, growing both revenues and EBITDA for the sixth consecutive year. We are pleased with our 526,000 postpaid phone net ads for the quarter, particularly given some of the rich promotion by our peers. This success demonstrates that the general health of the wireless industry and the consistency of our go-to-market strategy, which continues to resonate with high-value customers.
Pascal Skol: Our mobility business continues to deliver strong results growing both revenues and EBITDA for the sixth consecutive year. We are pleased with our 526000 postpaid phone net adds for the quarter, particularly given some of the rich promotion by our peers. This success demonstrates that the general health.
<unk> of the wireless industry and the consistency of our go to market strategy, which continues to resonate with high value customers.
Pascale: Revenues were up more than 4% for the quarter and 2.7% for the year.
Pascal Skol: Revenues were up more than 4% for the quarter and two 7% for the year.
Pascale: Service revenues also continue to improve thanks to steady and profitable subscriber growth.
Pascal Skol: Service revenues also continued to improve thanks to steady and profitable subscriber growth.
Pascale: In the quarter, service revenues rose about 4% while they were up 4.4% for the full year.
Pascal Skol: In the quarter service revenues rose about 4%, while they were up four 4% for the full year.
Pascale: Mobility EBITDA for the quarter was up about $450 million or 5.6% driven by growth in service risk.
Pascal Skol: Mobility EBITDA for the quarter was up about $450 million or five 6% driven by growth in service revenues.
Pascale: For the full year, mobility EBITDA grew 7.4%, and we continue to see margin expansion year over year.
For the full year mobility, EBITDA grew seven 4% and we continue to see margin expansion year over year.
John T. Stankey: We have the right formula to continue the improved operating momentum established over the last three years. I'm pleased with our momentum exiting 2023 and remain optimistic about where AT&T is positioned in the broader industry as we enter a year that I suspect will shape the direction of our industry in the decade to come. With that, I'll turn it over to Paschal.
Pascale: Mobility post-paid phone ARPU was $56,023, up 1.4% year-over-year. ARPU growth continues to be largely driven by our targeted pricing actions and from customers trading up to higher price unlimited plans.
Pascal Skol: Mobility postpaid phone <unk> was $56.23 up one 4% year over year <unk> growth continues to be largely driven by our targeted pricing actions and from customers trading up to higher price unlimited plan.
Pascale: Postpaid phone churn of 0.84% for the quarter remains historically low. Our continued low churn levels clearly demonstrate customers prefer the value proposition they are getting from AT&T.
Pascal Skol: Postpaid phone churn of <unk>, 84% for the quarter remains historically low our continued low churn levels clearly demonstrate customers prefer the value proposition they are getting from AT&T.
Thank you, John, and good morning, everyone. As John shared, we've maintained our momentum across both 5G and fiber. Let's start by reviewing our fourth quarter financial summary on slide 7. Revenues were up 2.2% for the quarter and 1.4% for the full year, largely driven by wireless service revenue, broadband revenues, and Mexico. This was partly offset by declining business wirelines. Adjusted EBITDA was up 3.2% for the quarter and 4.7% for the full year as growth in mobility, consumer wireline, and Mexico was partly offset by a decline in business wirelines. In the fourth quarter, adjusted EPS was $0.54, down 11.5% for the quarter due to a $0.10 impact from higher non-cash pension costs.
Pascale: In prepaid, our phone churn was less than 3% with cricket phone churn substantially lower.
Pascal Skol: And prepaid.
Pascal Skol: Our phone churn was less than 3% with cricket phone churn substantially lower.
Pascale: We remain encouraged by the overall health of the wireless industry and are confident that our mobility business will deliver again as we expect to continue to grow in customers, service revenues, and EBITDA at a healthy clip in 2024.
Pascal Skol: We remain encouraged by the overall health of the wireless industry and are confident that our mobility business would deliver again as we expect to continue to growing customers.
Pascal Skol: Service revenues and EBITDA at a healthy clip in 2024.
Pascale: Now, let's move to consumer and business wireline results, which are on slide nine.
Pascal Skol: Now, let's move to consumer and business wireline results, which are on slide nine.
Pascale: Let's start with consumer wireless.
Pascal Skol: Let's start with consumer wireline.
Pascale: As John mentioned, the financial and operational performance of our fiber business is exceeding our initial expectations.
As John mentioned, the financial and operational performance of our fiber business is exceeding our initial expectation.
Pascale: Wherever we have fiber, we continue to win. In the fourth quarter, we added 273,000 fiber customers even in a seasonally slow fourth quarter and lower year-over-year household moves. This accentuates the resiliency of fiber and the superior experience it provides customers.
Pascal Skol: Wherever we have fiber we continue to win in the fourth quarter. We added 273000 fiber customers, even in a seasonally slow fourth quarter and lower year over year household moves. This accentuates the resiliency of fiber and a superior experience it provides customers.
Lower capitalized interest, lower equity income from DirecTV, and a higher effective tax rate. For the full year, adjusted EPS from continuing operations was $2.41, in line with our previously stated expectations of the low $2.40 range. Freecast flow for the quarter was $6.4 billion, including about $900 million in DirecTV distribution.
Pascale: Broadband revenues grew more than 8% year over year due to fiber revenue growth.
Pascal Skol: <unk> revenues grew more than 8% year over year due to fiber revenue growth fiber.
Pascale: Fiber ARPU was $68.50, up 29 cents sequentially, with intake ARPU now at more than $70.
Pascal Skol: <unk> was $68 50.
Pascal Skol: Up 29% sequentially with intake are we now at more than $70.
John: Consumer wireline EBITDA grew more than 10% for the quarter and more than 8% for the full year due to growth in fiber revenues and the more efficient cost profile of fiber.
Consumer wireline EBITDA.
For the full year, we came in above our already recently raised guidance with $16.8 billion in pre-cash flow. This is an improvement of $2.6 billion year over year, or up 19%. We achieved this free cash flow growth even with about $1 billion of higher cash taxes and about $750 million of lower cash distributions from direct TV. Additionally, and as previously mentioned, we reduced vendor financing obligations by $3.3 billion last year. Cash from operating activities came in at $11.4 billion for the quarter, up $1 billion year-over-year.
Pascal Skol: Grew more than 10% for the quarter and more than 8% for the full year due to growth in fiber revenues.
Pascal Skol: And the more efficient cost profile fiber.
Pascale: And while fiber remains our focus and lead product, we've also been encouraged by the initial introduction of AT&T Internet Air, our targeted fixed wireless access service.
Pascal Skol: And while fiber remains our focus and lead product. We've also been encouraged by the initial introduction of AT&T Internet are our targeted fixed wireless access service.
Pascale: We had 93,000 AT&T Internet Air subscribers at the end of the year and now offer this service in parts of 35 locations.
Pascal Skol: We had 93000 AT&T internet subscribers at the end of the year and now offer this service and parts of 35 locations.
Pascale: Turning to business wireline, EBITDA was down about 19% in the quarter. This was impacted by about $100 million of items, primarily discrete intellectual property transaction revenues we had in the fourth quarter of 2022 that did not repeat in the fourth quarter of 2023.
Pascal Skol: Turning to business wireline EBITDA was down about 19% in the quarter. This was impacted by about $100 million of items, primarily discrete intellectual property transaction revenues, we had in the fourth quarter of 2022 that did not repeat in the fourth quarter of 2023.
For the quarter, capital expenditures were $4.6 billion, with capital investments of $5.6 billion. Full year capital expenditures were $23.6 billion as we continue to invest in 5G and fiber at historic levels. We also continue to strengthen our balance sheet. Last year, we lowered net debt by about $3.3 billion, which was also burdened by a $1.7 billion increase year-over-year due to changes in FX rates related to foreign debt. Additionally, we completed an $8 billion pension liability transfer through the purchase of insurance annuities last spring.
Pascale: As I will discuss in a moment, we expect trends in business wireline EBITDA to improve on a four-year basis in 2024.
Pascal Skol: As I will discuss in a moment, we expect trends in business wireline EBITDA to improve on a full year basis in 2024.
Pascale: in the fourth quarter
Pascal Skol: In the fourth quarter of.
Pascale: Our business solutions wireless service revenues grew nearly 6%. This is an area where we continue to grow faster than our nearest peer.
Pascal Skol: Our business solutions wireless service revenues grew nearly 6%. This is an area, where we continue to grow faster than our nearest peer.
Pascale: FirstNet also continues to be a growth vector for us with wireless connections growing by about 260,000 sequentially.
Pascal Skol: <unk> also continues to be a growth vector for us with wireless connections growing by about 260000 sequentially.
Pascale: Now let's move to slide 10 for our 2024 financial guide.
Pascal Skol: Now, let's move to slide 10 for our 2024 financial guidance.
And we've done all this despite overcoming meaningful declines in the legacy wireline part of our business. Now, let's look at our mobility segment, Operating Yourself, on slide 8. Our mobility business continues to deliver strong results, growing both revenues and EBITDA for the sixth consecutive year. We are pleased with our 526,000 post-paid phone net ads for the quarter, particularly given some of the rich promotion by our peers. This success demonstrates the general health of the wireless industry and the consistency of our go-to-market strategy, which continues to resonate with high-value customers. Revenues were up more than 4% for the quarter and 2.7% for the year. Service revenues also continue to improve thanks to steady and profitable subscriber growth. In the quarter, service revenues rose about 4%, while they were up 4.4% for the full year.
Pascale: Here are our expectations for the year. First, we expect to again grow mobility subscribers against a healthy but normalized industry growth. We also anticipate continued benefits from a larger subscriber base and modest growth in post-paid phone arc.
Pascal Skol: Here are our expectations for the year first we expect to again grow mobility subscribers against a healthy but normalized industry growth.
Pascal Skol: We also anticipate continued benefits from a larger subscriber base and modest growth in postpaid phone <unk>.
Pascale: This should result in wireless service revenue growth in the 3% range for the full year.
Pascal Skol: This should result in wireless service revenue growth in the 3% range for the full year.
Pascale: For broadband, we expect revenue increases of 7% plus for the full year. This growth reflects continued fiber subscriber growth and higher ARPUs from the mixed shift to fiber. Overall, we expect to continue to grow consolidated revenues
Pascal Skol: For broadband we expect revenue increases of 7% plus for the full year. This growth reflects continued fiber subscriber growth and higher <unk> from the mix shift to fiber overall, we expect to continue to grow consolidated revenues next year as we think about the EBITDA trends in 2024, we expected.
Pascale: as we think about EBITDA trends in 2024.
Pascale: We expect to grow mobility EBITDA in the mid-single digits as our disciplined approach helps us to grow valuable subscribers. In business wireline, we expect EBITDA to be down about 10% plus or minus. We expect legacy business wireline declines to be partially offset by incremental cost savings and increased fiber and fixed wireless reps.
Mobility EBITDA in the mid single digits as our disciplined approach helps us to grow valuable subscribers in business wireline, we expect EBITDA to be down about 10% plus or minus we expect legacy business wireline declines to be partially offset by incremental cost.
Mobility EBITDA for the quarter was up about 450 million, or 5.6%, driven by growth in service revenue. For the full year, mobility EBITDA grew 7.4%, and we continue to see margin expansion year-over-year. Mobility post-paid phone ARPU was $56,023, up 1.4% year-over-year. ARPU growth continues to be largely driven by our targeted pricing actions and from customers trading up to higher-priced unlimited plans. Post-pay phone churn of 0.84% for the quarter remains historically low.
Pascal Skol: Savings and increased fiber and fixed wireless revenues.
Pascale: Additionally, our guides reflect the impact of the expected deconsolidation of our cybersecurity services.
Pascal Skol: Additionally, our guidance reflects the impact of the expected deconsolidation of our cyber security services business.
Pascale: In consumer wireline, we expect to grow EBITDA in the mid-single-digit range thanks to continued growth in fiber revenues and, to a lesser degree, growth in fixed wireless subscribers. This will be partly offset by an expected continued decline in legacy copper revenues.
Pascal Skol: In consumer wireline, we expect to grow EBITDA in the mid single digit range. Thanks to continued growth in fiber revenues and to a lesser degree growth in fixed wireless subscribers. This will be partly offset by an expected continued decline in legacy copper revenues.
Our continued low churn levels clearly demonstrate customers prefer the value proposition they are getting from AT&T. For prepaid, our phone churn was less than 3%, with Cricut phone churn substantially lower. We remain encouraged by the overall health of the wireless industry and are confident that our mobility business will deliver again as we expect to continue to grow in customers, service revenues, and EBITDA at a healthy clip in 2024. Now, let's move to our consumer and business wireline results, which are on slide nine. Let's start with consumer wireline.
Pascale: Finally, similar to last year, we expect to benefit from ongoing corporate cost reductions again this year.
Pascal Skol: Finally, similar to last year, we expect to benefit from ongoing corporate cost reductions again. This year. These factors combined to deliver.
Pascale: These factors combined deliver consolidated adjusted EBITDA growth in the 3% range for the full year.
Pascal Skol: Consolidated adjusted EBITDA growth in the 3% range for the full year.
Pascale: Moving to EPS, here's what to think about when you do your calculations.
Pascal Skol: Moving to EPS, here's what to think about when you do your calculations.
Pascale: Our full-year guides reflect non-cash headwinds of about 24 cents, which include the following.
Pascal Skol: Our full year guidance reflects noncash headwinds of about <unk> 24 cents, which include the following.
Pascale: 17 cent higher depreciation
Pascal Skol: 17th higher depreciation.
Pascale: Approximately half is from accelerated depreciation on Nokia assets impacted by our open RAN transformation, and we expect this impact to continue through 2026.
Pascal Skol: Approximately half.
Pascal Skol: Is from accelerated depreciation on Nokia assets impacted by our open ran transformation and we expect this impact to continue through 2026. The other half is incremental depreciation from our elevated <unk> fiber builds.
As John mentioned, the financial and operational performance of our fiber business is exceeding our initial expectations. Wherever we have fiber, we continue to win. In the fourth quarter, we added 273,000 fiber customers, even in a seasonally slow fourth quarter and lower year-over-year household moves.
Pascale: The other half is incremental depreciation from our elevated 5G and fiber bill.
Pascale: Headwinds of approximately $0.07 associated with higher non-cash pension and post-retirement benefit costs, largely driven by declines in prior service credit amortization.
Pascal Skol: Headwinds of approximately seven cents.
Pascal Skol: Associated with higher non cash pension and postretirement benefit costs, largely driven by declines of prior service credit amortization.
This accentuates the resiliency of fiber and the superior experience it provides customers. Broadband revenues grew more than 8% year-over-year due to fiber revenue growth. Fiber ARPU was $68.50, up 29 cents sequentially, with intake ARPU now at more than $70.
Pascale: As a reminder, prior service credit are the result of amendments made in prior years to our post-retirement benefit plan that reduce benefits.
Pascal Skol: As a reminder, prior service credit are the result of amendments made in prior years to our post retirement benefit plan that reduced benefits under GAAP. The impact of these amendments is recorded as a credit and equity and amortized into income over the expected service period of planned participants.
Pascale: Under GAAP, the impact of these amendments is recorded as a credit inequity and amortized into income over the expected service period of plan participants.
Consumer wireline EBITDA grew more than 10% for the quarter and more than 8% for the full year due to growth in fiber revenues and the more efficient cost profile of fiber. And while fiber remains our focus and lead product, we've also been encouraged by the initial introduction of AT&T Internet Air, our targeted fixed wireless access service. We had 93,000 AT&T Internet Air subscribers at the end of the year and now offer this service in parts of 35 locations. Turning to business wireline, EBITDA was down about 19% in the quarter.
Pascale: In 2023, prior service credit amortization was $2.6 billion, which is a positive contribution to other income. In 2024, we expect prior service credit amortization to be $2 billion, or a decline of about $600 million. Next year, we expect a more moderate decline in prior service credit amortization, continuing to decrease in the subsequent years as prior year plan changes become fully amortized.
Pascal Skol: In 2023 prior service credit amortization was $2 6 billion, which is a positive contribution to other income in 2024, we expect prior service credit amortization to be $2 billion or a decline of about $600 million next year, we expect a more moderate declines in <unk>.
Pascal Skol: This service credit amortization continuing to decrease in the subsequent years as prior year plan changes become fully amortized.
Pascale: We have provided the projected future annual amortization by year in the footnotes of our Supplemental Financial Trends document on our Investor Relations website.
Pascal Skol: We have provided the projected future annual amortization by year in the footnotes of our supplemental financial trends document on our Investor Relations website.
This was impacted by about $100 million of items, primarily discrete intellectual property transaction revenues we had in the fourth quarter of 2022 that did not repeat in the fourth quarter of 2023. As I will discuss in a moment, we expect trends in business while on EBITDA to improve on a full year basis in 2024. In the fourth quarter, our business solutions wireless service revenues grew nearly 6%.
Pascale: Importantly, we have continued to lower our pension obligation, including our transfer of certain pension assets and liabilities to ASEAN last year, and we don't expect any material required contributions to our pension plans for the balance of this decade.
Pascal Skol: Fortunately, we have continued to lower our pension obligation, including our transfer of certain pension assets and liabilities to athene last year, and we don't expect any material required contributions to our pension plans for the balance of this decade.
Pascale: In addition to these non-cash items, the guidance also includes eight cents of other headwinds.
Pascal Skol: In addition to these noncash items. The guidance also includes eight setup other headwinds.
Pascale: These include 5-cent impact from lower-spectrum-related interest capitalization as we near completion of our initial C-band spectrum deployment in 2024. We don't expect capitalized interest to be a significant headwind beyond 2024.
Pascal Skol: These include <unk> <unk> impact from lower spectrum related interest capitalization as we near completion of our initial C band spectrum deployment in 2024, we don't expect capitalized interest to be a significant headwind beyond 2024.
This is an area where we continue to grow faster than our nearest peer. FirstNet also continues to be a growth vector for us, with wireless connections growing by about 260,000 sequentially. Now let's move to slide 10 for our 2024 financial guide. Here are our expectations for the year. First, we expect to again grow mobile subscribers against a healthy but normalized industry growth. We also anticipate continued benefits from a larger subscriber base and modest growth in post-paid phone arc. This should result in wireless service revenue growth in the 3% range for the full year. For broadband, we expect revenue increases of 7% plus for the full year.
Pascale: and a $0.03 impact from lower adjusted equity income from DirecTV, which we expect to be about $2.6 billion.
Pascal Skol: And a <unk> <unk> impact from lower adjusted equity income from Directv, which we expect to be about $2 6 billion.
Pascale: versus 2.9 billion in 2023.
Pascal Skol: <unk> $2 9 billion in 2023.
Pascale: Lastly, we expect an effective tax rate in 2024 consistent with the 2023 rate.
Pascal Skol: Lastly, we expect an effective tax rate in 2024, consistent with the 2023 right.
Pascale: Given these assumptions, adjusted EPS for 2024 is expected to be in the $2.15 to $2.25 range. Normalizing for these four items, our 2024 guides would imply adjusted EPS growth consistent with our expected growth in adjusted EBITDA.
Pascal Skol: Given these assumptions adjusted EPS for 2024 is expected to be in the $2 15 to $2 25 range normalizing for these four items, our 2024 guidance would imply adjusted EPS growth consistent with our expected growth in adjusted EBITDA.
This growth reflects continued fiber subscriber growth and higher ARPUs from the mixed shift to fiber. Overall, we expect to continue to grow consolidated revenues as we think about the EBITDA trends in 2024. We expect to grow mobility EBITDA in the mid-single digits as our disciplined approach helps us to grow valuable subscribers. In business wireline, we expect EBITDA to be down about 10% plus or minus.
Pascale: We expect to be in a position to begin to grow AdjustDPS again in 2025.
Pascal Skol: We expect to be in a position to begin to grow adjusted EPS again in 2025.
Pascale: Turning to free cash flow, here's what to consider for 2024.
Pascal Skol: Turning to free cash flow, here's what to consider for 2024.
Pascale: First, we expect adjusted EBITDA growth in the 3% range.
Pascal Skol: We expect adjusted EBITDA growth in the 3% range.
Pascale: We also expect cash taxes to be up about $1.5 billion based on current tax law. As we look out to 2025, we would anticipate cash taxes to increase around $1 billion over 2024.
Pascal Skol: We also expect cash taxes to be up about $1 5 billion based on current tax law.
We expect legacy business wireline declines to be partially offset by incremental cost savings and increased fiber and fixed wireless revenue. Additionally, our guides reflect the impact of the expected deconsolidation of our cybersecurity services. In consumer wireline, we expect to grow EBITDA in the mid-single-digit range thanks to continued growth in fiber revenues and, to a lesser degree, growth in fixed wireless subscribers. This will be partly offset by an expected continued decline in legacy copper revenues.
Pascal Skol: As we look out to 2025, we would anticipate cash taxes to increase around $1 billion over 2024.
Pascale: Cast distributions from DirecTV in 2023 were $3.7 billion, down about $750 million compared to the prior year.
Pascal Skol: Cash distributions from Directv in 2023 were $3 7 billion down about $750 million compared to the prior year.
Pascale: Looking forward, we expect DirecTV cash distributions to decline at a similar rate in 2024 and thereafter.
Pascal Skol: Looking forward, we expect Directv cash distributions to decline at a similar rate in 2024 and thereafter.
Pascale: I'd also like to point out that DirecTV's debt levels have not changed materially since the end of 2021, and its debt is non-recourse to AT&T.
Pascal Skol: I'd also like to point out that Directv is debt levels have not changed materially since the end of 2021 and its debt is nonrecourse to AT&T.
Finally, similar to last year, we expect to benefit from ongoing corporate cost reductions again this year. These factors combined deliver consolidated adjusted EBITDA growth in the 3% range for the full year. Moving to EPS, here's what to think about when you do your calculations. Our full-year guides reflect non-cash headwinds of about 24 cents, which include the following. $0.17 higher depreciation.
Pascale: Another impact to free cash flow is lower capital investment. We expect 2024 capital investment levels in the 21 to 22 billion dollars.
Pascal Skol: Another impact of free cash flow is lower capital investment, we expect 2020 for capital investment levels in the 'twenty, one to 'twenty $2 billion range.
Pascale: It's also important to note that the next shift of our capital investment continues to move in a favorable direction as vendor financing obligations decline and project capital spend increase.
Pascal Skol: It's also important to note that the mix shift of our capital investment continues to move in a favorable direction and vendor financing obligations decline and project capital spend increases.
Pascale: Accordingly, we plan to continue to pay down short-term vendor and direct supplier financing this year as we shape an even more sustainable and rattleable quarterly free cash flow cage.
Pascal Skol: Accordingly, we plan to continue to pay down short term vendor and direct supplier financings. This year as we shape and even more sustainable and ratable quarterly free cash flow cadence.
Approximately half is from accelerated depreciation on Nokia assets impacted by our Open RAN transformation, and we expect this impact to continue through 2026. The other half is incremental depreciation from our elevated 5G and fiber bill, and headwinds of approximately 7 cents associated with higher non-cash pension and post-retirement benefit costs, largely driven by declines in prior service credit amortization. As a reminder, prior service credit is the result of amendments made in prior years to our post-retirement benefit plan that reduce benefits.
Pascale: Remember, our capital investments consist of payments from prior year capital spend plus current year spend.
Pascal Skol: Remember our capital investments consistent payments from prior year capital spend plus current year spending.
Pascale: This year.
Pascal Skol: This year.
Pascale: there will be less payments of prior year obligations than we saw in 2023 due to significant reductions in vendor financing. However, in the year, we do expect higher spend on capital projects.
Pascal Skol: There will be less payments of prior year obligations than we saw in 2023 due to significant reductions intended financings. However in the year, we do expect higher spend on capital projects.
Pascale: When you combine all these factors, we expect to deliver free cash flow in the $17 to $18 billion range this year.
Pascal Skol: When you combine all these factors, we expect to deliver free cash flow in the $17 billion to $18 billion range. This year.
Pascale: This is greater than two times our current annual common dividend and more than enough to cover other commitments.
Pascal Skol: This is greater than two times, our current annual common dividend and more than enough to cover other commitments as we've discussed in recent quarters, we continue to make progress on improving the rate ability of our free cash flow.
Under GAAP, the impact of these amendments is recorded as accredited inequity and amortized into income over the expected service period of planned participants. In 2023, prior service credit amortization will be $2.6 billion, which is a positive contribution to other income. In 2024, we expect prior service credit amortization to be $2 billion, or a decline of about $600 million. Next year, we expect a more moderate decline in prior service credit amortization, continuing to decrease in subsequent years as prior year plan changes become fully amortized. We have provided the projected future annual amortization by year in the footnotes of our Supplemental Financial Trends document on our Investor Relations website. Importantly, we have continued to lower our pension obligations, including our transfer of certain pension assets and liabilities to the scene last year, and we don't expect any material required contributions to our pension plans for the balance of this decade.
Pascale: As we discussed in recent quarters, we continue to make progress on improving the readability of our free cash flow. Last year, our free cash flow was about 70% back-end loaded to the second half. We expect that to be closer to 60% this year. Accordingly, we expect first quarter free cash flows of at least $2.5 billion.
Pascal Skol: Last year, our free cash flow was about 70% backend loaded to the second half, we expect that to be closer to 60%. This year. Accordingly, we expect first quarter free cash flows of at least $2 $5 billion.
Pascale: Overall, the combination of increased free cash flow and fewer one-time items will enable us to continue our deleveraging progress in 2024 and remain on track to achieve our target range of 2.5 times net debt to adjusted EBITDA in the first half of 2025.
Pascal Skol: Overall, the combination of increased free cash flow and fewer one time items will enable us to continue our deleveraging progress and 2024 and remain on track to achieve our target range of two five times net debt to adjusted EBITDA in the first half of 2025.
Speaker Change: Amir, that's our presentation. We're now ready for the Q&A. Thank you, Pascal. Operator, we're ready to take the first question.
Speaker Change: <unk>, that's our presentation, we're now ready for the Q&A. Thank you Pascal operator, we're ready to take the first question.
Speaker Change: Our first question will come from the line of John Hudlick of UBS. Please go ahead.
Speaker Change: Our first question will come from the line of John Hodulik of UBS. Please go ahead.
Speaker Change: Great. Thanks. Good morning, guys. First, thanks for all the detail on the free cash flow, Pascal. But can we focus on the sustainability of the postpaid phone growth in 24? You added 1.7 million subs, but gross ads were down a bit in the fourth quarter. I guess, first, could you talk about the momentum you're seeing here in the first quarter and how competition is shaping up? And then, John , you talked about these underpenetrated markets, these three segments, value, SME, and conversion. Any color you can give us in terms of how big of an opportunity those underpenetrated segments are or how you expect to address them here in 24?
John C. Hodulik: Great. Thanks, Good morning, guys.
John C. Hodulik: Thanks Robert.
John C. Hodulik: On the free cash flow for Scott, but can we focus on.
In addition to these non-cash items, the guidance also includes 8 cents of other headwinds. These include 5 cents of impact from lower spectrum-related interest capitalization as we near completion of our initial C-band spectrum deployment in 2024. We don't expect capitalized interest to be a significant headwind beyond 2024, and a three-cent impact from lower adjusted equity income from DirecTV, which we expect to be about $2.6 billion versus $2.9 billion in 2023. Lastly, we expect an effective tax rate in 2024 consistent with the 2023 rate. Given these assumptions, adjusted EPS for 2024 is expected to be in the $2.15 to $2.25 range.
John C. Hodulik: The sustainability of the postpaid phone growth in.
In 'twenty four.
John C. Hodulik: We added $1 7 million subs, but gross adds were down a bit in the fourth quarter I.
John C. Hodulik: I guess first could you talk about the momentum you are seeing here here in the first quarter and how competition shaping up and then John you talked about these underpenetrated markets as these three segments value SME and conversion any color you can give us in terms of how big of an opportunity those those underpenetrated segments or how you expect to address that.
John C. Hodulik: And here in 2004.
Speaker Change: Hi. Good morning, John . Happy New Year. So, look, first of all, in the aggregate market, as we've been indicating, we thought there was going to be a little bit of a slowdown from, you know, previous year's activity level. We saw that happen.
Speaker Change: Hi, Good morning, John Happy New year.
Speaker Change: So look the first of all in the aggregate market as we've been indicating we thought there was going to be a little bit of a slowdown.
Speaker Change: This year's activity level, we saw that happening.
Speaker Change: in 23. I think we're at a more normalized level right now. We're kind of expecting that is going to continue into next year. You know, it'll be probably right around.
Speaker Change: In 2003, I think as we are at a more normalized level right. Now we're kind of expecting that is going to continue into next year. It would be probably right around the same place, we're not going to see a dramatically different.
Normalizing for these four items, our 2024 guides would imply adjusted EPS growth consistent with our expected growth in adjusted EBITDA. We expect to be in a position to begin to grow AdjustedVPS again in 2025. Turning to free cash flow, here's what to consider for 2024. First, we expect adjusted EBITDA growth in the 3% range. We also expect cash taxes to be up about $1.5 billion based on the current tax law. As we look out to 2025, we would anticipate cash taxes to increase around $1 billion over 2024. Cast distributions from DirecTV in 2023 were $3.7 billion, down about $750 million compared to the prior year.
Speaker Change: same place. We're not going to see it dramatically different. And our expectations are we're going to continue to attack the market the same way we've been attacking it. And we've been really consistent about that over the last three years.
Speaker Change: Our expectations are we're going to continue to attack the market.
Speaker Change: The same way, we've been attacking that and we've been really consistent about that over the last three years.
Speaker Change: And I don't think you should expect to see that there is going to be any less sustainability of our performance than what you've seen over the previous couple of years in the strategies and the tactics we use.
Speaker Change: And I don't think you should expect to see that there is going to be any less sustainability of our performance and what you've seen over the previous couple of years and the strategies and the tactics, we use I think the market.
Speaker Change: is a healthy market right now. I would say if you would look at the fourth quarter and look at what we delivered on postpaid phone net ads,
Speaker Change: As a healthy market right now I would say if you look at the fourth quarter and look at what we delivered on postpaid phone net adds.
Speaker Change: Your point on gross is an accurate statement, and I think it reflects the fact that we're trying to be incredibly disciplined around profitable growth.
Speaker Change: Your point on grosses and accurate statement and I think it reflects the fact that we're trying to be incredibly disciplined around profitable growth.
Speaker Change: We managed to outgrow one of our peers that has already reported. We did that, I think, being very disciplined on our promotional levels and being very strategic in the channels that we operate in, as I've indicated on previous calls.
Speaker Change: Managed to outgrow one of our peers and as already reported we did that I think being very disciplined on our promotional levels and being very strategic in the channels that we offer.
Looking forward, we expect DirecTV cash distributions to decline at a similar rate in 2024 and thereafter. I'd also like to point out that DirecTV's debt levels have not changed materially since the end of 2021, and its debt is non-recourse to AT&T. Another impact on free cash flow is lower capital investment.
Speaker Change: Operator.
Speaker Change: Indicated on previous calls.
Speaker Change: We deliver an incredible churn level, which helps us do that. It's always easier to keep your customers than to churn them out. We've managed to keep that churn level while we've been growing our poop.
Speaker Change: We deliver an incredible churn level, which helps us do that it's always easier to keep your customers and the churn them out we've managed to keep that churn level, while we've been growing <unk>.
We expect 2024 capital investment levels in the 21 to 22 billion dollar range. It's also important to note that the mixed shift of our capital investment continues to move in a favorable direction as vendor financing obligations decline and project capital spend increases. Accordingly, we plan to continue to pay down short-term vendor and direct supplier financings this year as we shape an even more sustainable and routable quarterly free cash flow cage. Remember, our capital investments consist of payments from prior year capital spend plus current year spend. There will be fewer payments of prior year obligations than we saw in 2023 due to significant reductions in vendor financing.
Speaker Change: You know, we're driving operating leverage in EBITDA growth in a really strong fashion.
Speaker Change: We're driving operating leverage and EBITDA growth and a really strong fashion.
Speaker Change: I think the equation is incredibly sustainable with what we're doing right now. We're going to tweak it.
Speaker Change: I think the equation is incredibly sustainable with what we're doing right now we're going to tweak it.
Speaker Change: And that's what I was alluding to in some of the things that we know there's some areas where we could probably do a little bit better. I suspect looking at some of the numbers yesterday from what Verizon reported.
And Thats, what I was alluding to in some of the things that we know there are some areas, where we can probably do a little bit better.
I suspect looking at some of the numbers yesterday from what Verizon reported.
Speaker Change: There's some areas that they probably looked at and said that they can do a little bit better in, and we all have regional players that we play against.
Speaker Change: There are some areas.
Speaker Change: Probably looked at so that they can do a little bit better in and we all have regional players that we played against.
Speaker Change: Things that we do like the cable companies, as we kind of understand the playbook and look at it, we can adjust.
Speaker Change: Things that we do like the cable companies as we kind of understand the playbook and look at it we can adjust.
Speaker Change: how we approach that. They're kind of a new player in the market. My guess is after everybody comes out and reports, we're going to see that the three large incumbent wireless carriers have had very effective quarters. We all understand how to run our business. I think we're all being pretty disciplined around how we go about it. I think we're all conscious of the fact that we've invested at record levels and need to make sure that we're driving returns on those record levels of investments. To me, that kind of lines up for a very sustainable outlook as we move into next year.
Speaker Change: How we.
Speaker Change: <unk> that they're kind of a new player in the market My guess is.
Speaker Change: After everybody comes out reports, we're going to see that the three large.
However, during the year, we do expect higher spending on capital projects. When you combine all these factors, we expect to deliver free cash flow in the $17 to $18 billion range this year. This is greater than two times our current annual common dividend and more than enough to cover other commitments. As we've discussed in recent quarters, we continue to make progress on improving the readability of our free cash flow. Last year, our free cash flow was about 70% back-end loaded to the second half. We expect that to be closer to 60% this year. Accordingly, we expect first-quarter free cash flows of at least $2.5 billion.
Speaker Change: <unk> wireless carriers have had very effective quarters, we all understand how to run our business I think we're all being pretty disciplined around how we go about it I think we're all conscious of the fact that we've invested at record levels and need to make sure that we're driving returns on those record levels of investments and to me that kind of lines.
Speaker Change: For a very sustainable outlook as we move into next year.
Speaker Change: Yeah.
Speaker Change: Thanks, Jeff.
Speaker Change: Thank you.
Speaker Change: and Simon Flannery of Morgan Stanley . Please go ahead.
Speaker Change: And Simon Flannery of Morgan Stanley. Please go ahead.
Simon Flannery: Great. Thank you very much. Good morning. I wanted to come back to the balance sheet. We're now looking at this time next year or near where you hit your $2.5 times the first half of 25, so it's getting closer. How are you weighing at this point the opportunities to either buy back stock or to attack that 10 to 15 million additional fiber homes or de-lever further? It would be great to get your thoughts on that. And then if you can give us anything on your ACP exposure and how that might play out and your latest thoughts on bead, that would be great.
Simon Flannery: Great. Thank you very much good morning, I wanted to come back to the balance sheet. We're now looking at so at this time next year, our generic where you hit your $2 five times first half of 'twenty five so its getting closer how are you weighing at this point the opportunities to either buyback stock or to attack that.
Overall, the combination of increased free cash flow and fewer one-time items will enable us to continue our deleveraging progress in 2024 and remain on track to achieve our target range of two and a half times net debt adjusted EBITDA in the first half of 2025. Amir, that's our presentation. We're now ready for the Q&A. Thank you, Pascal.
Simon Flannery: $10 million to $15 million additional fiber homes or delever further, but it'd be great to get your thoughts on that and then if you can give us anything on your ACP exposure and how that might play out in your latest thoughts on beat that would be great.
Operator: Operator, we're ready to take the first question. Our first question will come from the line of John Hodulik of UBS. Please go ahead. Great. Thanks.
Speaker Change: Sure Good morning, sorry, good morning so.
Speaker Change: Sure. Morning, Simon. Morning.
Speaker Change: So
Speaker Change: I would say, first of all, and we've been really clear on this and it doesn't change. First and foremost, we want to invest at the right level in our business to make sure that we can grow it in a way that we think drives it.
John T. Stankey: Good morning, guys. First, thanks for all the detail on the free cash flow, but can we focus on the sustainability of the postpaid phone growth in 24? You added 1.7 million subscribers, but gross ads were down a bit in the fourth quarter. I guess, first, could you talk about the momentum you're seeing here in the first quarter and how competition is shaping up? And then, John, you talked about these underpenetrated markets, these three segments, value, SME, and conversion. Any color you can give us in terms of how big of an opportunity those underpenetrated segments are or how you expect to address them here in 24 hours? Hi, good morning, John.
Speaker Change: I would say first of all.
Speaker Change: We've been really clear on this and it doesn't change first and foremost we want to invest at the right level in our business to make sure that we can grow it in a way that we think drives.
Speaker Change: sustainable returns to our shareholders.
Speaker Change: Sustainable returns to our shareholders secondly, the <unk>.
Speaker Change: dividend is something that we have to protect and make sure that we're offering a fair return on
Speaker Change: Dividend is.
Speaker Change: Something that we have to protect and make sure that we're offering a fair return on it.
Speaker Change: And then, you know, getting the balance sheet where we want to get the balance sheet is absolutely critical. When we arrive at that point, it's the time to make the decision. And the decision has to be made relative to where stock is trading, where interest rates are in the environment, what opportunities we have in front of us as a business to continue to grow things based on how policies evolve in this country and where we think there's opportunity for us to grow and get fair returns. All those things will go into the board's deliberation. I think what you're touching on, though, is we are about ready to enter the doorstep where we have choices around what we do at that cap.
Speaker Change: And then getting the balance sheet, where we wanted to get the balance sheet is absolutely critical when we arrive at that point.
Speaker Change: Time to make the decision.
Speaker Change: And the decision has to be made relative to where the stock is trading where interest rates are and the environment.
Speaker Change: What opportunities we have in front of us as a business to continue to grow things based on.
John T. Stankey: Happy New Year. So, look, first of all, in the aggregate market, as we've been indicating, we thought there was going to be a little bit of a slowdown from, you know, the previous year's activity level. We saw that happen. In 23, I think we're at a more normalized level right now. We're kind of expecting that to continue into next year. You know, it'd probably be right around.
Speaker Change: How.
Speaker Change: Policies evolve in this country and where we think there is opportunity for us to grow and get fair returns.
Speaker Change: All of those things will go in to the Board's deliberation, I think what you're touching on though is we are about ready to enter the doorstep, where we have choices around what we do with that capital and that's that's the most important thing.
Speaker Change: And that's the most important thing. And I step back from the year of 2023 and look at the progress that we have made, not just on delivering the commitments that we made back to all of you and our investors,
John T. Stankey: We're not going to see it dramatically different, and our expectations are we're going to continue to attack the market the same way we've been attacking it, and we've been really consistent about that over the last three years. And I don't think you should expect to see any less sustainability of our performance than you've seen over the previous couple of years in the strategies and the tactics we use. I think the market is a healthy market right now.
Speaker Change: I step back from the year of 2023 and look at the progress that we have made not just on delivering the commitments that we made back to all of you and our investors.
Speaker Change: But the fundamental improvements in the structure of our balance sheet, the momentum that we have in the business, and to be on the doorstep of those options is a really exciting thing in aggregate for the management team. And I think it shows an incredible amount of progress in the hard work. We have a tremendous amount of optionality in front of us, as we shared with you. Our balance sheet is in really good shape in terms of how we've been able to tear us out our obligations and the rates that we're paying on it and how our organic cash flow will allow us to pay down the maturing debt that's in there. And so, as we choose to drive more shareholder value, the field is wide open to us as to where we wish to go and what we wish to do. And we will do. What is in the most and best interest of the shareholder at that point in time. And we view it as being a really important moment for us to arrive at. It's something the management team is focused on and is ensuring that we get there. And we all know that it's incredibly important to driving the value in our stock.
Speaker Change: But the fundamental improvements in the structure of our balance sheet the momentum that we have in the business and to be.
Speaker Change: On the doorstep of those options is a really exciting thing in aggregate for the management team and I think it shows an incredible amount of progress and the hard work we have.
John T. Stankey: I would say if you look at the fourth quarter and look at, you know, what we delivered on postpaid phone net ads. Your point on growth is an accurate statement, and I think it reflects the fact that we're trying to be incredibly disciplined around profitable growth. We managed to outgrow one of our peers that is already reported.
Speaker Change: Have a tremendous amount of optionality in front of us as we shared with you our balance sheet is in really good shape in terms of how we've been able to terrorists out our obligations and the rates that we're paying on it and how our organic cash flow will allow us to pay down the maturing debt sitting there.
Speaker Change: As we choose to drive more shareholder value. The field is wide open to us as to where we wish to go and what we wish to do and we will do what is in the most and best interest of the shareholder at that point in time.
John T. Stankey: We did that, I think, by being very disciplined on our promotional levels and being very strategic in the channels that we operate in, as I've indicated on previous calls. We deliver an incredible churn rate, which helps us do that. It's always easier to keep your customers than to churn them out.
Speaker Change: We view it as being a really important moment for us to arrive at its something the management team is focused on is ensuring that we get there and we all know that it's incredibly important to driving the value of our stock.
John T. Stankey: We've managed to keep that churn level while we've been growing our business. You know, we're driving operating leverage and EBITDA growth in a really strong fashion. I think the equation is incredibly sustainable with what we're doing right now. We're going to tweak it. And that's what I was alluding to in some of the things, that we know there are some areas where we could probably do a little bit better. I suspect, looking at some of the numbers yesterday from what Verizon reported.
Speaker Change: On the ACP side, I guess the, you know, the editorial comment I'll make is
Speaker Change: On the ACP side I guess the.
Speaker Change: The editorial comment I'll make is.
Speaker Change: It's unfortunate that we're at this moment, and I say that from the perspective of
Speaker Change: It's unfortunate that we're at this moment and I see that from the perspective of <unk>.
Speaker Change: We have an awful lot of subsidy that's deliberate and overt that are in regulatory structures today which are important
Speaker Change: We have an awful lot of subsidy that's deliberate over there in regulatory structure stay which are important.
Speaker Change: to ensure that every American can gain access
Speaker Change: To ensure that every American can gain access to.
John T. Stankey: There's some areas that they probably looked at and said that they could do a little bit better in, and we all have regional players that we play against, and things that we do like the cable companies, as we kind of understand the playbook and look at it, we can adjust how we approach that. They're kind of a new player in the market. My guess is that after everybody comes out and reports, we're going to see that the three large incumbent wireless carriers have had very effective quarters. We all understand how to run our own business. I think we're all being pretty disciplined about how we go about it.
Speaker Change: to the internet and those subsidies unfortunately in many cases were set up and structured
Speaker Change: To the Internet.
Speaker Change: Those subsidies. Unfortunately in many cases, we're setup and structured.
Speaker Change: from many years ago and they've been funded under constructs
Speaker Change: From many years ago, and they've been funded under construct.
Speaker Change: that have kind of run their time as industry and products have shifted and changed.
Speaker Change: It kind of run their time as industry and products have shifted and changed and from my point of view regulators right now should be spending their time and energy stepping back from that and understanding how we take all of the different subsidy structures in place and get them together in a coherent approach.
Speaker Change: From my point of view, regulators right now should be spending their time and energy stepping back from that.
Speaker Change: and understanding how we take all the different subsidy structures in place and get them together in a coherent approach to ensuring those most in need
Speaker Change: Two ensuring those most in need.
Speaker Change: can get subsidy that they need to be able to afford access to the internet so that as a country we can step back and say that everybody has
John T. Stankey: I think we're all conscious of the fact that we've invested at record levels and need to make sure that we're driving returns on those record levels of investments. To me, that kind of lines up for a very sustainable outlook as we move into next year. Thanks, and Simon Flannery of Morgan Stanley. Please go ahead. Great, thank you very much.
Speaker Change: Tim get subsidy that they need to be able to afford access to the internet.
Speaker Change: As a country, we can step back and say that everybody has.
Speaker Change: access to capable, scalable internet that allows them to do all the things that are so critical today. And I think through a combination of ACP, universal service reform, other programs that are out there, that money is there. If there was a political will and a coherent policy put forward, that it would be good for the industry and good for our country.
Speaker Change: Access to capable scalable internet that allows them to do all the things that are so critical today and I think through a combination of ACP Universal service reform other programs that are out there that money is there. If there was a political will in a coherent policy put forward that it would be good for the industry.
John T. Stankey: Good morning. I wanted to come back to the balance sheet. We're now looking at, so this time next year or near where you hit your $2.05 times first half of 2025, so it's getting closer. How are you weighing at this point the opportunities to either buy back stock or to attack that $10 million to $15 million additional fiber homes or de-lever further? It would be great to get your thoughts on that. And then if you can give us anything on your ACP exposure and how that might play out and your latest thoughts on bead, that would be great. Sure. Good morning, Simon.
Speaker Change: Good for our country.
Speaker Change: Unfortunately, we now are looking at a triage moment on one program, ACP. I don't know where it's going to go. I will tell you either way it goes, we'll be fine. We've given you guidance, you know, fully knowing it can break one way or the other. I'm comfortable that, you know, what we can deliver in our plan next year isn't going to hang on what the government chooses to do with ACP. ACP, if they choose to cancel the program and don't fund it and move forward on it, we have plays that we'll run. We have things that we'll do with our customers and how we approach the market and what we do to respond.
Speaker Change: Unfortunately, we now are looking at a triage moment on one program ACP.
Speaker Change: I don't know where its going to go I will tell you either way it goes will be fine.
Speaker Change: We've given you guidance fully knowing that can break one way or the other.
Speaker Change: I'm comfortable that what we can deliver on our plan next year isn't going to hang on what the government chooses to do with ACP.
Choose to cancel the program and don't funded and move forward on it.
John T. Stankey: So, I would say, first of all, and we've been really clear on this, and it doesn't change. First and foremost, we want to invest at the right level in our business to make sure that we can grow it in a way that we think drives growth. The dividend is something that we have to protect and make sure that we're offering a fair return on. And then, you know, getting the balance sheet where we want to get the balance sheet is absolutely critical. When we arrive at that point, it's the time to make the decision.
Speaker Change: We are pleased that will run we have things that we will do with our customers and how we approach the market and what we do to respond to it and we believe we can manage through that in an effective way within the context of the size of our company and what we do and how we go to market. If they go the other way and they do manage to fund it or fund.
Speaker Change: And we believe we can manage through that in an effective way within the context of the size of our company and what we do and how we go to market.
Speaker Change: If they go the other way and they do manage to fund it or fund it on some kind of a revised basis,
Speaker Change: On some kind of a revised basis.
Speaker Change: AT&T will be continuing to lobby that regulators should be thinking about a more holistic and sustainable approach, trying to get this right for the future so we don't approach this moment again at some, you know, last-minute circumstance and that we can have a thoughtful approach to it, and, you know, that battle will not go away, and I think it's the important thing for all of us to do.
Speaker Change: AT&T will be continuing to lobby in that.
Speaker Change: Regulators should be thinking about a more holistic and sustainable approach.
John T. Stankey: And the decision has to be made relative to where the stock is trading, where interest rates are in the environment, what opportunities we have in front of us as a business to continue to grow things based on how policies evolve in this country and where we think there's an opportunity for us to grow and get fair returns. All those things will go into the board's deliberation. I think what you're touching on, though, is we are about ready to enter the doorstep where we have choices around what we do at Capital. And that's, that's the most important thing. And I step back from the year of 2023 and look at the progress that we have made, not just on delivering the commitments that we made to all of you and our investors, but the fundamental improvements in the structure of our balance sheet, the momentum that we have in the business, and to be on the doorstep of those options is a really exciting thing in aggregate for the management team, and I think it shows an incredible amount of progress in the hard work.
Speaker Change: Turning to get this right for the future. So we don't approach this moment again it some.
Speaker Change: Last minute circumstance and that we can have a thoughtful approach to it.
Speaker Change: And that that Battle will not go away and I think that's the important thing for all of us to do.
Speaker Change: On the beach side, Simon, I don't know that a lot has changed other than we've seen some incremental progress on a couple states moving forward in their process.
Speaker Change: On the beef side, Simon I don't know that a lot has changed other than we've seen some incremental progress on a couple of states moving forward in their process.
Speaker Change: As I shared with you the last time I was asked this question, you know, we'll probably have 50 different recipes of how bead ultimately works its way into the market. There may be some similarity between each of the states, but there clearly is, you know, 50 different states and 50 different points of view on.
Speaker Change: As I shared with you. The last time I was asked this question will.
Speaker Change: We will probably have 50 different recipes of how bead ultimately works its way into the market.
Speaker Change: There may be some similarity between each of the states, but there clearly is.
Speaker Change: <unk> 50 different states and 50 different points of view on this.
Speaker Change: I think we're going to be very measured and targeted as to where we go in, both in terms of the states that are setting up the right kind of rules that incent the joint private sector investment, as well as the right rules that are sustainable for how you operate in that. I think a good news story is I point to a state like Texas, I think was the largest benefactor of BEAT financing. Seems to me policy-wise, they have a pretty sound approach to things. It looks to me like we can work effectively in the state, given it's a large amount, we'll probably have good opportunity there. There's a few other states that I look at and say, I'm not sure the policies are going to line up effectively.
Speaker Change: I think we're going to be very measured and targeted as to where we go in both in terms of the states that are setting up the right kind of rules that incent the joint private sector investment.
John T. Stankey: We have a tremendous amount of optionality in front of us. As we shared with you, our balance sheet is in really good shape in terms of how we've been able to tear out our obligations and the rates that we're paying on them, and how our organic cash flow will allow us to pay down the maturing debt that's in there. And so as we choose to drive more shareholder value, the field is wide open to us as to where we wish to go and what we wish to do, and we will do what is in the most and best interest of the shareholders at that point in time. And we view it as being a really important moment for us to arrive at.
Speaker Change: As well as the REIT rules that are sustainable for how you operate in that I think are good good news story as I point to a state like Texas.
Speaker Change: I think it was the largest benefactor of bead financing.
Speaker Change: It seems to me policy wise, they have a pretty sound approach to things.
Speaker Change: It looks to me like we can work effectively in the state given it's a large amount will probably have a good opportunity. There is a few other states.
Speaker Change: I look at it and say Im not sure of the policies are going to lineup effectively.
Speaker Change: At the end of the day,
Speaker Change: End of the day.
Speaker Change: As I said in my opening comments,
Speaker Change: As I said in my opening comments.
Speaker Change: We have 10 to 15 million organic opportunities to go and invest and build.
John T. Stankey: It's something the management team is focused on and is ensuring that we get there, and we all know that it's incredibly important to driving the value in our stock. On the ACP side, I guess the, you know, editorial comment I'll make is... It's unfortunate that we're at this moment, and I say that from the perspective of, We have an awful lot of subsidy that's deliberate and overt that are in regulatory structures today, which are important to ensure that every American can gain access to the Internet. And those subsidies, unfortunately, in many cases, were set up and structured many years ago, and they've been funded under constructs that have, you know, kind of run their time as industry and products have shifted and changed.
Speaker Change: We have $10 million to $15 million organic opportunities to go and invest and build.
Speaker Change: We know what the average cost per pass location is for us to build those areas.
Speaker Change: We know what the average cost per past location is for us to build those areas.
Speaker Change: It's a very controlled and measurable number.
Speaker Change: It's a very controlled and Measureable number.
Speaker Change: In some of the bead circumstances, the amount of private capital per living unit that's being required is actually substantially higher than what our average cost is and what I would call our organic and market-driven non-bead footprint.
Speaker Change: And some of the bead circumstances, the amount of private capital per living unit, that's being required is actually substantially higher than what our average cost is and what I would call <unk>.
Speaker Change: <unk> and market driven non bead footprint.
Speaker Change: And so if I think about I can get more scale, more households faster in places where, you know, the construct is very straightforward, the amounts and the plays to run are getting more scale in existing areas, you know, that's what weighs against your incentive to invest. And I think states that understand that are coming up with smart policies to try to be competitive with that, and states that don't understand that are probably going to have pretty voluminous and deep requirements that ultimately cause private capital to maybe shy away from matching in some of those areas.
Speaker Change: So if I think about I can get more scale more households faster in places where the.
Speaker Change: The construct is very straightforward the amounts in the plays to run are getting more scale in existing areas.
Speaker Change: That's what ways against your incentive to invest and I think states that understand that are coming up with smart policies to try to be competitive with that in states that don't understand that are probably going to have pretty voluminous and deep requirements that ultimately caused private capital to maybe shy away.
John T. Stankey: From my point of view, regulators right now should be spending their time and energy stepping back from that and understanding how we take all the different subsidy structures in place and get them together in a coherent approach to ensuring that those most in need can get the subsidies that they need to be able to afford access to the internet so that, as a country, we can step back and say that everybody has access to a capable, scalable internet that allows them to do And I think through a combination of the ACP, universal service reform, and other programs that are out there, the money is there. If there was a political will and a coherent policy put forward, it would be good for the industry and good for our country. Unfortunately, we are now looking at a triage moment for one program, ACP. I don't know where it's going to go.
Speaker Change: From matching some of those areas.
Speaker Change: Great. Thanks for the call.
Speaker Change: Great. Thanks for the color.
Speaker Change: Yeah.
Speaker Change: And Phil Cusick of J.P. Morgan, please go ahead.
Speaker Change: And Phil Cusick of J P. Morgan. Please go ahead hi.
Phil Cusick: Hi, guys. Thank you. John , maybe talk about pricing and wireless this year. Verizon just ran through another one. It seems like the inflation-driven wave of general consumer price increases is slowing. Do you think there's more room to take a little more price in the postpaid space? And then maybe just expand on the AT&T Air effort. How much does this scale over time, and how many more markets do you think are possible this year? Thank
Phil Cusick: Guys. Thank you.
Phil Cusick: John maybe talk about pricing in wireless this year Verizon just ran through another one it seems like the inflation driven a wave of general consumer price increases are slowing do you think theres more room to take a little more price in the postpaid space and then maybe just expand on the AT&T air effort, how much does this scale over.
Phil Cusick: Time, and how many more markets do you think are possible this year.
John: Morning, Phil. So, look, I'll give you the same answer on pricing I think I probably give every time I'm asked it, and I just suggest
Speaker Change: Good morning, Phil.
Phil Cusick: So look.
Phil Cusick: I'll give you the same answer on pricing I think they are probably give every time I've asked it.
John T. Stankey: I will tell you, either way it goes, we'll be fine. We've given you guidance, you know, fully knowing it can break one way or the other. I'm comfortable that, you know, what we can deliver in our plan next year isn't going to hang on what the government chooses to do with ACP. If they choose to cancel the program and don't fund it and move forward on it, we have plans that we'll run. We have things that we'll do with our customers and how we approach the market and what we do to respond. And we believe we can manage that in an effective way within the context of the size of our company and what we do and how we go to market.
Phil Cusick: I'd just suggest.
John: there's a string of data points to go back and look at to kind of buttress up my observations on this, which is...
Phil Cusick: There is a string of data points to go back and look at kind of buttress up my observations on this which is.
John: We've been pretty deliberate about where we think we add additional value into our customers and whether or not we can ultimately drive price changes that are aligned with driving that incremental value. And as I mentioned earlier, we've invested a heck of a lot in our networks. People are using over 30% more of it per year.
Phil Cusick: We've been pretty deliberate about where we think we add additional value into our customers and whether or not we can ultimately drive.
Phil Cusick: This changes that are aligned with driving that incremental value and as I mentioned earlier, we've invested a heck of a lot in our networks people are using over 30% more of it per year.
John: They are getting more utility out of what we do, and the capability of the networks is allowing them to do more things in more ways.
Phil Cusick: They are getting more utility out of what we do and the capability of the networks is allowing them to do more things in more ways.
John T. Stankey: If they go the other way and they do manage to fund it, or fund it on some kind of a revised basis, AT&T will be continuing to lobby that regulators should be thinking about a more holistic and sustainable approach, trying to get this right for the future, so we don't approach this moment again. It's some, you know, last minute circumstance, and we can have a thoughtful approach to it. And, you know, that battle will not go away. And I think it's an important thing for all of us to do. On the Pete side, Simon, I don't know that a lot has changed other than we've seen some incremental progress on a couple of states moving forward in their processes. As I shared with you the last time I was asked this question, you know, we'll probably have 50 different recipes of how bead ultimately works its way into the market. There may be some similarity between each of the states, but there clearly are, you know, 50 different states and 50 different points of view on that.
John: And as a result of that, I think that value is allowing us to go in in places and certainly drive some remuneration to the level of investments that we're putting in. And you see it in our ARPU growth. I think we shared with you that we expect probably some modest ARPU accretion in our guidance.
Phil Cusick: And as a result of that I think that value is allowing us to go in and places and certainly drive some renewed narration for the level of investments that we're putting in.
Phil Cusick: You see it in our <unk> growth I think we shared with you that we expect probably some modest <unk> accretion in our guidance as we move through next year in the wireless space some of that will come from moving people up to.
John: as we move through next year in the wireless space. Some of that will come from moving people up to higher-priced plans with more bells and whistles, and some of it will come through pricing movement. I would tell you,
Phil Cusick: Higher priced plans with more bells, and whistles and some of it will come through pricing movement.
Phil Cusick: I'd tell you.
John: I go and I rest on our track record. You're seeing the numbers. You're seeing what we've been able to do. I think we can continue to run many of the same plays that we've run. And we're doing it with, I don't know, we may end up with another record churn quarter or best in industry churn quarter. We'll be darn close to it. And we're doing it at levels of our performance in the market that I think is pretty stellar. So my message is I think we know how to do this. I think we've done it pretty effectively. I think the team is pretty diligent about it. I think there's opportunities for us to continue running the business the way we've been running the business. And I expect we'll have to do that in 2024 to deliver our plan and do what we need to do, inflation driven or not.
Phil Cusick: I go and I addressed on our track record Youre.
Phil Cusick: Seeing the numbers you see what we've been able to do I think we can continue to run many of the same plays that we've run and we're doing it with I don't know we may end up with another record churn quarter best in industry churn quarter will be darn close to it and we're doing it at levels of <unk> performance in the market that I think is pretty.
Phil Cusick: So.
John T. Stankey: I think we're going to be very measured and targeted as to where we go in, both in terms of the states that are setting up the right kind of rules that incentivize joint private sector investment, as well as the right rules that are sustainable for how you operate in that. I think a good news story is, I point to a state like Texas, which I think was the largest benefactor of bead financing. It seems to me, policy-wise, they have a pretty sound approach to things. It looks to me like we can work effectively in the state; given it's a large amount, we'll probably have a good opportunity there. There are a few other states that I look at and say, I'm not sure the policies are going to line up effectively. At the end of the day.
Phil Cusick: My message is I think we know how to do this I think we've done a pretty effectively I think the team is pretty diligent about it I think there's opportunities for us to continue running the business. The way we've been running the business and I expect we will have to do that 2024 to deliver our plan and do what we need to do.
Phil Cusick: Inflation driven we're not.
John: On AT&T Air, again, not much different in my narrative around it. I don't expect that we are going to be pushing the product in the same way that some others in the market are pushing it today. We've made a conscious choice.
Phil Cusick: On AT&T are again not much different in my narrative around it I don't expect that we're going to be pushing the product in the same way that some others in the market or pushing that today, we've made a conscious choice as a company that we want to dedicate capital to invest.
John: is a company that we want to dedicate capital to investing in fiber, which we believe is a more sustainable long-term means to deal with stationary and fixed broadband needs.
Phil Cusick: And fiber, which we believe is a more sustainable long term means to deal with stationary and fixed broadband needs.
John T. Stankey: As I said in my opening comments... We have 10 to 15 million organic opportunities to go and invest in and build. We know what the average cost per path location is for us to build those areas. It's a very controlled and measurable number.
John: It doesn't mean that we don't think that fixed wireless serves some segment of the market. It does. It serves certain types of circumstances in the consumer base.
Phil Cusick: It doesn't mean that we don't think that fixed wireless serves some segment of the market. It does it serves certain types of circumstances in the consumer base.
John: It serves certain types of circumstances in the business space.
Phil Cusick: It serves certain types of circumstances in the business space.
John: and we will take advantage of those certain circumstances
Phil Cusick: And we will take advantage of those certain circumstances.
John T. Stankey: In some bead circumstances, the amount of private capital per living unit that's being required is actually substantially higher than what our average cost is and what I would call our organic and market-driven non-bead footprint. And so, if I think about I can get more scale, more households faster in places where, you know, the construct is very straightforward, the amounts and the costs to run are getting more scale in existing areas, you know, that's what weighs against your incentive to invest, and I think states that understand that are coming up with smart policies to try to be competitive with that, and states that don't understand that are probably going to have pretty voluminous and deep Great Thanks for the color, and Phil Cusick of J.P. Morgan, please go ahead.
John: As I've said, there's a lot of small businesses that have usage profiles that fixed wireless is very attractive to. It's something that we will lean into this year. You will see it reflected in our performance as we move throughout the year.
Phil Cusick: As Ive said Theres a lot of small businesses that have usage profiles that fixed wireless is very attractive to.
Phil Cusick: It's something that we will lean into this year you will see it reflected in our performance as we move throughout the year.
John: We have places where because of our spectrum profile and our share position in particular markets, we can maybe lean in a little bit more aggressively in defining the consumer segment that we might serve with the product and service on a competitive market that you will see us begin to add some degree of market penetration on. And as I've told you before, we will continue to use it very, very actively in our transition away from legacy assets as we begin to shutter copper footprint, take out square miles in our network, not have the operating costs associated with those fixed infrastructure that we can use this as a catch product. It's a very effective catch product in some of those areas, especially given the density characteristics of what's happened, that we haven't built fiber there yet or we will not build fiber, but it still allows us to meet our obligation back to the customer base specifically. So, I don't think you're ever going to see a scale to the kind of monthly numbers and quarterly numbers you see coming from some of our competitors, but it's a great tool. It's a great opportunity for us to continue to grow. I think the most important thing to understand, as you've seen, is we are broadband positive, aggregate broadband positive, and we are going to continue to be aggregate broadband positive going forward. So, not only are we growing EBITDA, we're going to now start growing the customer base, and this will be one of the tools we use to have that ratable, sustainable growth that I think we've been seeing.
Phil Cusick: We have places where because of our spectrum profile in our share position in particular markets. We can maybe lean in a little bit more aggressively in defining the consumer segment that we might serve with the product and service on a competitive market that you will see us begin to add.
Phil Cusick: Some degree of market penetration on and as I've told you before we will continue to use it very very actively in our transition away from legacy assets as we begin to shutter copper footprint takeout square miles in our network not have the operating costs.
Phil Cusick: With those fixed infrastructure that we can use this as a catch product. It's a very effective catch product in some of those areas, especially given the density characteristics of what's happened, but we haven't built fiber there yet or we will not build fiber, but it still allows us to meet our obligation back to the customer base.
John T. Stankey: Hi guys, thank you. John, maybe we can talk about pricing and wireless this year. Verizon just ran through another one.
John T. Stankey: Seems like the inflation-driven wave of general consumer price increases is slowing. Do you think there's more room to take a little more price in the postpaid space? And then maybe just expand on the AT&T air effort? How much does this scale over time? And how many more markets do you think are possible this year? Thank you. Good morning, Phil.
Phil Cusick: Interstate franchise agreements et cetera, so I.
Phil Cusick: I don't think you're ever going to see a scale of the kind of monthly numbers in quarterly numbers, you see coming from some of our competitors, but it is a great tool. It's a great opportunity for us to continue to grow I think the most important thing to understand as you've seen as we are broadband positive aggregate broadband positive and we are going to continue to be aggregate broadband pause.
John T. Stankey: So look, I'll give you the same answer on pricing that I think I probably give every time I'm asked it, and I just suggest, There are a string of data points to go back and look at to kind of buttress my observations on this, which is... We've been pretty deliberate about where we think we add additional value to our customers and whether or not we can ultimately drive price changes that are aligned with driving that incremental value. And, as I mentioned earlier, we've invested a heck of a lot in our networks. People are using over 30% more of it per year.
Phil Cusick: <unk> going forward. So not only are we growing EBITDA, we're going to now start growing the customer base and this will be one of the tools. We use to have that ratable sustainable growth that I think we've been seeking.
Speaker Change: Thanks, John .
Speaker Change: Thanks, John.
Speaker Change: We have a question from the line of David Barden of Bank of America. Please go ahead.
Speaker Change: We have a question from the line of David Barden of Bank of America. Please go ahead.
David Barden: Hey guys, thanks so much for taking the questions.
David Barden: Hey, guys. Thanks, so much for taking the questions.
David Barden: I guess the first one
David Barden: I guess the first one.
Speaker Change: If you could kind of elaborate a little bit on the range of the free cash flow guidance, is it dependent largely on where capital investment lands within that 21 to 22, or are there other potential moving parts that we don't see in that equation? And I guess.
David Barden: Scott if you could kind of elaborate a little bit on the range of the free cash flow guidance is is it dependent largely on where capital investment lands within that 'twenty, one to 'twenty two or are there other.
John T. Stankey: They are getting more utility out of what we do, and the capability of the networks is allowing them to do more things in more ways. And as a result of that, I think that value is allowing us to go into places and certainly drive some remuneration for the level of investments that we're putting in. And you see it in our ARPU growth. I think we shared with you that we probably expect some modest ARPU accretion in our guidance. As we move through next year in the wireless space, some of that will come from moving people up to higher-priced plans with more bells and whistles, and some of it will come through price movement. I would tell you, You know, I go, and I rest on our track record. You're seeing the numbers.
David Barden: Potential moving parts that we don't see in that in that equation and I guess related to that.
Speaker Change: Related to that, maybe, John , at the end of the year, at 26 million fiber homes passed, the goal is 30 by 2025, obviously. You've got a choice to kind of continue to kind of deploy the way you've been doing, which puts you closer to that 30 by the end of this year, or you could throttle it back in an effort to contain the capital investment out the door and support the free cash flow guide. Could you kind of elaborate a little bit on the game plan?
David Barden: John you ended the year at 26 million fiber homes passed the goal is 30 by 2025, obviously.
Speaker Change: You've got a choice to kind of continue to kind of deploy the way you have been doing which puts you closer to that 30 by the end of this year or you can throttle it back.
Speaker Change: In an effort to contain the capital investment out the door and support the free cash flow guide could you kind of elaborate a little bit on the game plan there. Thank you.
John: Hey, Dave. Good morning and happy new year. Here's the way I think about cash. We've made really good progress over the course of 2023 in paying down some of our short-term financing obligations. And therefore, as I look at the capital spend in 2024, it's going to be more heavily weighted towards projects.
Speaker Change: Hey, Dave Good morning, and happy new year.
John T. Stankey: You're seeing what we've been able to do. I think we can continue to run many of the same plays that we've run, and we're doing it with, I don't know. We may end up with another record turn quarter or best in the industry turn quarter. We'll be darn close to it, and we're doing it at levels of ARPU performance in the market that I think are pretty stellar. So my message is, I think we know how to do this. I think we've done it pretty effectively. I think the team is pretty diligent about it. I think there are opportunities for us to continue running the business the way we've been running the business, and I expect we'll have to do that in 2024 to deliver our plan and do what we need to do, inflation-driven or not. On AT&T Air, again, not much different in my narrative around it.
Dave: Here's the way I think about cash we've made really good progress over the course of 2023.
Dave: Paying down some of our short term financing obligations and therefore as I look at the capital spend in 2020.
Speaker Change: Or it's going to be more heavily weighted towards projects span. We have really good line of sight on that it's going to be within the range. We provided to you.
Dave: We have really good line of sight on that. It's going to be within the range we provided to you.
Dave: and we feel really good about that. The other factor that we have a reasonably good line of sight to is our cash taxes for the year. Based on current legislation, we have a pretty good line of sight in terms of where that lands
Speaker Change: We feel really good about that the other factor that we have.
Speaker Change: Reasonably good line of sight to it.
Speaker Change: Is our cash taxes for the year based on current legislation.
Speaker Change: Pretty good line of sight in terms of where that lands.
Dave: you know, obviously we're expecting EBITDA to grow. That's going to be the driver of the growth coupled with the step down in capital investment. I don't anticipate any material headwinds from working capital, albeit depending upon how we're doing, we may decide to continue to lean into short-term financing obligations to reduce those. So those are the swing factors. But look, all in all, I feel really good about our ability to deliver on the guidance and continue to grow the business from there.
Speaker Change: Obviously, we're expecting EBITDA growth, that's going to be the driver up the growth coupled with the step down in capital investment I don't anticipate any material headwinds from working capital, albeit depending upon how we're doing we've made decide to continue to lean into short term financing.
John T. Stankey: I don't expect that we are going to be pushing the product in the same way that some others in the market are pushing it today. We've made a conscious choice, as a company, to dedicate capital to investing in fiber, which we believe is a more sustainable long-term means to deal with stationary and fixed broadband needs. It doesn't mean that we don't think that fixed wireless serves some segment of the market. It does.
Speaker Change: <unk> reduced those so those are the swing factors, but look all in all feel really good about our ability to deliver on the guidance and.
Speaker Change: It continued to grow the business from there.
Speaker Change: Dave, the way I would tell you, I go back to the question that was asked earlier about, you know, capital allocation, what we need to do. And I would say, first and foremost, you've got to understand we've given you guidance. We've made a set of commitments. Those are important to us. That's what we need to deliver in whatever decision-making we ultimately undertake.
Speaker Change: David The way I would tell you I would go back to the question that was asked earlier about capital allocation, what we need to do.
David Barden: I would say first and foremost <unk> got to understand.
David Barden: Giving you guidance, we've made a set of commitments those are important to us that's what we need to deliver on whatever decision, making we ultimately undertake there's got to be within that context of ensuring that we're consistently delivering back to you in our commitments.
John T. Stankey: It serves certain types of circumstances in the consumer base. It serves certain types of circumstances in the business space, and we will take advantage of those certain circumstances. As I've said, there are a lot of small businesses that have usage profiles that fixed wireless is very attractive to. It's something that we will lean into this year. You will see it reflected in our performance as we move throughout the year. We have places where, because of our spectrum profile and our share position in particular markets, we can maybe lean in a little bit more aggressively in defining the consumer segment that we might serve with the product and service in a competitive market that you will see us begin to add some degree of market penetration to.
Speaker Change: It's got to be within that context of ensuring that we're consistent in delivering back to you in our commitment.
Speaker Change: What I would tell you, it's not just making the decision of, well, are there incremental homes you can go get with fiber? There are opportunities to present ourselves, present themselves to our business.
David Barden: What I would tell you it's not just making the decision of world are there incremental homes you can go get with fiber.
David Barden: There are opportunities to present ourselves present themselves to our business.
Speaker Change: in a variety of different places where we have a choice to say, well, we're a little ahead of plan or we were a little more efficient. Should we do something else here or there? And we'll take advantage of those things every time they pop up. And, you know, I would tell you very comfortable we're going to meet our commitment to you of 30 million passings. But I don't know, we could see something happen where we get a vendor's circumstance like we've seen in wireless where somebody comes in and changes pricing and we get more efficiency out of something or we see, you know, great results coming back in on the gigapower side and we decide that's a better place to go and allocate a little bit more capital. All those things are evolving. We'll weigh them, we'll make decisions, and we'll come back in and we'll tell you what we're going to do all within the context that we want to make sure we're consistent in meeting our commitments back to you.
David Barden: A variety of different places, where we have a choice to say well. We're a little ahead of plan and we were a little more efficient should we do something else here or there and.
David Barden: We will take advantage of those things every time, they pop up and I would tell you very comfortable we're going to meet our commitment to you of 30 million passengers.
David Barden: But.
David Barden: I don't know, we could see something happen, where we get our vendors circumstance like we've seen in wireless where somebody comes in and changes pricing and we get more efficiency out of something there, where we see great results coming back in on the Giga power side, and we decide that's a better place to go and allocate a little bit more capital all those things are evolving.
John T. Stankey: And, as I've told you before, we will continue to use it very, very actively in our transition away from legacy assets as we begin to shutter copper footprints, take out square miles in our network, not have the operating costs associated with those fixed infrastructure, that we can use this as a catch product. It's a very effective catch product in some of those areas, especially given the density characteristics of what's happened.
David Barden: <unk>.
David Barden: Wave them, we'll make decisions and we will come back in and we will tell you what we're going to do all within the context of we want to make sure. We're consistent immediate our commitments back to you.
Speaker Change: Thanks.
Speaker Change: Got it thanks guys.
Speaker Change: Michael Rollins of Citi, please go ahead.
Speaker Change: Michael Rollins of Citi. Please go ahead.
Michael I. Rollins: Thanks, and good morning.
Michael I. Rollins: Thanks, and good morning, I'm, just curious what youre seeing in terms of the stages the economy for consumers.
Speaker Change: what you're seeing.
Speaker Change: the economy.
John T. Stankey: We haven't built fiber there yet, or we will not build fiber, but it still allows us to meet our obligations back to the customer base and our state franchise agreements, etc. So, I don't think you're ever going to see a scale to the kind of monthly numbers and quarterly numbers you see coming from some of our competitors, but it's a great tool. It's a great opportunity for us to continue to grow. I think the most important thing to understand, as you've seen, is that we are broadband positive, aggregate broadband positive, and we are going to continue to be aggregate broadband positive going forward. So, not only are we growing EBITDA, but we're going to start growing the customer base, and this will be one of the tools we use to have that measurable, sustainable growth that I think we've been seeing. Thanks, John. We have a question from the line of David Barden of Bank of America. Please go ahead.
Michael I. Rollins: And for your business wireline segment can you share more of the playbook.
Speaker Change: business wireline
Speaker Change: share more of the playbook.
Speaker Change: how he
Michael I. Rollins: <unk>.
Michael I. Rollins: Operating performance in that segment.
Speaker Change: Morning, Michael. Happy to.
Speaker Change: Good morning, Michael Happy too.
Speaker Change: So.
Speaker Change: Look, the economy has proven resilient. I expect the economy is probably going to continue to be reasonably resilient moving into this year.
Michael I. Rollins: Look the economy has proven resilient.
Michael I. Rollins: I expect the economies, probably going to continue to be reasonably resilient moving into this year.
Speaker Change: it's an election year. Not that I'm a great soothsayer of what it's going to drive in terms of policy, but it seems like there's winds lining up that, like you would expect moving into an important election year, policy will probably be such that it favors trying to keep growth in the right place. And I think that will probably take what was a bit of a tenuous situation last year in terms of the rate of inflation decline and what that might do to growth rates and move us through a 2024 that's probably going to continue to be one where we perk along and see the economy growing. Our expectations aren't that we're going to see
Michael I. Rollins: It's an election year, not that I'm, a great soothsayer or what it's going to drive in terms of policy, but it seems like theres wins lining up like you would expect moving into an important election year policy, we will probably be such that it.
Michael I. Rollins: It favors trying to keep growth in the right place.
Michael I. Rollins: And I think that will probably take what was a bit of a tenuous situation last year in terms of the rate of inflation decline of what that might do to growth rates and move us through.
John T. Stankey: Hey guys, thanks so much for taking the questions. I guess the first one... Scull, if you could kind of elaborate a little bit on the range of the free cash flow guidance. Is it dependent largely on where capital investment lands within that 21 to 22, or are there other potential moving parts that we don't see in that equation? Related to that, maybe, John, at the end of the year, at 26 million fiber-ohms passed; the goal is 30 by 2025, obviously. You've got a choice to kind of continue to kind of deploy the way you've been doing, which puts you closer to that 30 by the end of this year, or you could throttle it back in an effort to contain the capital investment out the door and support the free cash flow guide. Could you kind of elaborate a little bit on the game plan? Hey Dave, good morning and Happy New Year.
Michael I. Rollins: 124, thats, probably going to continue to be one where we we poke along and see the economy growing our expectations are that we're going to see some kind of uptick in growth. We think the combination of a little bit higher.
Speaker Change: Thank you for joining us.
Michael I. Rollins: And then probably target level inflation inflation and what's going on in aggregate the economy, it's going to keep it a little bit tampered down but it's it's.
Speaker Change: It's something that we expect to still see to be relatively productive.
Michael I. Rollins: Something that we expect to still see it would be relatively productive.
Speaker Change: We haven't seen anything with the consumer that suggests they're not paying their bills or not in a position to continue to buy services from us. We certainly don't see anything in business formation right now that causes us any degree of concern at this juncture. So by and large, I think we feel like we're in a pretty good place moving into 2024, absent what I would call big exogenous variables in the global system that occurs. We feel like policy will probably line up pretty well.
Michael I. Rollins: We havent seen anything with the consumer that suggests they're not paying their bills or not in a position to continue to buy services from us.
Michael I. Rollins: Certainly don't see anything in business formation right now that causes us any degree of concern at this juncture.
Michael I. Rollins: By and large I think we feel like we're in a pretty good place moving into 2024 absent what I would call big exogenous variables in the global <unk>.
Here's the way I think about cash. We've made really good progress over the course of 2023 in paying down some of our short-term financing obligations. And therefore, as I look at the capital spend in 2024, it's going to be more heavily weighted towards projects. We have a really good line of sight on that. It's going to be within the range we provided to you.
Michael I. Rollins: System that occurs.
Michael I. Rollins: We feel like policy will probably wind up pretty well.
Speaker Change: On the business wireline side, I think there's a couple things I'd first say is, one,
Michael I. Rollins: On the business wireline side, I think Theres, a couple of things I'd first say as well.
Michael I. Rollins: One.
Speaker Change: you know, what was
Michael I. Rollins: What was not the right stuff in the fourth quarter that we have to kind of acknowledge one Pascal mentioned in his comments.
Speaker Change: not the right stuff in the fourth quarter that we have to kind of acknowledge. One, Pascal mentioned in his comments,
Speaker Change: We had nearly $100 million of one-time stuff that didn't repeat. That's certainly fully explainable. Something we expected would be the case.
Michael I. Rollins: We had nearly $100 million of one time stuff that didn't repeat.
And we feel really good about that. The other factor that we have a reasonably good line of sight on is our cash taxes for the year. Based on current legislation, we have a pretty good idea in terms of where that lands.
Michael I. Rollins: Certainly fully explainable.
Michael I. Rollins: Something we expected would be the case.
Speaker Change: The piece that probably I don't think we nailed at the beginning of the planning cycle for 23 that ended up transpiring over the course of 24 that further impacted that segment was
Michael I. Rollins: The piece that probably I don't think we nailed it at the beginning of the planning cycle for 2003 that ended up transpiring over the course of 'twenty for that further impacted that segment was <unk>.
Obviously, we're expecting EBITDA to grow. That's going to be the driver of growth coupled with the step-down in capital investment. I don't anticipate any material headwinds from working capital, albeit, depending upon how we're doing, we may decide to continue to lean into short-term financing obligations to reduce those. So, those are the swing factors.
Speaker Change: Wholesale revenues were weaker than what we expected. Those are important revenues in the segment because they tend to be higher margin, more resilient.
Michael I. Rollins: Wholesale revenues were weaker than what we expected those are important revenues in this segment because they tend to be higher margin.
Michael I. Rollins: More resilient subscription based services, there's been a fair amount going on in the industry relative to restructuring of access services and wholesale some of it's been driven through M&A consolidation some of it's new technology.
Speaker Change: subscription-based services.
Speaker Change: Fair amount going on in the industry relative to restructuring of access services and wholesale. Some of it's been driven through M&A consolidation, some of it's through technology.
John T. Stankey: But look, all in all, I feel really good about our ability to deliver on the guidance and continue to grow the business from there. Dave, the way I would tell you, I go back to the question that was asked earlier about capital allocation and what we need to do, and I would say first and foremost, you've got to understand that we've given you guidance, we've made a set of commitments, those are important to us, that's what we need to deliver, and whatever decision-making we ultimately undertake, it's got to be within that context of ensuring that we What I would tell you, it's not just making the decision of, well, are there incremental homes you can get with fiber?
Speaker Change: We are through, we believe, the worst of that now. We've had two years of having to kind of deal with a lot of that repositioning
Michael I. Rollins: Through we believe the worst of that now we've had two years of having to kind of deal with a lot of that repositioning.
Speaker Change: and renegotiation of contracts, we think we're in a pretty good position where our visibility for 24 is better than where we have been and don't expect that we're going to have quite the pressure we saw from that side of things that is a bit different from a forecasting and fundamentals perspective.
Michael I. Rollins: And renegotiation of contracts, we think we're in a pretty good position, where our visibility for 'twenty four is better than where we have been and don't expect that we're going to have.
The pressure we saw from that side of things that is a bit different from the <unk>.
Michael I. Rollins: Forecasting in fundamentals perspective.
Michael I. Rollins: And then I go to how we'd have to execute differently.
Speaker Change: And then I go to how we have to execute differently. I've given a fair amount of...
Michael I. Rollins: I've I've, given a fair amount of it.
John T. Stankey: There are opportunities to present ourselves, present them to our business, in a variety of different places where we have a choice to say, well, we're a little ahead of schedule, or we were a little more efficient; should we do something else here or there? And we'll take advantage of those things every time they pop up. And, you know, I would tell you very confidently we're going to meet our commitment to you of 30 million passes.
Speaker Change: information and focus on
Michael I. Rollins: Information and focus on.
Speaker Change: You know, we're really shifting into the mid-market and trying to be a much more effective provider into the mid-market. And we are in fact seeing the green shoots of that occurring. It's moving a little slower than I might like. It requires us to
Michael I. Rollins: We're really shifting into the mid market and trying to be a much more effective provider end of the mid market and we are in fact seeing the green shoots of that occurring it's moving a little slower than I might like it requires us to open.
Speaker Change: open up entirely new distribution channels. It requires us to cultivate new relationships with ways to represent our products
Michael I. Rollins: Open up entirely new distribution channels.
Michael I. Rollins: It requires us to cultivate new relationships with ways to represent our products than what we've traditionally done through what I would call direct owned and operated channels.
Speaker Change: than what we've traditionally done through what I would call direct owned and operated channels.
Speaker Change: Requires us to re-bundle and re-package the products a bit differently to be effective in that space of which we've been doing. And that requires us to do things like reprice, change systems, build capabilities for third parties to work with. We are making progress and we're seeing that. We're starting to see that instantiate itself in fiber-driven revenues that are coming on the products and services we want to sell, which are connectivity-based products and services.
John T. Stankey: But I don't know, we could see something happen where we get a vendor's circumstance like we've seen in wireless, where somebody comes in and changes pricing and we get more efficiency out of something, or we see, you know, great results coming back on the gigapower side, and we decide that's a better place to go and allocate a little bit more capital. All those things are evolving; we'll weigh them, we'll make decisions, and we'll come back in, and we'll tell you what we're going to do, all within the context that we want to make sure we're consistent in meeting our commitments to you. Thanks. Michael Rollins of Citi, please go ahead. Thanks, and good morning. I'm curious what you're seeing, pages, The Economist; share more of the play. Howie.
Michael I. Rollins: Requires us to rebuttal and repackage the products a bit differently to be effective in that space of which we've been doing and that requires us to do things like.
Michael I. Rollins: Reprice change systems build capabilities for third parties to work with we are making progress and we're seeing that we're starting to see that.
Michael I. Rollins: Instantiate itself in fiber driven revenues that are coming on the products and services, we want to sell which are connectivity based products and services.
Speaker Change: So we're going to continue to run those plays. We've got to get a little bit better at it. But I'd also say step back and realize that while we report segment-wise for wireline only,
Michael I. Rollins: So we're going to continue to run those plays we've got to get a little bit better at it but I would also say step back and realize that while we report segment wise for wireline only.
Speaker Change: you should understand that the business marketplace is an important marketplace to us. And on a combined basis, wireless and wireline, we're still growing EBITDA in that segment. And some of it is being driven from the goodness of more and more businesses are able to run the core of their company on a wireless infrastructure. And you're seeing some of that put the pressure on the wireline side of the business.
Michael I. Rollins: You should understand that the <unk>.
Business marketplaces, and important marketplace to us and on a combined basis wireless and wireline, we're still growing EBITDA in that segment.
Michael I. Rollins: Some of it is being driven from the goodness of more and more businesses are able to run the core of their company auto wireless infrastructure and Youre seeing some of that put the pressure on the wireline side of the business, but we're benefiting from that on the pickup on the other side.
John T. Stankey: Morning, Michael. Happy to see you. So, Look, the economy has proven resilient. I expect the economy is probably going to continue to be reasonably resilient moving into this year. It's an election year, not that I'm a great soothsayer of what it's going to drive in terms of policy, but it seems like there's winds lining up that, like you would expect moving into an important election year, policy will probably be such that it favors trying to keep growth in the right place. And I think that will probably take what was a bit of a tenuous situation last year in terms of the rate Our expectations aren't what we're going to see.
Speaker Change: but we're benefiting from that on the pickup, on the other side. And when we talk about things like fixed wireless asset and AT&T Internet Air being an opportunity for us,
Michael I. Rollins: When we talk about things like fixed wireless asset and AT&T Internet air.
Michael I. Rollins: Being an opportunity for us.
Speaker Change: We will be in a much better position this year on the catch to do some of that. And frankly, you know, that's not a trajectory move and a structural move that I think is a bad one for us over the long haul.
Michael I. Rollins: We will be in a much better position this year on the cash to do some of that and frankly.
Michael I. Rollins: That's not a trajectory move in a structural move that I think is a bad one for us over the long run.
Speaker Change: So that's kind of how I view the segment moving in. We still think our brand plays incredibly well. We can walk in and have credibility. We've got the right products that ultimately customers want if we can get them distributed properly. And I have high optimism that as convergence becomes more important, we will distinguish ourselves further in the mid-market.
Michael I. Rollins: So that's kind of how I view this segment moving than we are.
Michael I. Rollins: We still think our brand plays incredibly well, we can walk in and have credibility. We've got the right products that ultimately customers want if we can get them distributed properly and I have high optimism that this convergence becomes more important we will distinguish ourselves further in the mid market.
John T. Stankey: We think the combination is a little bit higher than probably target level inflation and what's going on in aggregate in the economy. It's going to keep it a little bit tampered down. It's something that we expect to still see to be relatively productive. We haven't seen anything with the consumer that suggests they're not paying their bills or not in a position to continue to buy services from us.
Speaker Change: Hey, Mike, one other point just to add as well.
Speaker Change: One other point just to add as well as.
Speaker Change: The legacy revenues continue to decline. We have an opportunity to continue to really hit costs in that sector fairly hard. And so I'm confident that that will also be a factor in moderating the losses.
Speaker Change: Legacy revenues continue to decline, we have an opportunity to continue really hit cost in that sector fairly hard and so I'm confident that that will also be a factor in moderating the losses over time.
Speaker Change: Thanks very much, Mike. Operator, we've got time for one more question.
Speaker Change: Thanks, very much Mike operator, we've got time for one more question.
Speaker Change: Our last question will come from the line of Tim Horan of Oppenheimer. Please go ahead.
Our last question will come from the line of Tim Horan of Oppenheimer. Please go ahead Sir.
John T. Stankey: We certainly don't see anything in business formation right now that causes us any degree of concern at this juncture. So, by and large, I think we feel like we're in a pretty good place moving into 2024. Absent what I would call big exogenous variables in the global system that happen, we feel like policy will probably line up pretty well.
Speaker Change: Yeah.
Speaker Change: Yeah.
Timothy Horan: Mr. Horan, your line is open.
Timothy Horan: Mr. <unk> your line is open.
Timothy Horan: Sorry about that. Can you talk about the longer-term capital intensity, what you're kind of thinking currently? And I guess there's a lot of moving parts with free cash flow. Maybe a sense, can you grow free cash flow off of this year? You know, it seems like you can, and it seems like your capital intensity is still relatively high versus your peers, just in color around longer-term free cash flow.
Timothy Horan: Sorry about that can you talk about the longer term capital intensity, what youre kind of thinking currently and I guess there is a lot of moving parts of free cash flow, maybe a sense can you grow free cash flow off of this year.
John T. Stankey: On the business wireline side, I think there are a couple things I'd first say. One, what was... not the right stuff in the fourth quarter that we have to kind of acknowledge one Pascal mentioned in his comments. We had nearly $100 million of one-time stuff that didn't repeat. You know, that's certainly fully explainable.
Timothy Horan: Like you can and it seems like your capital intensity is still relatively high versus your peers, just some color around longer term free cash flow growth. Thanks.
Speaker Change: Yeah, let me.
Speaker Change: Yes, let me.
Speaker Change: Going back on the capital allocation issues, Tim, I obviously...
Speaker Change: Going back on the capital allocation issues, Tim I, obviously believe that we should we should not be at the sustained levels of investment that we're at right now for ever.
Speaker Change: believe that we should not be at the sustained levels of investment that we're at right now for ever. You know, our point of view is,
John T. Stankey: Something we expected would be the case. The piece that probably, I don't think we nailed at the beginning of the planning cycle for 23 that ended up transpiring over the course of 24 that further impacted that segment was that wholesale revenues were weaker than what we expected. Those are important revenues in the segment because they tend to be higher-margin, you know, more resilient, description-based services. There's been a fair amount going on in the industry relative to the restructuring of access services and wholesale. Some of it's been driven through M&A consolidations, and some of it's through technology. We are through, we believe the worst of that now. We've had two years of having to kind of deal with a lot of that repositioning. In the renegotiation of contracts, we think we're in a pretty good position where our visibility for 24 is better than where we have been and don't expect that we're going to have quite the pressure we saw from that side of things, which is a bit different from a forecasting and fundamentals perspective.
Speaker Change: Our point of view as well.
Speaker Change: We're building infrastructure that's sustainable infrastructure that will build a franchise that will last for many years to come.
Speaker Change: We're building infrastructure that sustainable infrastructure that will build a franchise that will last for many years to come.
Speaker Change: Fiber investment is a hard one to do at the front end, but it's an incredibly durable investment. The depreciation levels on this go out a long time for a reason, and the beauty of the technology is
Speaker Change: The fiber investment is a hard one to do at the front end, but it is an incredibly durable investment the depreciation levels on this go out a long time for a reason and the beauty of the technology is.
Speaker Change: improving capacity on it is a relatively light lift incrementally once you got the glass in the ground. So, you know, you've heard me talk about we should be at mid-teens as a percent of revenue in a steady state as we kind of get through the front end of this investment cycle. As long as we continue to perform in the market the way we've been performing on this elevated level of investment, I'm comfortable that we should continue to do that. But we've got to continue to perform and make sure we deliver the right kind of results on that.
Speaker Change: Improving capacity on it is a relatively light lift incrementally once you've got the glass in the ground. So.
Speaker Change: <unk> heard me talk about we should be at mid teens as a percent of revenue in the steady state as we kind of get through the front end of this investment cycle as long as we continue to perform in the market. The way we've been performing on this elevated level of investment I am comfortable that we should continue to do that but we've got to continue to.
Speaker Change: Perform and make sure we deliver the right kind of results on that.
Speaker Change: So, you know, we've probably come through the worst of it at this juncture. We will get through kind of what we need to do on fiber before we're into another air interface investment. And as I mentioned in some of my public remarks that I made in December , the fact that we're moving to O-RAN will give us another way to kind of manage some of our capital intensity moving forward. The way I wish to describe that is it's not going to get us to different levels of historic investment, but it will be one of the tools that we do to manage our portfolio of capital investment between fixed and mobile services to drive the kind of returns we need to drive. We're going to get more tools out of our O-RAN investment to do that and still meet the needs of our capacity growth in a more efficient fashion in our wireless network moving forward. That gives us the room to do some of the things that we want to do on the fixed side.
Speaker Change: So we.
We've probably come through the worst of it at this juncture.
Speaker Change: We will we will get through kind of what we need to do on fiber before we're into another air interface investment and as I mentioned in some of my public remarks that I made in December. The fact that we're moving to Oran will give us another way to kind of manage some of our capital intensity moving forward.
John T. Stankey: And then I go to how we have to execute differently. I've given a fair amount of information and focus on, You know, we're really shifting into the mid-market and trying to be a much more effective provider into the mid-market, and we are, in fact, seeing the green shoots of that occurring. It's moving a little slower than I might like.
Speaker Change: <unk> wished to describe that is it's not going to get us to different levels of historic investment, but it will be one of the tools that we do to manage our portfolio of capital investment between fixed and mobile services to drive the kind of returns we need to drive we're going to get more tools out of our own.
John T. Stankey: It requires us to... open up entirely new distribution channels. It requires us to cultivate new relationships with ways to represent our products. And what we've traditionally done through what I would call direct owned and operated channels. It requires us to rebundle and repackage the products a bit differently to be effective in that space, and that requires us to do things like reprice, change systems, and build capabilities for third parties to work with.
Speaker Change: <unk> investment to do that and still.
Speaker Change: Meet the needs of our capacity growth and a more efficient fashion on our wireless network moving forward that gives us the room to do some of the things that we want to do on the fixed side. So I feel pretty good about where we are I think we're through the worst of it we'll see it continue to get more efficient as we move forward, we'll be selective of where we can get those kind of returns based on our <unk>.
Speaker Change: So I feel pretty good about where we are. I think we're through the worst of it. We'll see it continue to get more efficient as we move forward. We'll be selective of where we can get those kind of returns based on our market performance.
John T. Stankey: We are making progress, and we're seeing that. We're starting to see that manifest itself in fiber-driven revenues that are coming from products and services we want to sell, which are connectivity-based products and services. So we're going to continue to run those plays.
Speaker Change: Performance and overall I think we're in good shape past call that you want to add anything on that outlook.
Speaker Change: And you know, overall, I think we're in good shape. Pascal, did you want to add anything on that? No, look.
Pascal DeRoche: The investments we've been making obviously are working.
Speaker Change: The investments we've been making obviously are working.
Pascal DeRoche: And as I look forward, we've said it,
Speaker Change: And as I look forward.
Speaker Change: We've said it.
Pascal DeRoche: We expect to operate at mid-teens capital intensity long-term, and we're committed to that. We're also committed to having a capital allocation plan that also looks for other ways to deliver value to shareholders.
Speaker Change: We expect to operate at mid teens.
John T. Stankey: We've got to get a little bit better at it, but I'd also say step back and realize that while we report segment-wise for wireline only. You should understand that the business marketplace is an important marketplace to us, and on a combined basis, wireless and wireline, we're still growing EBITDA in that segment. And some of it is being driven from the goodness of more and more businesses being able to run the core of their company on a wireless infrastructure. And you're seeing some of that put pressure on the wireline side of the business. But we're benefiting from that on the pickup, on the other side.
Speaker Change: Capital intensity long term and we're committed to that we're also committed to.
Speaker Change: Having a capital allocation plan that also looks for other ways to deliver value to shareholders.
Speaker Change: Thanks very much, Tim. Turn it over to John for final comments. Well, thanks. I appreciate everybody speaking with us, and I apologize about some of the longer prepared remarks at the front end.
Speaker Change: Thanks, very much Tim turnover to John for final comments, well. Thanks, I appreciate it everybody sticking with us and I apologize about some of the longer prepared remarks at the front end.
John: not atypical as we try to give you some guidance and visibility into the business and appreciate you enduring that. I would just reiterate what I said in my opening remarks that I thought 2023 was an incredibly solid year for us from an execution perspective at AT&T, I'm incredibly proud
John: Not atypical as we tried to give you some guidance and visibility into the business and I appreciate your enduring that.
John: I would just reiterate what I said in my opening remarks that I thought 2023 was an incredibly solid year.
John: For us from an execution perspective at AT&T on incredibly proud.
John: the board of what we've done and the formula in optimizing the various parts of the business as we move through it. It's as solid a fundamental year at AT&T as I can remember in recent history, certainly in a very long time.
John: The board of what we've done in the Formula and optimizing the various parts of the business as we move through it it's as solid fundamentals.
John T. Stankey: And when we talk about things like fixed wireless assets and AT&T Internet Air being an opportunity for us, we will be in a much better position this year on the catch to do some of that. And frankly, you know, that's not a trajectory move and a structural move that I think is a bad one for us over the long haul.
John: Fundamentally you're at AT&T as I can remember in recent history, certainly in a very long time.
John: If I think about those fundamentals, you see them manifested all the way through the balance sheet.
John: If I think about those fundamentals you see them manifested all the way through the balance sheet.
John T. Stankey: So that's kind of how I view this segment moving forward. And we still think our brand plays incredibly well. We can walk in and have credibility. We've got the right products that, ultimately, customers want if we can get them distributed properly. And I have high optimism that as convergence becomes more important, we will distinguish ourselves further in the mid-market. Hey, Mike, one other point just to add as well: legacy revenues continue to decline. We have an opportunity to continue to really hit costs in that sector fairly hard, and so I'm confident that that will also be a factor in moderating the losses. Thanks very much, Mike. Operator, we've got time for one more question. Our last question will come from the line of Tim Horan of Oppenheimer. Please go ahead. Mr. Horan, your line is open. Sorry about that.
John: and our cash flow statement. And I think that's the most important thing to kind of step back from and realize
John: And our cash flow statement and I think that's the most important thing to kind of step back from them and realize this.
John: business enters 2024 in a very, very strong and healthy position. I'm excited about where we enter 2024. We've taken great steps to simplify our business. We still have some more work to do in that regard, but we are entirely focused on the future right now. And it's a future that I believe lines up incredibly well for the asset base of AT&T as consumer tastes are changing, as we're seeing the move to convergence, as we see the growth that's occurring and the importance of high-performance networking. I believe AT&T has the asset base and the positioning to move with where this future is going. And that's why I'm so optimistic about what we have in front of us. And I think we're going to get to a very exciting place.
John: Business enters 2024, and a very very strong and healthy position and I'm excited about where we enter 2024, we've taken great steps to simplify our business. We still have some more work to do in that regard.
John: We are entirely focused on the future right now and it's a future that I believe.
John: Lines up incredibly well for the asset base of AT&T as consumer tastes are changing as we're seeing the move to convergence as we see the growth that's occurring and the importance of high performance networking I believe AT&T is the asset base and the positioning to move with where this future is going and that's why I'm so optimistic.
John: <unk> about what we have in front of us and I think we're going to get to a very exciting place to start in 2025, where we have the choices in front of us that we would like to have we worked so hard to get.
John: start of 2025 where we have the choices in front of us that we would like to have and we've worked so hard to get.
Speaker Change: I'll give you one final housekeeping thing before we separate. This is Amir's last call with us.
John: I'll give you one final housekeeping thing before we separate this is.
John: Our mirrors last call with us.
Can you talk about the longer term capital intensity, what you're kind of thinking currently, and I guess there's a lot of moving parts for free cash flow, maybe a sense of, can you grow free cash flow off of this year? You know, it seems like you can, and it seems like your capital intensity is still relatively high versus your peers, just in terms of color around longer term free cash. Yeah, let me... Going back on the capital allocation issues, Tim, and I obviously believe that we should not be at the sustained levels of investment that we're at right now forever. You know, our point of view is... We're building infrastructure that's sustainable infrastructure that will build a franchise that will last for many years to come. The fiber investment is a hard one to do at the front end, but it's an incredibly durable investment. You know, the depreciation levels on this go out for a long time for a reason, and the beauty of the technology is... Improving capacity on it is a relatively light lift incrementally once you get the glass in the ground.
Speaker Change: We've worked him hard the last three years, and I guess like any Thoroughbred that we work hard, we need to send him on to his next chapter, and we're excited about what he's going to be able to do for us as we give him a new opportunity to show what he's been able to do and learn about the business. And as a result of that, I hope you join me in welcoming Brett Feldman to AT&T. A couple of you might know Brett. He's been around a little bit. But we're delighted to add Brett, and as good a job as Amir has done, and it's really hard to fill those Air Jordans, I'm sure Brett will do an exceptional job of that. We think he'll be a great addition to the management team, and we'll continue to work hard to keep you in the loop moving forward. So thank you all very much for your time this morning, and we'll see you in 90 days.
John: We've worked hard the last three years and I guess like any thorough bread that we work hard we need to send them on to his next chapter and we're excited about what is going to be able to do for us as we give them a new opportunity to to show what he has been able to do and learn about the business.
John: As a result of that.
Speaker Change: I Hope you join me in welcoming Brett Feldman to AT&T couple of you might know Brad he has been at around a little bit.
Speaker Change: We are delighted to add Brett in as good a job as a mirrored zone. It is done and it's really hard to fill those air Jordans.
I am sure Brett will do an exceptional job of that we think it will be a great addition to the management team and we will continue to work hard to keep you in the loop moving forward. So thank you all very much for your time this morning.
Speaker Change: We'll see you in 90 days.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Ladies and gentlemen That does
Ladies and gentlemen that does conclude.
Emily Beynon: include today's AT&T's earning call.
Speaker Change: Today's at&t's, earning call we'd like to thank you for your participation and thank you for using our service have a wonderful day you may now disconnect.
John T. Stankey: So, you know, you've heard me talk about us being at mid-teens as a percent of revenue in the steady state as we kind of get through the front end of this investment cycle. As long as we continue to perform in the market the way we've been performing on this elevated level of investment, I'm comfortable that we should continue to do that. But we've got to continue to perform and make sure we deliver the right kind of results on that. So, you know, we've probably come through the worst of it at this juncture.
Emily Beynon: and thank you for using our service. Have a wonderful day.
John T. Stankey: We will get through kind of what we need to do on fiber before we're into another air interface investment. And, as I mentioned in some of my public remarks that I made in December, the fact that we're moving to O-RAN will give us another way to kind of manage some of our capital intensity moving forward. The way I wish to describe that is it's not going to get us to different levels of historic investment, but it will be one of the tools that we use to manage our portfolio of capital investment between fixed and mobile services to drive the kind of returns we need to drive. We're going to get more tools out of our O-RAN investment to do that and still meet the needs of our capacity growth in a more efficient fashion in our wireless network moving forward. It gives us room to do some of the things that we want to do on the fixed side.
Emily Beynon: Conference recording has stopped.
Speaker Change: The conference recording has stopped.
John T. Stankey: So I feel pretty good about where we are. I think we're through the worst of it. We'll see it continue to get more efficient as we move forward. We'll be selective about where we can get those kind of returns based on our market performance, and you know, overall, I think we're in good shape. Pascal, did you wanna add anything to that? No, look.
The investments we've been making, obviously, are working. And as I look forward, we've said it. We expect to operate at mid-teens capital intensity long term. And we're committed to that. We're also committed to having a capital allocation plan that also looks for other ways to deliver value to shareholders. Thanks very much, Tim. I'll turn it over to John for final comments.
John T. Stankey: I appreciate everybody speaking with us, and I apologize about some of the longer prepared remarks at the front end, but that's... not atypical as we try to give you some guidance and visibility into the business, and I appreciate you enduring that. I would just reiterate what I said in my opening remarks that 2023 was an incredibly solid year for us from an execution perspective at AT&T. I'm incredibly proud.
John T. Stankey: Across the board, of what we've done, and the formula for optimizing the various parts of the business as we move through it, it's a solid, fundamental year at AT&T for me in recent history, certainly in a very long time. If I think about those fundamentals, you see them manifested all the way through the balance sheet and our cash flow statement. And I think that's the most important thing to kind of step back from and realize.
John T. Stankey: This business enters 2024 in a very, very strong and healthy position. I'm excited about where we are going in 2024. We've taken great steps to simplify our business. We still have some more work to do in that regard, but we are entirely focused on the future right now. And it's a future that I believe lines up incredibly well for the asset base of AT&T, as consumer tastes change, as we see the move to convergence, as we see the growth that's occurring and the importance of high-performance networking. I believe AT&T has the asset base and the positioning to move with where this future is going.
John T. Stankey: And that's why I'm so optimistic about what we have in front of us, and I think we're going to get to a very exciting place. We start in 2025, where we have the choices in front of us that we would like to have and we've worked so hard to get. I'll give you one final housekeeping thing before we separate.
John T. Stankey: This is Amir's last call with us. We've worked him hard the last three years, and I guess, like any thoroughbred that we work hard with, we need to send him on to his next chapter, and we're excited about what he's going to be able to do for us as we give him a new opportunity to show what he's been able to do and learn about the business. And as a result of that, I hope you will join me in welcoming Brett Feldman to AT&T. A couple of you might know Brett. He's been around a little bit. We're delighted to add Brett, and as good a job as Amir has done, and it's really hard to fill those Air Jordans, I'm sure Brett will do an exceptional job filling that.
John T. Stankey: We think he'll be a great addition to the management team, and we'll continue to work hard to keep you in the loop moving forward. So thank you all very much for your time this morning, and we'll see you in 90 days. Ladies and gentlemen, that does conclude today's AT&T Earnings Call. Thank you for using our service. Have a wonderful day.