Q1 2024 AT&T Inc Earnings Call

Operator: For the 2024 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 to 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.

For 2024 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 opened for questions. If you would like to ask a question. Please press wanted to 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 zero and as a reminder, this conference call is being recorded I would like to turn the conference call over to your host Brett Feldman Senior Vice President Finance and Investor Relations. Please go ahead.

Operator: And as a reminder, this conference call is being recorded. I would like to turn the conference call over to your host, Brett Feldman, Senior Vice President, Finance, and Investor Relations. Please go ahead.

Brett Feldman: Thank you and good morning, everyone. Welcome to our first quarterly call. I'm Brett Feldman, 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, and as such, they're subject to risks and uncertainties described in AT&T's SEC filings. Results may differ materially from those predicted.

<unk> you and good morning, everyone welcome to our first quarter call I'm, Brett Feldman 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 Thanks, Brett I. Appreciate you all joining us this morning, we.

Brett Feldman: 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 T. Stankey: Thanks, Brett. I appreciate you all joining us this morning. We started the year with a solid first quarter as we continue to make steady progress on our investment-led strategy of being the best connectivity provider through 5G and fiber. We're growing the right way by adding valuable long-term wireless and broadband subscribers. As Pascal will cover first quarter results in detail, I'd like to spend some time highlighting how our strategic priorities are enabling us to deliver positive results and build a long runway for sustainable growth. But when you look under the hood...

John T. Stankey: Started the year with a solid first quarter as we continue to make steady progress on our investment led strategy of being the best connectivity provider through <unk> and fiber.

John T. Stankey: We're growing the right way by adding valuable long term wireless and broadband subscribers.

Since Pascal will cover first quarter results in detail I'd like to spend some time, highlighting our strategic priorities are enabling us to deliver positive results and build a long runway for sustainable growth.

John T. Stankey: When you look under the Hood, it's clear that our largest and most powerful EBIT growth engine mobility is running well.

John T. Stankey: It's clear that our largest and most powerful EBITDA growth engine, Mobility, is running well. Our strength and value proposition help us deliver 349,000 postpaid phone net ads in the first quarter. We now have about 71.6 million high-value post-paid phone subscribers, which is up 1.5 million from a year ago. These aren't empty calorie editions.

John T. Stankey: Our strength and value proposition help us deliver 349000 postpaid phone net adds in the first quarter.

John T. Stankey: We now have about $71 6 million high value postpaid phone subscribers, which is up one 5 million from a year ago.

John T. Stankey: And these aren't empty calorie additions.

John T. Stankey: Our results reflect the quality of our customer growth with higher ARPU and higher Adjusted Operating Income. We're also growing efficiently thanks to our consistent and simple go-to-market strategy. Our post-paid phone churn of.72% was our lowest first-quarter churn ever on record.

John T. Stankey: Our results reflect the quality of our customer growth with higher <unk>.

John T. Stankey: Higher adjusted operating income improved margins and lower postpaid churn.

John T. Stankey: We're also growing efficiently thanks to our consistent and simple go to market strategy, our postpaid phone churn of <unk>, 72% was our lowest first quarter churn ever on record and once again, we expect to report the lowest postpaid phone churn among the major service providers this quarter.

John T. Stankey: And once again, I expect to report the lowest post-paid phone churn among the major service providers this quarter. This highlights the value customers place on the wireless service we provide and the continued strength of our Best Deals for Everyone strategy. Now let's move to fiber, which is our fastest growing business. The story here is familiar and one we like.

John T. Stankey: <unk>.

John T. Stankey: This highlights the value customers place on the wireless service, we provide and the continued strength of our best deals for everyone's strategy.

Now, let's move to fiber, which is our fastest growing engine.

John T. Stankey: The story here is familiar and one we like where we have fiber we win and.

John T. Stankey: Where we have fiber, we win. We're bringing fiber to more Americans than anyone else. Since the first quarter of last year, we've passed about 2.4 million locations with fiber and now have passed more than 27 million consumer and business locations. Over the last year, we grew our AT&T Fiber consumer subscriber base by about 1.1 million to nearly 8.6 million customers. This includes 252,000 AT&T FiberNet additions in the first quarter. As a result of our established fiber success and early AT&T Internet Air subscriber growth, we've grown our consumer broadband subscriber base for three consecutive quarters, and we expect this trend to continue.

John T. Stankey: We're bringing fiber to more Americans than anyone else.

John T. Stankey: Since the first quarter of last year, we passed about $2 4 million locations with fiber and now passed more than $27 million consumer and business locations.

John T. Stankey: Over the last year, we grew our AT&T fiber consumer subscriber base by about $1 1 million to nearly $8 6 million customers.

John T. Stankey: This includes 252000 AT&T fiber net additions in the first quarter.

John T. Stankey: As a result of our established fiber success and early AT&T Internet era subscriber growth, we've grown our consumer broadband subscriber base for three consecutive quarters and we expect this trend to continue.

John T. Stankey: We're even more excited about the converging power of 5G and fiber together. Where we have AT&T Fiber, our strong national 5G wireless brand, gives us the opportunity to be customers' single converged provider, seamlessly connecting them both in the home and on the go. We're able to deliver convergence at a level that none of our peers can match, as we're the only provider that benefits from the owner's economics and scale of both 5G and fiber. This all matters because convergence presents clear benefits.

John T. Stankey: We're even more excited about the converging power of five G and fiber together.

John T. Stankey: Where we have AT&T fiber, our strong national <unk> wireless brand provides us the opportunity to be customers single converged provider seamlessly connecting them both in the home and on the go.

John T. Stankey: We're able to deliver convergence at a level that none of our peers can match as we're the only provider that benefits from owners' economics and scale with both five June fiber.

John T. Stankey: So all matters because convergence presents clear benefits when a customer has both our wireless and fiber products, we see a meaningful improvement in churn and net promoter scores.

John T. Stankey: When a customer has both our wireless and fiber products, we see a meaningful improvement in churn and net promoters, which ultimately translates to much higher lifetime values for converged customers. We are also making great progress on ensuring more Americans have access to high-speed internet. Just this month.

John T. Stankey: Ultimately translates to much higher lifetime values for converged customers.

John T. Stankey: Also making great progress on ensuring more Americans have access to high speed Internet. Just this month, we expanded our commitment to $5 billion over this decade to help bridge the digital divide in our country.

Unknown Executive: Transcript by Transcription Outsourcing, LLC. We've already contributed to connecting approximately 5 million Americans, and our goal is to help connect 25 million people in total by 2030. We believe that connecting changes everything, that we must collectively address the communications capabilities of our country's needs for the next century and not the last.

John T. Stankey: We have already contributed to connecting approximately 5 million Americans.

John T. Stankey: Our goal is to help connect 25 million people in total by 2030.

John T. Stankey: We believe that connecting changes everything.

John T. Stankey: We must collectively address the communications capabilities of our country's needs for the next century.

John T. Stankey: Not the last one.

John T. Stankey: To make this happen, we need sound policy that's done right. Teams are working hard to make that happen. The future of connectivity is critical to advancing our society. That's why we're focused on growing and evolving our network. As a result of these efforts... The areas where we're investing most heavily through 5G and fiber are performing very well. For perspective.

John T. Stankey: To make this happen we need sound policy that's done right.

John T. Stankey: Our teams are working hard to make that happen.

John T. Stankey: The future of connectivity is critical to advancing our society. That's why we're focused on our growing and evolving our networks.

John T. Stankey: As a result of these efforts the areas, where we're investing most heavily through five gn fiber are performing very well for perspective in 2023 mobility and consumer wireline together represented more than 80% of revenue and about 85% of EBITDA and our communications.

John T. Stankey: In 2023, Mobility and Consumer Wireline together represented more than 80% of revenue and about 85% of EBITDA in our communications sector. This means we're growing the large majority of our business and driving improved operating leverage across. We expect this to continue. However, we still have legacy elements of our business that we're in the midst of transitioning, particularly in business wireless. In the quarter, business wireline EBITDA was down 16.5% as the industry-wide secular decline of legacy voice continued.

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John T. Stankey: This means we are growing the large majority of our business and driving improved operating leverage across it.

John T. Stankey: We expect this to continue.

John T. Stankey: However, we still have legacy elements of our business that we're in the midst of transitioning particularly in business wireline.

John T. Stankey: In the quarter business wireline EBITDA was down 16, 5% as the industry wide secular decline of legacy voice continues.

John T. Stankey: While the wholesale market is stabilized, the reality is that businesses are transitioning to mobile and cloud-based services at an accelerated rate as post-pandemic workplace restructuring takes hold. We see the benefits from this connectivity transition in business solutions, where wireless service revenues grew 4.6% in the first quarter, outpacing our overall mobility services revenue. While we continue to actively work our legacy transition strategies to end of life products, reduce our operating footprint, and eliminate fixed costs.

John T. Stankey: While the wholesale market has stabilized the reality is that businesses are transitioning to mobile and cloud based services at an accelerated rate.

John T. Stankey: Post pandemic workplace restructuring takes hold.

John T. Stankey: We see the benefits from this connectivity transition and business solutions Wireless service revenues grew four 6% in the first quarter outpacing our overall mobility services revenue growth.

John T. Stankey: While we continue to actively work our legacy transition strategies to end of life products reduce our operating footprint and eliminate fixed costs.

John T. Stankey: We're advancing several cost savings and productivity initiatives to align with this reality, such as Vendor and Management Workforce Rationalization. We also strongly believe that the future-focused area of business solutions aligns well with our core connectivity competencies, and we continue to build out a connectivity portfolio with real long-term growth opportunities. For example, take FirstNet.

John T. Stankey: We are advancing several cost savings and productivity initiatives to align with this reality.

John T. Stankey: As vendor and management workforce rationalization.

John T. Stankey: We also strongly believe that the future focused area of business solutions aligns well with our core connectivity competencies and we continue to build out our connectivity portfolio with real long term growth opportunity.

John T. Stankey: Take first net.

John T. Stankey: Prioritize service for first responders shows what we're able to accomplish when we focus on growing our business in areas, where we have traditionally under indexed.

John T. Stankey: This prioritized service for first responders shows what we're able to accomplish when we focus on growing our business in areas where we have traditionally under-indexed. Additionally, our continued 5G and fiber expansion will enable new growth when paired with broader distribution. We have relationships with nearly 2.5 million business customers today and an opportunity to win with more small to medium-sized businesses. One way we intend to meet small and medium businesses' connectivity needs is with our new fixed wireless service, AT&T Internet Air for Business.

John T. Stankey: Additionally, our continued five G and fiber expansion will enable new growth when paired with broader distribution.

John T. Stankey: We have relationships with nearly $2 5 million business customers today, and an opportunity to win with more small to medium sized businesses.

John T. Stankey: One way, we intend to meet small and medium businesses connectivity needs as with our new fixed wireless service AT&T Internet are for business we.

John T. Stankey: We believe this is a durable national play with business.

John T. Stankey: Because it's able to serve as a reliable five G powered primary internet connection.

John T. Stankey: Fiber is not available in remote locations when temporary access as needed.

John T. Stankey: We believe this is a durable national play with businesses because it's able to serve as a reliable 5G-powered primary internet connection where fiber is not available, in remote locations when temporary access is needed, or with small and medium businesses that don't require always-on video streaming. While it's still early, we've been very pleased with the solid demand we're seeing from businesses. Given our success in growing core connectivity, we're focused on furthering the AT&T value proposition in ways that matter to our business customers. Security is at the top of their list. That's why we introduced AT&T Dynamic Defense, which provides built-in security controls on top of world-class access.

John T. Stankey: War with small and medium businesses that don't require always on video streaming.

John T. Stankey: While it's still early we've been very pleased with the solid demand we're seeing from businesses.

John T. Stankey: Given our success growing core connectivity, we're focused on furthering the AT&T value proposition in ways that matter to our business customers and security is at the top of their list.

John T. Stankey: Why are we introduced AT&T dynamic defense, which provides built in security controls on top of World class access.

John T. Stankey: The takeaway is that we're well positioned to capitalize on emerging connectivity opportunities with businesses. Thanks to the strong relationships, we have with almost all of the fortune 1000, and our leading position in fiber and the fact, we operate the largest wireless network in the U S.

John T. Stankey: The takeaway is that we're well positioned to capitalize on emerging connectivity opportunities with businesses thanks to the strong relationships we have with almost all of the Fortune 1000 and our leading position in fiber and the fact we operate the largest wireless network in the U.S. Our business wireline operations transformation will not be a linear process, and we're going through the heaviest lift right now. However, our strong momentum across our growth areas of mobility and broadband is allowing us to outpace legacy declines and drive positive, consolidated results. We remain on track to deliver on all the consolidated financial guidance we shared in January. Now, let's spend a moment on our second priority of being effective and efficient in everything we do.

John T. Stankey: <unk>.

John T. Stankey: Our business wireline operations transformation will not be a linear process and we're going through the heaviest lift right. Now however, our strong momentum across our growth areas of mobility and broadband is allowing us to outpace legacy declines and drive positive consolidated.

John T. Stankey: Our results and we remain on track to deliver on all of the consolidated financial guidance, we shared in January.

John T. Stankey: Now, let's spend a moment on our second priority of being effective and efficient in everything we do.

John T. Stankey: Last year, we set a new target for an incremental $2 billion plus in run rate cost savings by mid 2026.

John T. Stankey: This came on top of the $6 billion plus run rate cost savings target, we achieved last year.

John T. Stankey: The continued adoption of AI is not only helping us make progress on this goal, but also benefiting our employee and customer experiences.

John T. Stankey: This focus on efficiency has translated into improved operating leverage despite continued elevated inflation.

John T. Stankey: Last year, we set a new target for an incremental $2 billion plus in run rate cost savings by mid-2026, on top of the $6 billion plus run rate cost savings target we achieved last year. The continued adoption of AI is not only helping us make progress on this goal but also benefiting our employee and customer experience. This focus on efficiency is translated into improved operating leverage despite continued elevated inflation. You can see this in our cash operating expenses, which were down year-over-year in the first quarter, contributing to an adjusted even-of-margin expansion of 170 basis points. This brings me to our final priority, which is our deliberate and balanced approach to capital allocation.

John T. Stankey: You can see this in our cash operating expenses, which were down year over year in the first quarter contributing to adjusted EBITDA margin expansion of 170 basis points.

John T. Stankey: This brings me to our final priority, which is our deliberate and balanced approach to capital allocation.

John T. Stankey: As we indicated would happen our capital investment levels have come down year over year as we move past the peak of our <unk> rollout.

John T. Stankey: Still we remain a top investor in Americas connectivity and continued to expand fiber at a steady pace.

John T. Stankey: Even with this continued investment we delivered first quarter free cash flow of $3 1 billion compared to $1 billion a year ago.

John T. Stankey: This aligns with the expectations, we shared for more ratable quarterly free cash flow, which we've accomplished by efficiently growing EBITDA, improving cash conversion and reducing our short term financing balances.

John T. Stankey: As we indicated would happen, our capital investment levels have come down year over year as we move past the peak of our 5G rollout. Still, we remain a top investor in America's connectivity and continue to expand fiber at a steady pace. Even with this continued investment, we delivered first quarter free cash flow of $3.1 billion compared to $1 billion a year ago.

John T. Stankey: Our strong free cash flow has also enabled us to pay down debt.

John T. Stankey: Finished the first quarter with net debt to adjusted EBITDA of two nine times.

John T. Stankey: Continue to expect to reach our target in the two five times range in the first half of 2025.

John T. Stankey: So it's clear, we're operating well against our business priorities and as a result, we're growing share with five <unk> and fiber.

John T. Stankey: And we will ability we've been increasing our share of wireless service revenue growth, even without the benefit of fixed wireless which is reported in consumer wireline.

John T. Stankey: This aligns with the expectations we shared for more ratable, quarterly free cash flow, which we've accomplished by efficiently growing EBITDA. Approving Cash Conversion and Reducing Our Short-Term Financing Balance; Our strong free cash flow has also enabled us to pay down debt, and we finished the first quarter with net debt to adjusted EBITDA of 2.9 times. We continue to expect to reach our target in the two and a half times range in the first half of 2025.

John T. Stankey: We also expect this will be the 11th time in the last 13 quarters, where we deliver the industry's lowest postpaid phone churn.

John T. Stankey: And consumer wireline.

John T. Stankey: Outpacing cable as we add broadband customers. This is driven by AT&T fiber, which is consistently captured over one third of broadband net adds across major providers for the past three years.

John T. Stankey: So in summary across the services and technologies, most important to the future five G and fiber, we're performing well and growing our share in a healthy industry environment.

John T. Stankey: So it's clear we're operating well against our business priorities, and as a result, we're growing our share of 5G and fiber. In mobility, we've been increasing our share of wireless service revenue growth, even without the benefit of fixed wireless, which is reported in Consumer Wireless. We also expect that this will be the 11th time in the last 13 quarters where we deliver the industry's lowest post-paid phone churn and Consumer Wireline. We're outpacing cable as we add broadband customers. This is driven by AT&T Fiber, which has consistently captured over one-third of broadband net ads across major providers for the past three years.

John T. Stankey: This gives me confidence in our strategy.

John T. Stankey: Our team is making solid progress on our priorities.

John T. Stankey: With that I'll turn it over to Pascal skull.

Pascal: Thank you John and good morning, everyone.

Pascal: Let's start by reviewing our first quarter financial summary on slide seven in the first quarter revenues were down slightly as the decline in low margin mobility equipment revenues and business wireline revenues offset growth in high margin wireless service revenues and fiber revenues.

Pascal: Adjusted EBITDA was up four 3% for the quarter as growth in mobility consumer wireline in Mexico were partially offset by continued decline in business wireline.

Pascal: For the full year, we still expect adjusted EBITDA growth in the 3% range adjusted.

John T. Stankey: So in summary... Across the services and technologies most important to the future, 5G and fiber, we're performing well and growing our share in a healthy industry environment. This gives me confidence in our strategy and tells me our team is making solid progress on our priorities. With that, I'll turn it over to Pascal. Thank you, John, and good morning, everyone.

Pascal: Adjusted EPS was <unk> 55, compared to <unk> 60 in the year ago quarter.

Pascal: In the quarter, there were about 11% of aggregated EPS headwinds from four items, we discussed last quarter. These include higher depreciation.

Pascal: Higher non cash post retirement benefit costs.

Pascal: Lower capitalized interest and lower equity income from Directv.

For the full year, our expectations remain for adjusted EPS of 2015 to $2 25.

Pascal Desroches: Let's start by reviewing our first quarter financial summary on slide 7. In the first quarter, revenues were down slightly as a decline in low-margin mobility equipment revenues and business wireline revenues was offset by growth in high-margin wireless service revenues and fiber revenues. Adjusted EBITDA was up 4.3% for the quarter as growth in mobility and consumer wireline in Mexico was partially offset by continued decline in business wireline. For the full year, we still expect adjusted EBITDA growth of 3%. Adjusted EPS was $0.55 compared to $0.60 in the year-ago quarter.

Pascal: First quarter free cash flow of $3 1 billion was up more than $2 billion compared to last year.

Pascal: The important takeaway is that it.

Pascal: Prove conversion of EBITDA to free cash flow has allowed us to pay down short term supplier obligations. The pay down of these facilities should allow us to continue to drive more ratable quarterly free cash flow.

Pascal: Cash from operating activities came in at seven 5 billion versus $6 7 billion last year.

Pascal: As a reminder, the first quarter is typically the high water Mark for device payments and we expect payments to get progressively lower throughout the year cap.

Pascal: Capital investment for the quarter was $4 6 billion down about one 8 billion compared to the prior year.

Pascal: Capital expenditures were $3 8 billion compared to $4 3 billion in the prior year.

Pascal Desroches: In the quarter, there were about 11 cents of aggregated EPS headwinds from four items we discussed last quarter. These include higher depreciation, higher non-cash post-retirement benefit costs, lower capitalized interest, and lower equity income from DirecTV. For the full year, our expectations remain for a DPS of $2.15 to $2.25. First quarter free cash flow of $3.1 billion was up more than $2 billion compared to last year. The important takeaway is that improved conversion of EBITDA to free cash flow has allowed us to pay down short-term supplier obligations.

Pascal: Now, let's look at our mobility operating results on slide eight.

Pascal: The wireless industry remains healthy and our mobility business continues to deliver strong results driven by our consistent go to market strategy and solid execution for.

Pascal: For the quarter, we reported 349000 postpaid phone net adds.

Pascal: We grew service revenue by three 3%, which included the impact of customer credits.

Pascal: This was offset by lower equipment revenues with postpaid upgrade rate of 3%, which was down from three 7% last year.

Pascal: We continue to expect wireless service revenue growth in the 3% range for the full year.

Pascal: Mobility, EBITDA grew 7% or about $600 million year over year, which exceeded service revenue growth on a dollar basis.

Pascal Desroches: The paydown of these facilities should allow us to continue to drive more rentable, quarterly free cash flow. Cash from operating activities came in at $7.5 billion versus $6.7 billion last year. As a reminder, the first quarter is typically the high water mark for device payments, and we expect payments to get progressively lower throughout the year. Capital investment for the quarter was $4.6 billion, down about $1.8 billion compared to the prior year.

Pascal: This demonstrate we're significantly improving operating leverage and highlights the efficiency of our consistent go to market strategy, which has enabled us to take cost out of the business.

Pascal: We now expect our mobility EBITDA to grow in the higher end of the mid single digit range. This year driven by better than expected performance with business wireless customers and continued disciplined cost management.

Pascal: Our postpaid phone <unk> was $55 57.

Pascal Desroches: Capital expenditures were $3.8 billion compared to $4.3 billion in the prior year. Now, let's look at our mobility operating results on slide 8. The wireless industry remains healthy, and our mobility business continues to deliver strong results driven by our consistent go-to-market strategy and solid execution. For the quarter, we reported 349,000 post-paid phone net ads.

Pascal: This was up nearly 1% year over year, largely driven by higher ARPA and legacy plants for.

Pascal: For the year, we continue to expect modest postpaid phone off of growth.

Pascal: Now, let's move to consumer wireline results on slide nine.

Pascal: Our growth in consumer wireline was led once again by our fiber subscriber growth, which has consistently yielded strong returns in the quarter. We had 252000 AT&T fiber net adds which is in line with the outlook we provided.

Pascal Desroches: We grew service revenue by 3.3%, which included the impact of customer credit. However, this was offset by lower equipment revenues, with a post-paid upgrade rate of 3%, which was down from 3.7% last year. We continue to expect wireless service revenue growth in the 3% range for the full year. However, Mobility EBITDA grew 7% or about $600 million year-over-year, which exceeded service revenue growth on a dollar basis. This demonstrates we're significantly improving operating leverage and highlights the efficiency of our consistent go-to-market strategy, which has enabled us to take costs out of the business. We now expect our mobility EBITDA to grow in the higher end of the mid-single-digit range this year, driven by better-than-expected performance with business wireless customers and continued disciplined cost match. Our post-paid phone ARPU was $55.57.

Pascal: This is the 17th consecutive quarter with AT&T fiber net adds above 200000, we now have fiber penetration of 40% with several markets well above that level.

Pascal: Broadband revenues grew seven 7%.

Pascal: Including strong fiber revenue growth of 19, 5% for the full year, we continue to expect broadband revenue growth of 7% plus fiber.

Pascal: Fiber offer of 68061 was up more than 4% year over year with intake all pool remaining above $70.

Pascal: Consumer wireline EBITDA grew 14, 6% due to growth in broadband revenues and ongoing cost transformation. We now expect consumer wireline EBITDA to grow in the mid to high single digit range. This year driven by continued strong fiber revenue growth and disciplined cost management, partially offset.

Pascal: By continued legacy copper declines.

Pascal: As our customer base continues to migrate to fiber from legacy services or broadband support are decreasing thanks to fibers more efficient operating model.

Pascal Desroches: This was up nearly 1% year-over-year, largely driven by higher ARPU and legacy plans. For the year, we continue to expect modest post-paid foreign offer growth. Now, let's move to Consumer Wireline results on slide 9. Our growth in consumer wireline was led once again by our fiber subscriber growth, which has consistently yielded strong returns. In the quarter, we had 252,000 AT&T FiberNet ads, which is in line with the outlook we provided. This is the 17th consecutive quarter with AT&T FiberNet ads above 200,000.

Pascal: Greater reliability and higher quality service.

Pascal: And while fiber remains our focus and lead product. We continue to be encouraged by the early performance of AT&T Internet are our targeted fixed wireless service, which is available in parts of 95 locations.

Pascal: We now have more than 200000, AT&T Internet are consumer subscribers, having added 110000 in the quarter.

Pascal: Ultimately, we couldnt be more excited about the future of consumer wireline with AT&T fiber well positioned to lead our growth and AT&T and that are helping us provide quality broadband service to customers, where we don't offer fiber now lets covered business wireline on slide 10.

Pascal Desroches: We now have fiber penetration of 40%, with several markets well above that level. Broadband revenues grew 7.7%, including strong fiber revenue growth of 19.5%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber R-Proof $68.61 was up more than 4% year-over-year, with intake R-Proof remaining above $70.

Pascal: Business wireline EBITDA was down 16, 5% due to faster than anticipated rate of decline for our legacy voice services.

Pascal: At the start of the year, we shared that we expected business wireline EBITDA trends to improve on a full year basis.

Pascal: However.

Pascal: Due to faster than expected decline of legacy voice services, we now expect full year business wireline EBITDA declines in the mid teens range versus our prior outlook of a decline of 10% plus or minus.

Pascal Desroches: Consumer wireline EBITDA grew 14.6% due to growth in broadband revenues and ongoing cost transformation. We now expect consumer wireline EBITDA to grow in the mid to high single-digit range this year driven by continued strong fiber revenue growth and disciplined cost management, partially offset by continued legacy copper decline. As our customer base continues to migrate to Fiber from legacy services, our broadband support costs are decreasing thanks to Fiber's more efficient operating model, greater reliability, and higher quality service.

Pascal: As John mentioned, we are advancing several cost savings and productivity initiatives. This should benefit results in the second half of the year. When we also have more favorable year over year comparison.

Pascal: As we transition this business, we believe our five cheap fiber expansion presents plenty of growth opportunities. We're already seeing this in some of the parts of our broader business solutions results today.

Speaker Change: Great. Examples first net where wireless connections grew about 320000 sequentially.

Speaker Change: We're also pleased with early demand for AT&T in net for business, which we expect to benefit results in the second half of the year now.

Speaker Change: Now, let's move to slide 11 for an update on our capital allocation strategy.

Pascal Desroches: And while fiber remains our focus and lead product, we continue to be encouraged by the early performance of AT&T Internet Air, our targeted fixed wireless service, which is available in parts of 95 locations. We now have more than 200,000 AT&T Internet Air consumer subscribers, having added 110,000 in the quarter.

Speaker Change: Our approach to capital allocation remains deliberate.

Speaker Change: We're successfully balancing long term network investment to fuel sustainable subscriber and service revenue growth paying down debt and returning value to shareholders.

Speaker Change: We remain on track for full year capital investments in the 'twenty, one to 'twenty $2 billion range versus approximately $24 billion in 2023.

Speaker Change: While our overall capital investment will be lower in 2024 compared to recent years.

Pascal Desroches: Ultimately, we couldn't be more excited about the future of consumer wireless, with AT&T Fiberwell positioned to lead our growth and AT&T Internet Air helping us provide quality broadband service to customers where we don't offer fiber. Now, let's cover business wireline on slide 10. Business Wireline EBITDA was down 16.5% due to a faster than anticipated rate of decline for our legacy voice service. At the start of the year, we shared that we expected business wireline EBITDA trends to improve on a four-year basis.

Speaker Change: We continue to invest in key growth areas given the compelling returns on these investments.

Speaker Change: In mobility, we are focused on modernizing our network through our open ran initiative and.

And with fiber, we remain on track to past 30 million plus consumer and business locations by the end of 2025 as we've stated before the better than expected returns, we're seeing on our fiber investments potentially expands the opportunity to go beyond our initial target by roughly.

Speaker Change: $10 million to $15 million additional locations.

Speaker Change: This also assumes similar bill parameters in a regulatory environment that remains attractive to building infrastructure.

Pascal Desroches: However, due to a faster than expected decline in legacy voice services, we now expect full-year business wireline EBITDA declines in the mid-teens range versus our prior outlook of a decline of 10% plus or minus. As John mentioned, we're advancing several cost-saving and productivity initiatives. This should benefit results in the second half of the year when we also have a more favorable year-over-year comparison. As we transition this business, we believe our 5G and fiber expansion presents plenty of growth opportunities. We're already seeing this in some of the parts of our broader business solution results today. A great example is FirstNet, where wireless connections grew about 320,000 sequentially.

Speaker Change: It's important to note that as we continue to build out our network. This year, we expect to have lower vendor financing payments, while increasing the total investment we make directly into our networks as we continue to invest in fiber expansion and wireless network transformation.

Speaker Change: In other words, we expect our total capital investment of capital intensity to decline this year, even as we boost investments in our network.

Speaker Change: We also remain laser focused on deleveraging over the last four quarters, we reduced net debt by about $6 billion.

Speaker Change: At the end of March net debt to adjusted EBITDA was two nine times, and we're making steady progress on achieving our target in the two and a half times range in the first half of 2025.

Speaker Change: As I mentioned last quarter, we expect to address near term maturities with cash on hand, and this quarter, we repaid $4 7 billion of long term debt maturities looking forward our debt maturities are very manageable and we are in a great position with more than 95% of our long term debt fixed with.

Pascal Desroches: We're also pleased with early demand for AT&T Internet Air for Business, which we expect to benefit results in the second half of the year. Now, let's move to slide 11 for an update on our capital allocation strategy. Our approach to capital allocation remains deliberate.

Speaker Change: An average rate of four 2%.

Speaker Change: In addition to paying down debt, we reduced vendor and direct supplier financing obligations by about $2 3 billion during the quarter. This was partially offset by.

Pascal Desroches: We're successfully balancing long-term network investment to fuel sustainable subscriber and service revenue growth, paying down debt, and returning value to shareholders. We remain on track for full year capital investments in the 21 to 22 billion dollar range versus approximately 24 billion dollars in 2023. While our overall capital investment will be lower in 2024 compared to recent years, we continue to invest in key growth areas given the compelling returns on these investments. For example, in mobility, we are focused on modernizing our network through our Open RAN initiative.

Speaker Change: $400 million in additional proceeds on our securitization facility.

Speaker Change: These efforts highlight the quality of the free cash flow we're delivering.

Speaker Change: Directv distributions in the quarter were $500 million compared to $1 3 billion in the first quarter of 2023.

Speaker Change: For the year and thereafter, we continue to expect Directv cash distributions to decline at a similar rate to 2023 or by about 20% annually.

Speaker Change: With $3 1 billion in first quarter free cash flow, we've dramatically improved our free cash flow rate ability just as we committed we would last year.

Speaker Change: Looking forward, we still anticipate generating.

Speaker Change: Approximately 40% of our total 2020 for free cash flow in the first half of the year and continue to expect full year free cash flow of $17 billion to $18 billion range. So.

Pascal Desroches: And with FIBER, we remain on track to pass 30 million-plus consumer and business locations by the end of 2025. As we've stated before, the better-than-expected returns we're seeing on our FIBER investment potentially expand the opportunity to go beyond our initial target by roughly 10 to 15 million additional locations. This also assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure.

Speaker Change: To close I'm really pleased with our team's overall performance in the quarter.

Speaker Change: Despite managing through legacy declines our strength in mobility and consumer wireline has us on pace to deliver on our full year consolidated financial guidance.

Speaker Change: Brett that's our presentation, we're now ready for the Q&A.

Brett Feldman: Thank you Pascal operator, we're ready to take the first question.

Brett Feldman: Yeah.

Brett Feldman: And as a reminder, if you have not done so please press one zero if you ask a question.

Pascal Desroches: It's important to note that as we continue to build out our network this year, we expect to have lower vendor financing payments while increasing the total investment we make directly into our networks as we continue to invest in fiber expansion and wireless network transformation. In other words, we expect our total capital investment and capital intensity to decline this year, even as we boost investments in our network. We also remain laser-focused on deleveraging.

Pascal: A second time move your line from Q.

Pascal: Our first question will come from the line of Simon Flannery.

Simon William Flannery: Of Morgan Stanley. Please go ahead.

Simon William Flannery: Great. Thank you very much good morning.

Simon William Flannery: Good to hear the reiteration of the $2 five leverage target for early next year. It would be great. If you could just go through how youre thinking about the various capital allocation alternatives buybacks dividend growth deleveraging. The 10 to 15 million fiber ads b investments any any other considerations.

Simon William Flannery: And how we should think about the profile.

Pascal Desroches: Over the last four quarters, we reduced net debt by about $6 billion. At the end of March, net debt to adjusted EBITDA was 2.9 times, and we're making steady progress on achieving our target in the 2.5 times range in the first half of 2025. As I mentioned last quarter, we expect to address near-term maturities with cash on hand, and this quarter, we repaid $4.7 billion of long-term debt maturities. Looking forward, our debt maturities are very manageable, and we are in a great position with more than 95% of our long-term debt fixed with an average rate of 4.2%. In addition to paying down debt, we reduced vendor and direct supplier financing obligations by about $2.3 billion during the quarter.

Simon William Flannery: Presumably this time next year, we'll be having a more fulsome conversation, but anything more you could add around that would be great and then just housekeeping on the on the outage maybe you could just size the credit for US and was there any impact on net adds in the quarter.

Speaker Change: Good morning Simon.

Simon William Flannery: Good morning.

Simon William Flannery: I don't know that I'm going to give you a whole lot more than what I previously said I mean, it's really good to have choices.

Simon William Flannery: We clearly have choices coming up and we've worked really hard to put ourselves in this position to do that.

Simon William Flannery: And Ah.

Told you there would be a very deliberate process of the board would go through to understand.

Simon William Flannery: What they want to do is those choices start to materialize and we're in the middle of doing that we are working through a.

Simon William Flannery: Pretty systemic process and at the top of that as you can well imagine is we're very cognizant of the desire to ensure that we're treating our shareholders well in returning capital where we can.

In doing that.

Simon William Flannery: Smart way.

Pascal Desroches: This was partially offset by... 400 million in additional proceeds on our securitization facility. These efforts highlight the quality of the free cash flow we're delivering. Direct TV distributions in the quarter were 500 million compared to 1.3 billion in the first quarter of 2023.

Simon William Flannery: And so as I've said before we will evaluate at that time, where things like interest rates stand, we'll evaluate where we are on the dividend yield relative to the equity value.

Simon William Flannery: Where we have opportunities for reinvestment in the business and kind of understand what we think the right combination of those are and we have a pretty deliberate approach to making that happen.

Simon William Flannery: To give you some characterization right now is we've worked really hard over the last couple of years.

Pascal Desroches: For the year and thereafter, we continue to expect DirecTV cash distributions to decline at a similar rate to 2023 or by about 20% annually. With $3.1 billion in first quarter free cash flow, we've dramatically improved our free cash flow ratability, just as we committed we would last year. Looking forward, we still anticipate generating approximately 40% of our total 2024 free cash flow in the first half of the year and continue to expect full year free cash flow in the $17 to $18 billion range.

Simon William Flannery: To ensure we protect the dividend and I think you've seen that we've we've done that and we've put ourselves in a really strong financial position.

Simon William Flannery: Paramount and important to us as we move into this year.

Simon William Flannery: <unk> comments that we feel pretty good about where the balance sheet sits today relative to what we're paying for the capital on the balance sheet and our abilities to manage that moving forward I don't feel like we've got some immediate need to move differently than the trajectory. We've been on so if I ever was.

Simon William Flannery: Weighting will be waiting against those other options that we think about and how we want to go on to get the mix right. So.

Simon William Flannery: I think youll see more as we get me end of the year as I said the board is working really hard on this issue and I don't want to take away any degrees of freedom and latitude. They have the debate it and figure out what they want to do given what's going on in the market at the time we arrive.

Pascal Desroches: To close, I'm really pleased with our team's overall performance in the quarter. Despite managing through legacy declines, our strength in mobility and consumer wireline has us on pace to deliver on our full year consolidated financial guidance. Brett, that was our presentation. We're now ready for the Q&A. Thank you, Pascal. Operator, we're ready to take the first question. And as a reminder, if you have not done so, please press 1, then 0 if you have a question. Doing so a second time will remove your line from the queue.

Simon William Flannery: On the outage.

Simon William Flannery: Look I.

Simon William Flannery: We had it.

Simon William Flannery: It's unfortunate we had it the entire team feels.

Simon William Flannery: Responsible for we know we can do better.

Simon William Flannery: Put in place an awful lot of steps to ensure that we do better moving forward.

Simon William Flannery: I think I'm confident that we have done that and I feel like we can operate better than what we exhibited on that particular morning.

Simon William Flannery: Now, having said that I'm really proud of the way they have responded to the circumstances when they occur and they manage through the situation as well as could be expected.

Simon William Flannery: And in fact, I think you see that in the metrics.

Operator: Our first question will come from the line of Simon Flannery of Morgan Stanley. Please go ahead. Great, thank you very much. Good morning. It is good to hear the reiteration of the 2.5 leverage target for early next year. It would be great if you could just go through how you're thinking about the various capital allocation alternatives, buybacks, dividend growth, deleveraging, the 10 to 15 million fiber ads, bead investments, any other considerations, and how we should think about the profile. Presumably, this time next year, we'll be having a more fulsome conversation. But anything more you could add around that would be great.

Simon William Flannery: You see that we had a really really good churn quarter, obviously that wouldn't happen. If we didn't do the right things with the customer base.

Simon William Flannery: I am pleased relative to what I've seen reported so far in the industry of our customer growth.

Simon William Flannery: I'm sure there were a couple of days of May be some suppressed activity as a result of the outage I think it's probably something that's measured in days it wasn't measured in weeks and months.

Simon William Flannery: But we feel pretty good about where we stand right now certainly as you might guess, we have variety of survey methodologies that we use in research with our customer base and prospective customers. Those indicators don't show me anything that causes me to be concerned about what transpired or what occurred I think.

Simon William Flannery: Some of our recovery methods that we use with our customer base.

John T. Stankey: And then just housekeeping on the outage; maybe you could just size the credit for us. And was there any impact on net ads in the quarter? Thanks. Morning, Simon.

Simon William Flannery: It was they were the right decisions.

Simon William Flannery: And you've seen most of that reflected in the first quarter financials. There is a little bit that will drag into the second quarter based on how bill rounds go but.

Simon William Flannery: You should expect that you've seen the bulk of that moved through our numbers and I am satisfied that where we ended up on service revenue growth and margins that that was a strong quarter in aggregate inclusive of what we had to do in terms of the credits.

John T. Stankey: So I don't know that I'm going to give you a whole lot more than what I've previously said. I mean, it's really good to have choices, and we clearly have choices coming up, and we've worked really hard to put ourselves in this position to do that. And I told you there would be a very deliberate process that the board would go through to understand what they want to do. What they want to do is those choices start to materialize, and we're in the middle of doing that.

Speaker Change: Hi, operator.

Diana: Yes go ahead Diana.

Diana: Nothing that I think as I said last quarter assignment I think beads 2025 issue, it's not a 2024 issue it doesn't feel like it's moving in any particular way.

Diana: All that fast at the state level and as I have also indicated it's pretty clear to me that Theres places, where we're going to be more energized about playing in places, where we're going to be less energized about plant based on how various states are approaching us and.

John T. Stankey: We are working through a pretty systemic process, and at the top of that, as you can well imagine, we're very cognizant of a desire to ensure that we're treating our shareholders well and returning capital where we can, and doing it in a smart way. And so, as I've said before, we'll evaluate at that time where things like interest rates stand, we'll evaluate where we are on the dividend yield relative to the equity value, and where we have opportunities for reinvestment in the business, and kind of understand what we think the right combination of those is.

Diana: I don't think Theres anything right now I can tell you point blank, we won't be coming back in with any revisions to our guidance or anything like that that is relevant to 2024, I think as we get through this year. There may be some incremental things that we talked about in 2025 in terms of how we choose to reinvest capital in where we choose to go but.

Diana: It's not anything that I see right now.

Diana: Front and center.

Speaker Change: Many thanks.

Speaker Change: We'll take our next question now operator, our next our next question will come from the line of John Hodulik of UBS. Please go ahead.

John T. Stankey: And we have a pretty deliberate approach to making that happen. I would give you some characterization right now, as we've worked really hard over the last couple years to ensure that we protect the dividend. And I think you've seen that we have.

John Christopher Hodulik: Great. Thanks, Good morning, guys.

John Christopher Hodulik: First sort of a follow up to Simon's question on the data breach.

John Christopher Hodulik: Sort of a second quarter issue, but just want to make sure. It see if there is any impact that you saw earlier in the quarter from the data breach and then.

John T. Stankey: And we've put ourselves in a really strong financial position. That's paramount and important to us as we move into this. You heard Pascal's comments that, you know, we feel pretty good about where the balance sheet sits today relative to what we're paying for the capital on the balance sheet and our abilities to manage that moving forward. I, you know, I don't feel like we've got some immediate need to move differently than the trajectory we've been on. So, you know, if I was waiting, we'd be waiting against those other options that we think about and how we want to go and get the mix right.

Speaker Change: Certainly one of the themes that we're seeing here in the first quarter is the low upgrades and low churn environment.

Speaker Change: Do you expect that to continue despite the fact that we may have a sort of AI device launch later this year and does that low churn environment give the industry and AT&T particular pricing power as you look into the into the rest of the year. Thanks.

Speaker Change: Good morning, John.

John: I don't want to characterize this incorrectly but.

John: There are a lot of things going on broadly beyond AT&T in the cyber environment Im sure Youre, all obviously consumers in.

John: Are seeing the dynamics of what's happening there is there is clearly.

John: The bad actors have stepped up a level.

John T. Stankey: So I think you'll see more as we get closer to the end of the year. As I said, the board is working really hard on this issue, and I don't want to take away any degrees of freedom and latitude they have to debate it and figure out what they want to do, given what's going on in the market at the time we arrive. On the outage. Look, I'm upset that we had it.

John: Last several months I think and if I were to broadly step back and say are we going to see.

John: More activity and more problems, partly because of just the.

John: The activity level and how robust the business opportunities are for hackers and those that want to inflict.

John: Bad bad.

John: Bed axon folks and partly I think because of reporting requirements.

John: I expect you're probably going to see the noise level go up.

John T. Stankey: It's unfortunate we had it. The entire team feels responsible for it. We know we can do better. We've put in place an awful lot of steps to ensure that we do better moving forward. I think I'm confident that we have done that, and I feel like we can operate better than we did on that particular morning. Now, having said that, I'm really proud of the way they responded to the circumstances when they occurred, and they managed through the situation as well as could be expected.

John: What we have seen from our notification.

John: Is very similar to the outage.

John: Don't see anything in the customer metrics or anything that's going on that suggest.

John: It creates a long term issue on sentiment.

John: That doesn't mean, we don't take it seriously that doesn't mean that we're not examining what happened back in 2019 and trying to understand what root causes are around that.

John: Those actions are all underway, but it doesn't appear to me that its doing anything to impact our business as we stand here today in 2024.

John T. Stankey: In fact, I think you see that in the metrics. You see that we had a really, really good churn quarter. Obviously, that wouldn't happen if we didn't do the right things with the customer base. I'm pleased relative to what I've seen reported so far in the industry about our customer growth. I'm sure there were a couple of days of maybe some suppressed activity as a result of the outage. I think it's probably something that's measured in days that wasn't measured in weeks and months.

John: But we will continue to evaluate that and we will continue to work through the dynamics that are occurring.

John: I would tell you that.

John: On the upgrade rates and churn.

John: We've seen as I've said last quarter, a little bit of tapering in the industry. We expected that to occur we expected upgrade rates to be a little bit more tempered than what we had seen last year.

John: I don't see anything going on right now that suggests we're out of pattern to what our expectations were as we set up the plan for 2024.

John: We'll probably see a little bit of ebb and flow each quarter I'm not sure that I'm.

John T. Stankey: But, you know, we feel pretty good about where we stand right now. Certainly, as you might guess, we have a variety of surveying methodologies that we use and research with our customer base and prospective customers. Those indicators don't show me anything that causes me to be concerned about what happened or what happened.

John: Of the mindset that theres going to be something that occurs in the device portfolio that dramatically changes things in the latter part of the year there'll be the usual holiday promotions there'll be the usual devices and opportunities for individuals to create something that's special during the holidays, but that's that's the seasonal pattern.

We're accustomed to.

John: I think we'll be seeing things on the margin adjusting left and right I just don't believe we're going to be into a cycle.

John T. Stankey: I think some of our recovery methods that we use with our customer base were the right decisions. And you've seen most of that reflected in the first quarter financials. There's a little bit that we'll drag into the second quarter based on how bill rounds go.

What I would consider to be an out of pattern cycle in any way shape or form.

John: I'm going to give you the same answer I always give on where we are.

John: Pricing power look.

John: The industry is healthy I think as I've indicated before we're coming off of policies that drove record levels of investment in the industry. I think all players are mindful after record levels of investment to try to yield the appropriate returns that you would have to get after making those.

John T. Stankey: But you should expect that you've seen the bulk of that move through our numbers. And you know, I'm satisfied that where we ended up on service revenue growth and margins, that was a strong quarter in aggregate, inclusive of what we had to do in terms of the credit. I operate on Bede.

John: Things and I see that kind of dynamic occurring I think I know, we're mindful of it and we wanted to make sure that we're getting reasonable returns off that level of capital and my observations of what ICBM reported over the last couple of quarters is that others are doing the same.

John T. Stankey: Yeah, go ahead. Go ahead. Nothing that I think, you know, I, as I said last quarter, Simon, I think it's a 2025 issue, it's not a 2024 issue, it doesn't feel like it's moving in any particular way, all that fast at the state level.

John: And we're providing tremendous amount more value to customers.

John: They're using 30% more of our product 35% more every year.

John: <unk> of these networks is increasingly better there's choices that are coming in and how they apply the use of the technology for mobile to fixed so.

John: One would expect maybe there is an opportunity to change that value equation and continue to take a little price in places and we're going to continue to do that where we think certain products have that kind of staying power I think we've been pretty consistent over the last couple of years of saying theres opportunities to do that I think.

John T. Stankey: And as I've also indicated, it's pretty clear to me that there are places where we're going to be more energized about playing and places where we're going to be less energized about playing based on how various states are approaching this. And I don't think there's anything right now, I can tell you point blank, we won't be coming back in with any revisions to our guidance or anything like that that is relevant to 2024.

John: We've tried to stress with you when we do it we're very mindful of doing it intelligently.

John: Believe our churn numbers reflect that we've executed pretty well on that front and I feel good about the fact that we've been able to drive our <unk> up keep our margins in check if not improve them and continue to do some things that take some price in certain places, where we think we can keep the value equation in check.

John T. Stankey: I think as we get through this year, there may be some incremental things that we talked about in 2025 in terms of how we choose to reinvest capital and where we choose to go. But it's not anything that I see right now that's, you know, front and center.

John: And I expect we're going to continue to do that as we move through this year.

Speaker Change: Great. Thanks, John.

Speaker Change: Hi, operator, we'll take our next question please.

Speaker Change: Peter <unk> of Wolfe Research. Please go ahead.

Peter: Hi, good morning, everybody.

Peter: Thinking about the mobility side.

Peter: The consolidated segment results were really good and looking at the EBIT growth is similar to the rate of service revenue growth in a quarter when gross adds and churn.

Peter: <unk> were lower a great thing and less cost and I was just wondering why what else is happening in the cost structure. So that EBITDA wouldn't outgrowth service revenue in a quarter like this.

Operator: Many thanks. Our next question will come from the line of John Hodulik of UBS. Please go ahead. Great, thanks again.

Speaker Change: And then a quick one on <unk>.

Speaker Change: That are for business is your intent to distribute that nationally or will that.

John T. Stankey: Good morning, guys. First, sort of a follow-up to Simon's question on the data breach. You know, that's sort of a second quarter issue, but just want to make sure and see if there was any impact that you saw early in the quarter from the data breach. And then, you know, certainly one of the themes that we're seeing here in the first quarter is the low upgrades and low churn environment. Do you expect that to continue, despite the fact that we may have a sort of AI device launch later this year? And does that low churn environment give the industry, and AT&T, in particular, pricing power as you look into the rest of the year? Thanks. Uh, morning, John.

Speaker Change: The more regional strategy and the way that <unk>.

Speaker Change: Has been so far in residential thank you.

Speaker Change: Hey, Peter.

Speaker Change: Peter Pascale how are you.

Peter Lawler Supino: In terms of EBIT and you are talking about operating income thats inclusive of depreciation correct, yes, I am thanks.

Peter Lawler Supino: You remember, we guided that as a result of the.

Peter Lawler Supino: Ericsson open ran deal we would have accelerated depreciation associated with some of the equipment.

Peter Lawler Supino: That was previously in our network that we were going to.

We were going to depreciate over shorter lives, that's the dynamic youre seeing come through there.

Peter Lawler Supino: I feel really good about the overall.

Peter Lawler Supino: Expense management, and overall cost profile and you see that coming through in our EBITDA margin expansion in that business.

John T. Stankey: The, um... I don't want to characterize this incorrectly, but there are a lot of things going on broadly beyond AT&T in the cyber environment. I'm sure you're all obviously consumers, and are seeing the dynamics of what's happening. There's clearly The Bad Actors have stepped up a level in the last, you know, several months, I think.

And Peter we broadly as I indicated in my remarks that we see internally there for business being a national product you probably noticed that you may not be a golfer, but you noted strength.

Peter Lawler Supino: The Masters, we kind of.

Peter Lawler Supino: Previewed some of our.

Peter Lawler Supino: Advertising that will be coming out on the product that's geared towards the business market segment.

John T. Stankey: And if I were to broadly step back and say, are we going to see more activity and more problems partly because of just the activity level and how robust the business opportunities are for hackers and those that want to inflict bad acts on folks, and partly, I think, because of reporting requirements? I expect you're probably going to see the noise level go up. What we have seen from our notification... is very similar to the outage. I don't see anything in the customer metrics or anything that's going on that suggests that it creates a long-term issue with sentiment. That doesn't mean we don't take it seriously.

Peter Lawler Supino: It doesn't mean that it is a product for every business, but it certainly is a product for every state is what I would say, we want to be mindful of making sure that we match the product businesses that have the right usage characteristics that we think we can provide a quality level of service and the right value there are many businesses.

Peter Lawler Supino: That match that.

Peter Lawler Supino: There are many businesses that have usage characteristics and behaviors that are atypical to a typical single family dwelling and that's why we think it's a good place to invest time energy money and I think that was consistent with what our expectations were from the founding of the product and where we thought we'd go to market with it.

Speaker Change: Understood. Thank you.

Speaker Change: Operator, we'll take next question please.

John T. Stankey: That doesn't mean that we're not examining what happened back in 2019 and trying to understand what the root causes are. Those actions are all underway, but it doesn't appear to me that they're doing anything to impact our business as we stand here today in 2024. But we'll continue to evaluate that, and we'll continue to work through the dynamics that are occurring. I would tell you that on the upgrade rates and churn... We've seen, as I said last quarter, a little bit of tapering in the industry, but we expected that to occur.

Speaker Change: Bryan Kraft Deutsche Bank. Please go ahead.

Bryan D. Kraft: Hi, good morning, Thank you.

Bryan D. Kraft: John can you talk about how you're balancing the marketing and sales budget today between customer acquisition and retention and how that's driving at&t's performance relative to your competitors one of the concerns we often hear from investors is that well.

Speaker Change: Churn has been great gross adds have been down for several quarters, but I suspect. This is at least partly a function of the strategy. So if you could shed some light there that'd be great. Thanks.

John: Good morning, Brian you're you've answered your question.

Speaker Change: Pension all with the strategy.

John T. Stankey: We expected upgrade rates to be a little bit more tempered than what we had seen last year. But I don't see anything going on right now that suggests we're out of pattern with what our expectations were as we set up the plan for 2024. We're probably going to see a little bit of ebb and flow each quarter. I'm not sure that I'm of the mindset that there's going to be something that occurs in the device portfolio that dramatically changes things in the latter part of the year. There'll be the usual holiday promotions, there'll be the usual devices and opportunities for individuals to create something that's special during the holidays, but that's a seasonal pattern we're accustomed to.

Speaker Change: I am more than happy to take gross in places, where I think I can drive gross.

Speaker Change: <unk> and <unk>.

Speaker Change: I think in some cases.

Speaker Change: We have to think about how much people are paying for growth and then we also have to think about growth and we have to think about whether or not that growth really has yield on it if its what the end user is paying ultimately when they come on our network and so I think some of the numbers ultimately or what I referred to in my opening remarks.

Speaker Change: Low calorie.

Speaker Change: I don't really want to play in the low calorie space I want to make sure I'm getting my fair share of the high calories subscribers and that's why we're focused on share of service revenues as maybe being a better benchmark is as the company balancing its growth in the right way.

Speaker Change: When you think about how we balance our budget and what we do internally is we are pretty rigorous around asking ourselves those questions.

John T. Stankey: And I think we'll be seeing things on the margin, adjusting left and right. I just don't believe we're going to be into a cycle that's what I would consider to be an out-of-pattern cycle in any way, shape, or form. And I'm going to give you the same answer I always give on where we are in pricing power. Look, I think the industry is healthy. I think, as I've indicated before, we're coming off of policies that drove record levels of investment in the industry. I think all players are mindful, after record levels of investment, to try to yield the appropriate returns that you would have to get after making those things, and I see that kind of dynamic occurring.

Speaker Change: And the segments, we attack how we go after them the longevity and look churns a key driver when you are investing for that growth.

Speaker Change: I'll take lower churn all the time I don't think Thats, a bad sign necessarily.

Speaker Change: Okay, with where we stand on that front.

Speaker Change: We've talked previously Brian one of the things I like about where we've been in the market and that I think is frankly sustainable.

Speaker Change: Probably a year and a half ago two years ago. Most of the questions. On this call is where's the growth coming from and I kept saying the growth was balanced it's coming from a lot of different segments. We're seeing it come from different parts of the business community and we're giving you. The fact that our business growth has been strong we like what we're picking up in the residential environment and the consumer environment.

Speaker Change: And where we see our growth coming from there in terms of.

John T. Stankey: I think I know we're mindful of it, that we want to make sure that we're getting reasonable returns on that level of capital, and my observations of what I see being reported over the last couple of quarters is that others are doing the same, and we're providing a tremendous amount more value to customers. They're using 30% more of our product, 35% more every year. The performance of these networks is increasingly better.

Speaker Change: What we're taking so we have a pretty balanced approach to our distribution right now, but I think that diversity is helpful. It diversifies our portfolio of diversified the base and that's one of the reasons why the churn numbers are as strong as they are.

Speaker Change: Thank you.

Speaker Change: Operator, we're ready for the next question.

Speaker Change: David Barden of Bank of America. Please go ahead.

David Barden: Hey, guys. Thanks, so much for taking the question I guess.

First.

David Barden: A follow up question, if I could John Thank you for your comments about kind of having digested the impact of the outage, but.

John T. Stankey: There are choices that are coming in and how they apply to the use of the technology for mobile to fix. So one would expect that maybe there's an opportunity to change that value equation and continue to take a little price in some places. And we're gonna continue to do that where we think certain products have that kind of staying power. I think we've been pretty consistent over the last couple of years of saying there are opportunities to do that. I think we've tried to stress with you that when we do it, we're very mindful of doing it intelligently.

David Barden: The postpaid phone <unk> was obviously down about a little over a percent in the quarter and I'm assuming.

John: It would be some if not all of that had to do with the credit and the GAAP accounting for that and so I was wondering if we could get to.

John: Maybe Pat Gallagher jumping off point for where <unk> really is.

Unknown Attendee: If we if we normalize for <unk>.

John: That credit and then.

John: Second another kind of housekeeping question is.

John: With the sale of Sky Mexico.

John T. Stankey: I believe our churn numbers reflect that we've executed pretty well on that front, and I feel good about the fact that we've been able to drive our ARPUs up, keep our margins in check, if not improve them, and continue to do some things that take some price in certain places where we think we can keep the value equation in check. And I expect we're gonna continue to do that as we move through this year. Great. Thanks, John. Operator, we'll take our next question, please. Peter Supino of Wolf Research said, please go ahead.

John: Back to I think Televisa what happens now like how does that affect the reporting as we think about the rest of the year. Thank you.

John: Alright.

John: Dave.

Speaker Change: I can take both questions first on postpaid phone <unk> I'm, assuming you're citing the sequential trend as opposed to year over year, because we grew year over year. The sequential trend a couple of things to keep in mind, yes, the credit was a factor but.

Speaker Change: It's part of the mix.

Speaker Change: We told you at the time was not significant but it was still a factor in sequential trends and the other thing to keep in mind too is there is.

Operator: Hi, good morning, everybody. A question about the mobility side. Obviously, the consolidated segment results were really good. In looking at the EBIT growth, it's similar to the rate of service revenue growth. In a quarter when gross ads and churn were lower, a great thing, less cost. And I'm just wondering why, what else is happening in the cost structure so that EBITDA wouldn't outgrow service revenue in a quarter like this? And then a quick one on internet air.

Speaker Change: Seasonality associated with it.

International roaming.

Speaker Change: That.

Speaker Change: There are periods, where its national roaming is going to be higher than not and that impacts ARPA as well overall, we feel really good about the guidance, we gave for modest <unk> growth for the year, So nothing substantive there.

Speaker Change: And your second question.

Speaker Change: Mexico, Mexico.

Speaker Change: It really is a non event.

Speaker Change: Dave.

Speaker Change: We didnt consolidated it was an equity method investees that it wasn't.

Pascal Desroches: For business, is your intent to distribute that nationally, or will that be a more regional strategy in the way that IA has been so far in residential? Thank you. Hey, Peter Pascal, how are you?

Speaker Change: Contact with AT&T, not a significant item.

Speaker Change: Great and then just one follow up if I could ask you.

Speaker Change: You said that we should expect a 20% rate of kind of run rate decline in DTD cash contributions.

Speaker Change: On an annual basis on a go forward basis is that fair.

Pascal Desroches: In terms of EBIT, you're talking about operating income that's inclusive of depreciation, correct? Yes, I am. You know, remember we guided that as a result of the Erickson Open RAN deal, we would have accelerated depreciation associated with some of the equipment that was previously in our network that we were going to depreciate over shorter lives. That's a dynamic you're seeing come through there. I feel really good about the overall expense management and overall cost profile.

Speaker Change: Yes that is.

That is our best judgment, yes, and Thats the guidance, we gave at the beginning of the year and that Hasnt changed in Q1.

Speaker Change: There was some last year there were some one time items and that's probably why you saw some of the decline year over year, but we feel good about the guidance. We previously provided.

Speaker Change: Should put us at around thank you for calling on AT&T conference replay system.

Speaker Change: Hello, Dave are you still there.

Dave: I'm listening.

Dave: All of it.

Dave: Alright.

Pascal Desroches: And you see that coming through in our EBITDA margin expansion in that business. And Peter, we broadly, as I indicated in my remarks, that we see Internet Air for Business being a national product. You probably maybe noticed that you may not be a golfer, but you noticed during.

Dave: Yes, so for the year, we expect to have overall $3 billion of cash distributions from Directv I. Appreciate it guys. Thank you so much.

Speaker Change: We'll take the next question.

Speaker Change: Michael Rollins of Citi. Please go ahead.

Michael Ian Rollins: Thanks for taking the question and good morning.

Look at the EBITDA growth for first quarter of the four 3% year over year.

Michael Ian Rollins: And compare that to the guidance of 3% range for the full year can you just frame some of the elements may be changing whether it's by segment or between revenue and cash expenses just to think about the differences there and then it could be a related question.

John T. Stankey: The Masters, we kind of previewed some of our advertising that will be coming out on the product that's geared toward the business market segment. And it doesn't mean that it's a product for every business, but it certainly is a product for every state, is what I would say. We want to be mindful of making sure that we match the product to businesses that have the right usage characteristics that we think provide a quality level of service and the right value. There are many businesses that do that. And there are many businesses that have usage characteristics and behaviors that are atypical to a typical single-family dwelling.

Michael Ian Rollins: Can you review your exposure to the ACP program your expectations.

Speaker Change: On the program, possibly.

Speaker Change: Can you.

Speaker Change: This will impact <unk> financial results.

Speaker Change: Okay.

Speaker Change: Mike. Thank you for the question good morning.

Speaker Change: So first.

Mike: As it relates to our segment level guidance.

Mike: When relative to the started the year as we as I noted in my comments.

Anticipate business wireline will be a little bit worse than we thought principally because an acceleration of legacy voice declines so putting that down in the mid teens.

John T. Stankey: And that's why we think it's a good place to invest time, energy, money. And I think that was consistent with what our expectations were from the founding of the product and where we thought we'd go to market with. Okay. Thank you. Operator will take the next question. Bryan Kraft of Deutsche Bank, please go ahead.

Mike: But look you saw the strong start to both our mobility business.

Mike: Including the record low churn and consumer wireline.

Mike: We delivered over 14% of.

Mike: EBITDA growth and.

Mike: The dynamics for both we would anticipate.

What you saw in Q1, we would anticipate.

Operator: John, can you talk about how you're balancing the marketing and sales budget today between customer acquisition and retention? And how that's driving AT&T's performance relative to your competitors? You know, one of the concerns we often hear from investors is that while churn has been great, gross ads have been down for several quarters, but I suspect this is at least partly a function of the strategy. So if you could shed some light on that, that'd be great. Thanks. Good morning, Brian, you've answered your question. It's it's intentional with the strategy.

Mike: Being there for the balance of this year those businesses are operating really well.

Mike: The transformation work we've done the last few years is really setting us up to have margin expansion in those businesses and we feel really good about the trajectory of those two businesses business wireline.

Mike: At an earlier point in the product transition and.

Mike: While we are growing fiber revenues and John mentioned.

Mike: AT&T Internet payer for business, that's going to grow.

Mike: And of course, the wireless business relationships will also grow.

Mike: Those will be offset by legacy declines.

Mike: We're confident we can manage through that.

John T. Stankey: I'm more than happy to take on gross in places where I think I can drive gross profitably. And I think in some cases, we have to think about how much people are paying for growth, and then we also have to think about gross, and we have to think about whether or not that gross really has yield on it if it's, you know, what the end user is paying ultimately when they come on a network. And so I think some of the numbers, you know, ultimately are what I referred to in my opening remarks, a bit low-calorie. I don't really want to play in the low-calorie space.

Mike: In the balance of the year and still deliver on around 3%.

Mike I think we indicated last quarter and are still no different position that we can work through the ECP sunset. If in fact that occurs and I would say, it's probably more likely than not that it does occur.

Mike: And we could do so without a revisions or changes to what we guide you guided you to and we still feel that way.

Mike: Started the process as you might guess notifying customers and working with them in.

We're not just idly sitting by I think we'll be successful in many instances finding ways to continue relationships with customers.

John T. Stankey: I want to make sure I'm getting my fair share of the high-calorie subscribers, and that's why we're focused on share of service revenues as maybe being a better benchmark of whether the company is balancing its growth in the right way. And when you think about how we balance our budget and what we do internally, we're pretty rigorous about asking ourselves those questions about the segments we attack, how we go after, and the longevity, and what becomes a key driver when you're investing for that growth. And I'll take a lower turn all the time.

Mike: Ease them into different constructs that makes sense for them, but.

Mike: But I feel good about how we went about using the program I think we used it consistent with the way that policymakers, probably would've liked to have seen it used which is to over index more than anything else on fixed broadband capabilities.

Mike: I think we had a.

Mike: Quality customer base relative to how the program was set up and that's going to allow us to probably transitioned some of them into other approaches for how to use the service and those that we ultimately do lose because of the subsidy sunsets.

John T. Stankey: I don't think that's necessarily a bad sign necessarily. I'm perfectly okay with where we stand on that front. We've talked previously, Bryan, about one of the things I like about where we are in the market and that I think is frankly sustainable. Probably a year and a half ago, two years ago, most of the questions on this call were, well, where's the growth coming from? And I kept saying the growth was balanced

Mike: I don't think its going to be in the impacts ultimately what we're giving you in terms of our ability to operate the business and our financials.

Speaker Change: Okay great.

Speaker Change: Thanks, Mike We'll go ahead and the next question.

Speaker Change: Sebastiano Petti of J P. Morgan. Please go ahead.

Unknown Attendee: Thank you a couple of quick housekeeping questions. Jonathan you talked about the balanced growth on the mobility side you.

Unknown Attendee: You have cited some underpenetrated segments I was hoping you can give us an update.

Operator: It's coming from a lot of different segments. We're seeing it in different parts of the business community. And we're giving you the fact that our business growth has been strong. We like what we're picking up in the residential environment, in the consumer environment, and where we see our growth coming from there in terms of what we're taking. So we have a pretty balanced approach to our distribution right now, and I think that diversity is helpful.

On the opportunity there I think SMB value and fiber.

Unknown Attendee: So on the mobility side.

Unknown Attendee: When do you expect to see some of the share gains I guess within some of these segments and that more of a is that could we see that within 24 that takes some time to build in 'twenty five and beyond and then on the business wireline side I think obviously some focus there on the EBITDA trajectory, but you mentioned you are accelerating some cost cutting.

Unknown Attendee: <unk>.

Unknown Attendee: Would that be within the context of the $2 billion cost cutting program or should we maybe think of these as additive.

Operator: It diversifies our portfolio; it diversifies the base, and that's one of the reasons why the churn numbers are as strong as they are. Thank you. Operator, are we ready for the next question? David Barden of Bank of America, please go ahead.

Unknown Attendee: To that program.

Unknown Attendee: Okay.

Good morning, Sebastian I will.

Sebastian: I'll tell you that as we indicated we've accelerated some of the work that we're doing so this is things that probably would've occurred later in the cycle that we're moving forward. So we'll get some incremental run rate benefit to that maybe an accelerating our forecast not necessarily change the endpoint I guess is the way I would describe that.

Operator: Hey guys, thanks so much for taking the question. I guess, um... First, a follow-up question, if I could, John, thank you for your comments about kind of having digested the impact of the outage, but... The Postmates Phone, Arpoo, was obviously down about a little over a percent in the quarter, and I'm assuming... Some, if not all, of that had to do with the credit and the gap accounting for that, and so I was wondering if we could get maybe Pascal a jumping off point for where, you know, ARPU really is if we, if we normalize. Credit. And then second.

Sebastian: And on our progress around where we're trying to make sure that we are operating more effectively and how our channel distribution works within distribution.

Sebastian: I would say that we've made some reasonable progress and have things in place around what we're able to do to penetrate.

Sebastian: Fiber, where we don't have fiber on a wireless subscriber that is eligible to get fiber and the reverse of that.

Sebastian: Pretty good about what we have lined up around that front I think we're going to see progress in that regard as we move through 'twenty four <unk>.

Expected in our business plan and how we've communicated to you our performance that we would have progress in that regard.

Pascal Desroches: Another kind of housekeeping question is, you know, with the sale of Sky Mexico back to, I think, Televisa, what happens now? Like, how does that affect reporting as we think about the rest of the day. All right. Hey, Dave.

I do think I'm, starting to see the machine work the right way.

Sebastian: We're working hard and trying to position ourselves in the value segment.

I would say that it's been a little bit slower ramping in that space.

Pascal Desroches: I can take both questions. First, on post-pay phone ARPU, I'm assuming you're citing the sequential trend as opposed to year over year because we do year over year. The sequential trend, a couple things to keep in mind. Yes, the credit was a factor, but it's part of the mix.

Sebastian: Specifically.

Sebastian: Getting the right lineup and the right products in the right place I do expect as we move through this year that we will make progress in that regard again, we expected we would make progress in that regard in terms of how we guided our expectations around the performance of the business.

Sebastian: <unk>.

Sebastian: We'll keep pushing and working on it.

Pascal Desroches: We told you at the time it was not significant, but it was still a factor in sequential trends. And the other thing to keep in mind, too, is there is seasonality associated with international roaming. [inaudible] And your second question was from Mexico. Mexico. It really is a non-event.

Sebastian: I would also say that it's probably the same statement in truth.

Sebastian: Where we see certain.

Sebastian: Ethnic segments that maybe we could do a little bit better at and what we're doing right now and we'll continue to work those as well.

Speaker Change: Following up quickly just on Mike's question about the ACP, obviously access from AT&T program was in <unk>.

Speaker Change: A portion.

Speaker Change: The commitment that you made earlier in the month you see this as an opportunity to.

Pascal Desroches: Dave, if we didn't consolidate, it would have been a neckly method investee that wasn't in the context of AT&T, not a significant one, and then just one follow-up question if I could, Pascal, you said that we should expect a 20% rate of kind of run rate decline in DTV cash contribution on an annual basis, on a kind of go-forward basis, is that... Yeah, that is our And that's the guidance we gave at the beginning of the year, and that hasn't changed. And Q1, you know, there were some last year; there were some one-time items.

Speaker Change: Meaning in perhaps on accidents from AT&T has an opportunity to gain some share from AC ATP Celgene may be churning from peers or do you see this as an opportunity lean in a little bit into the low income segments to drive greater adoption and brought that number down.

Speaker Change: So we intend to continue to keep the access from AT&T in the market and we will continue to actively promote it.

Speaker Change: To apply it where it makes sense.

Speaker Change: I think we're going to continue to see the same segments. We were attempting when ACP was alive to find that an attractive place to go.

Speaker Change: I don't know exactly how some of our competitors have used the ECP subsidy I know how I've used it.

Speaker Change: I think we've used it in a way where we believe we're catching the waterfront of what we think are the right customers to be.

Speaker Change: Putting the subsidy in front of which are the right customers that should get access from AT&T.

Pascal Desroches: And that's probably why you saw some of the decline year over year. But we feel good about the guidance we previously provided, which should put us at around... Thank you for calling the AT&T Conference Replay System. Hello, Dave. Are you still there?

Speaker Change: Does that mean that incrementally we should see more coming back our way.

Speaker Change: I don't know I would've intuitively hoped that in the form of a competitive markets in which we operate that our messages equally communicating to those who chose us and those who didn't choose us. So I don't know that just because ACP goes away, then I'm going to dramatically see that equation change.

Operator: I'm here. I'm listening. Okay, all of it. Yeah. All right.

So I don't expect theres going to be a strong pivot over to AT&T and I I would hope or expect that our competitors might continue to leave some kind of a discounted offer in place for those qualified for it so.

Operator: Yeah. So for the year, we expect to have an overall $3 billion of cash distribution from direct. I appreciate it, guys. We'll take the next question now. Michael Rollins of Citi, please go ahead.

Operator: Good morning. When we look at the EBITDA growth for the first quarter of 4.3% year-over-year and compare that to the guidance of a 3% range for the full year, can you just frame some of the elements that may be changing, whether it's by segment or between revenue and cash expenses, just to think about the differences there? And then this could be a related question. Can you review your exposure to the ACP program and your expectations? on the program possibly being discontinued and the potential impact on AT&T's financial results. Thank you. He, Mike, thank you for the question. Good morning.

Speaker Change: I am not expecting huge shifts as a result of that Sebastiano I'm pretty <unk>.

Speaker Change: Proud actually comfortable given the overall state of the what I'll call the fixed broadband market.

Speaker Change: Our performance and how.

Speaker Change: How we've been growing in that space.

Speaker Change: To big deal, we just hit 40% about 40% penetration of our fiber base right now and if you'd asked me two years ago that I think we would arrive at that level given the number of households, we're adding and building too and I probably wouldn't have said that we derive that quickly. So I think our goal is to just.

Speaker Change: Keep operating as effectively as we have been taking the good growth that's coming our way and I think you'll see that reflected in the overall performance of the numbers.

Speaker Change: Operator, we can take our next question. Thank you.

Speaker Change: Frank Louthan of Raymond James Please go ahead.

Frank Garrett Louthan: Great. Thank you I wanted to delve.

Frank Garrett Louthan: Sheldon on the business side first can you give us your overall read on the economy and your outlook. There and then secondly, what is sort of the end game on the business wireline side. It continues to kind of decline is there a bottom there and can you give us maybe a split between what's left in that revenue that's voice versus other data services to get an idea of where.

Pascal Desroches: So first, as it relates to our segment level guidance. Relative to the start of the year, as I noted in my comments, I anticipate business wireline will be a little bit worse than we thought, principally because of an acceleration of legacy voice decline. So I'm putting that down in the mid-teens.

Pascal Desroches: But look, you saw the strong start to both our mobility business, including record-low churn, and consumer wireline. I mean, we delivered over 14% of EBITDA growth, and the dynamics for both, we would anticipate, you know, what you saw in Q1, we would anticipate being there for the balance of this year. Those businesses are operating really well.

Frank Garrett Louthan: The weakness might be thanks.

Sheldon: Yes, Frank.

Sheldon: So first of all look I don't I'm not going to sit here and tell you that I think.

Sheldon: The shifts in the business segment or economic driven.

Sheldon: I know there has been.

Sheldon: Some discussion around what's happening.

Sheldon: In business investment and communication services.

Fully expect that we're going to be big.

Sheldon: Businesses that look around and say gosh, I need to find incremental money to invest in AI and as we all know how our corporations that were part of work sometimes it's you take from one to invest in another and I expect we're going to see that happening, but I think the fundamentals under what's occurring in the business segment or.

Pascal Desroches: The transformation work we've done in the last few years is really setting us up to have margin expansion in those businesses, and we feel really good about the trajectory of those two businesses. Business Wireline is at an earlier point in the product transition, and while we are growing fiber revenues, John mentioned. AT&T Internet Air for Business that's going to grow, And, of course, the wireless business relationships will also grow, but those will be offset by legacy declines. And we're confident we can manage through that.

Sheldon: Largely technology, driven I think we've known for a long time that traditional voice had a shelf life and ultimately it was it was going to get replaced with integrated communication services and.

Sheldon: And as a service capabilities that run over the top of IP.

Sheldon: I think what we saw is a bit during the pandemic.

Sheldon: There was a suppression of change.

Sheldon: For whatever reason people were out of the office.

John T. Stankey: In the balance of the year and still deliver on around three percent, Mike, I think we indicated last quarter and there's still no different position that we could work through the ACP sunset if, in fact, that occurs, and I would say it's probably more likely than not that it does occur. And we could do so without any revisions or changes to what we guided you to, and we still feel that way. We started the process, as you might guess, of notifying customers and working with them.

It wasn't a priority people didn't want to mess around with their communications infrastructure, while they were working hard to accommodate.

Sheldon: A different hybrid work environment.

Sheldon: Now, we're kind of seeing that evolution kind of pick up a degree of street steam Theres, probably some good business reasons thats occurring people are rationalizing office space. They are moving things around.

Sheldon: They are working differently. They are evaluating the kind of technology. They want in place as a result of that and Thats from my point of view why we're seeing a little bit of that step up in that voice transition and what's occurring.

John T. Stankey: We're not just idly sitting by. I think we'll be successful in many instances finding ways to continue relationships with customers and ease them into different constructs that make sense for them. But I feel good about how we went about using the program.

Sheldon: I think we're going to try to do some work with you broadly not just specific to business, but we will give you some transparency and visibility of whats left in the legacy businesses and what's going on around those things.

John T. Stankey: I think we used it consistent with the way that policymakers probably would have liked to have seen it used, which is to over-index more than anything else on fixed broadband capabilities. I think we have a quality customer base relative to how the program was set up, and that's going to allow us to probably transition some of them into other approaches for how to use the service, and those that we ultimately do lose because the subsidies sunset.

As we move through this year I think we're working on maybe some ways to schedule. Some of that for you. So you can kind of get a sense of whats occurring there I understand your desire to want to understand it I think what I would balance that with as we stressed multiple times. This morning, those things that we're investing in right now we've got really good strong Saar.

Sheldon: <unk> growth business.

Sheldon: And those growth businesses are built on fiber and fiber in businesses and game is really no different.

John T. Stankey: I don't think it's going to be anything that impacts, ultimately, what we've given you in terms of our ability to operate the business and manage our finances. Thanks, Mike. We'll go ahead for the next question. Sebastiano Petti of JP Morgan, please go ahead. Thank you. A couple of quick housekeeping questions.

Sheldon: We're shifting to build a company that is good at selling <unk> and fiber into business and selling <unk> in fiber in the business not just at the top end of the market for the fortune 1000, but across the continuum of the market and that's a bit of a transition for AT&T.

Sheldon: Because I would say, where we've made our bread and butter over the last decade rightly or wrongly has been at the top end of the market and so as we shift and generate more revenues and more share out of the mid portion of the market, we're having to rebuild some muscle and some distribution and the right product mix to attack that and we.

Operator: John, I think you talked about balanced growth on the mobility side. You cited some underpenetrated segments. I just hope you can give us an update on the opportunity there.

Sheldon: We can do that in the end game is we will catch this decline will ultimately catch the decline with connectivity based services.

John T. Stankey: I think SMB value and fiber selling on the mobility side. When do you expect to see some of the share gains, I guess, within some of these segments? Could we see that within 24? Does that take some time to build on 25 and beyond?

Sheldon: Both in fiber and five G. We're just going through that transition to make that happen and unfortunately as you know some of the historic voice services are really high margin services that are being replaced with good margin services, but not quite as high and.

Sheldon: It's going to be a little bit painful for a couple of quarters as we move through this transition, but I have ultimate confidence at the AT&T brand plays incredibly well in business.

John T. Stankey: And then on the business wireline side, I think, obviously, there's some focus there on the EVADOT trajectory, but you mentioned you are accelerating some cost-cutting initiatives. Would that be within the context of the $2 billion cost-cutting program, or should we maybe think of these as additives? to that program. Thank you. Good morning, Sebastiano.

Sheldon: All of our research suggests that I have very high confidence that when we walk in and we talked to businesses of any size about using AT&T for either their wireless or fixed connectivity. We're high in the consideration set and can win that business.

Sheldon: I have confidence that there is another generation of incremental services that go on top of that connectivity as I alluded to in my opening remarks in what we're doing with dynamic defense is a good example, which is that overlay incremental service that comes on top of the basic transport that allows us to scrub traffic on behalf of the customer to <unk>.

John T. Stankey: I would tell you that, as we indicated, we've accelerated some of the work that we're doing. So these are things that probably would have occurred later in the cycle that we're moving forward with. So we'll get some incremental run rate benefit from that, maybe in accelerating our forecast, not necessarily changing the endpoint, I guess, is the way I would describe that. And on our progress around where we're, you know, trying to make sure that we're operating more effectively and how our channel distribution works.

Sheldon: Prove their security posture.

Sheldon: I think theres a lot more of those things that can come on in the middle market given the lack of sophistication. The lack of ability to have full time staff dedicated to those things and I think thats just natural for us to extend our capabilities into that space and then long term bullish that it's the right thing for us to be in both.

Sheldon: The fixed and the wireless market given our our brand presence our distribution channel capabilities and how we build products.

John T. Stankey: Within distribution, I would say that we've made some reasonable progress and have things in place around what we're able to do to penetrate fiber where we don't have fiber on a wireless subscriber that is eligible to get fiber and the reverse of that. I feel pretty good about what we have lined up around that front.

Operator, we have time for one last question.

Sheldon: Our last question in queue will come from the line of Walter Paycheck of light shed. Please go ahead.

Unknown Attendee: Thanks, John I, just wanted to get your kind of refresh us on the fixed wireless market. If you look at Verizon they've added a percentage point of overall wireless growth using fixed wireless.

John T. Stankey: I think we're going to see progress in that regard as we move through 24. We expected, in our business plan and how we've communicated to you our performance, that we would have progress in that regard, and I do think I'm starting to see, you know, the machine work the right way. And, you know, we'll keep pushing and working on it. I would also say that it's probably the same statement and truth about where we see certain ethnic segments that maybe we could do a little bit better at than what we're doing right now, and we'll continue to work on those as well. Following up quickly on Mike's question about the ACP, obviously access to the AT&T program was in, was, you know, a portion within the commitment that you made earlier in the month.

Unknown Attendee: <unk> has added I think 160 basis points.

Unknown Attendee:

Unknown Attendee: Seeing advertisements for I guess I forget what you call it free air or something like that.

Unknown Attendee: What do you think in terms of the growth opportunity here and.

Unknown Attendee: If you were able to get some additional spectrum.

Unknown Attendee: Or maybe even with your existing spectrum as you've seen the usage from some of your early learnings.

Unknown Attendee: It cannot be as broad of an opportunity for you as it's been for Verizon and T mobile.

Speaker Change: Good morning Walt.

Speaker Change: I think the short answer to the last part of your question is I don't intend to promote it in the market in a manner that Verizon and T mobile are promoting it in the market.

Speaker Change: And.

Speaker Change: I would just sit on the sideline I observe I also see them doing some things right now to try to manage the dynamics around those products.

Speaker Change: Reflective of what I believe the ultimate outcome was going to be and what I've been saying for a period of time, which is wireless networks aren't particularly the best place to take a single family home.

John T. Stankey: Do you see this as an opportunity to, you know, leaning in perhaps on access from AT&T as an opportunity to gain some share from ACP subs who may be churning from peers, or do you see this as an opportunity to lean in a little bit into the low-income segments to drive greater adoption abroad? So we intend to continue to keep access from AT&T in the market, and we'll continue to actively promote it and try to apply it where it makes sense.

Speaker Change: Streams hours and hours of video a day and try to serve them with a.

Kind of $50, a month product or service.

Speaker Change: I, just don't see that as long term sustainable or healthy growth of returns for the business and I've been pretty consistent in saying that and I'm still consistent in saying that and that's why we're making a choice in our capital allocation to invest more heavily in fiber as the basis of which to make an investment that we think has long run.

John T. Stankey: And I think we're going to continue to see the same segments we were attempting when ACP was live, to find that an attractive place to go. I don't know exactly how some of our competitors have used the ACP subsidy, but I know how I've used it.

Speaker Change: One way and a long annuity stream. It is a technology that has flexibility to deal with what we know is going to be continuing calls and demands on growth for high performance networking and homes and businesses now having said that.

John T. Stankey: I think we've used it in a way where we believe we're catching the waterfront of what we think are the right customers to be, you know, putting the subsidy in front of, which are the right customers that should get access from AT&T. Does that mean that, incrementally, we should see more coming back our way? I don't know.

Speaker Change: I have also been very very clear that there is a place for fixed wireless in our portfolio.

Speaker Change: Don't believe my point of view on this has changed in any way shape or form nor our executions any different than that.

Speaker Change: Said from the start that there are many businesses do not have the characteristics of single family homes and as a result of that fixed wireless can be a really effective way of meeting their needs and doing so at a value proposition price and performance that makes sense for them, especially when we start to think about.

John T. Stankey: I would have intuitively hoped that, in the form of the competitive markets in which we operate, our message is equally reaching those who chose us and those who didn't choose us. So I don't know that just because ACP goes away, I'm going to dramatically see that equation change. And so I don't expect there's going to be a strong pivot over to AT&T, and I would hope or expect that our competitors might continue to leave some kind of a discounted offer in place for those that qualify for it. So I'm not expecting huge shifts as a result of that. Sebastiano, I'm pretty.

Speaker Change: Those companies that have a convergence of both fixed and mobility needs. It's a natural in those cases.

Speaker Change: I'd like to participate.

Speaker Change: And that market aggressively and I will go after it as aggressively as my competitors and picking up any of those business customers that I can on a national basis, and I think thats a margin accretive decision within the context of how we're allocating capital between spectrum investments in fiber investments.

Speaker Change: I've also said that in the consumer space, There are places, where I would apply the technology.

Speaker Change: Dave a couple of specific examples.

Speaker Change: We have some places where we have a good copper DSL base that we're in the process of deploying fiber and in some cases fixed wireless can give better performance than what our copper network can deliver and we know that will be 12 months 18 months from fiber deployment and we may want to hold some cut.

John T. Stankey: I'm proud, actually, and comfortable, given the overall state of what I'll call the fixed broadband market and our performance and how we've been growing in that space. It's a big deal. We've just hit about 40% penetration of our fiber base right now, and if you'd asked me two years ago whether I think we'd arrive at that level, given the number of households we're adding and building to, I probably wouldn't have said that we'd arrive that quickly.

Speaker Change: <unk>.

Speaker Change: Offering them, a better service and we'll use it as a bridging or hold strategy for those customers that are high value to us and we will continue to use that technique, where we can I've indicated that we will use it as an opportunity for us to turn down footprint.

Speaker Change: Where I've got small numbers of data customers in place I need to get them off of fixed infrastructure that I ultimately want to shutter because that allows me to turn down a geography that is.

John T. Stankey: So I think our goal is to just keep operating as effectively as we have been and take the good growth that's coming our way, and I think you see that reflected in the overall performance of the numbers. Operator, we're going to take our next question. Thank you. Frank Louthan of Raymond James, please go ahead.

Our low utilization geography in a low profitable geography on the fixed side and I can turn out the lights walkaway take cost out of the business I will do that and I've also said, we have some select markets, where our penetration levels and mobility are low and our spectrum position is high.

Operator: Great, thank you. I want to delve in on the business side. First, can you give us your overall read on the economy and your outlook there? And then, secondly, what is sort of the end game on the business wireline side? It continues to kind of decline. Is there a bottom there?

Speaker Change: And we may choose in those markets to do some incremental marketing to do as you indicated to buy some incremental growth that we believe has a longer runway. So that's that's how the team is operationalized around this but in the end when all of those plays are put together.

John T. Stankey: And can you give us maybe a split between what's left in that revenue that's voice versus other data services to get an idea of, you know, where the weakness might be? Yeah, Frank. So first of all, look, I don't, I'm not going to sit here and tell you that I think the shifts in the business segment are driven by economics. I know there's been some discussion around what's happening in business investment and communication services, and I fully expect them to be businesses that look around and say, gosh, I need to find incremental money to invest in AI. And as we all know how our corporations that were part of And I expect we're going to see that happen.

Speaker Change: No I don't think youre going to see us have the same posture that two of our competitors do because our posture is different we're investing in fiber and I don't see myself moving into the market just to buy spectrum. So that I can change the operating posture I just described to you.

Speaker Change: Well. Thank you everyone for joining us operating and go ahead and close out the call.

Speaker Change: Ladies and gentlemen that does conclude our conference call for today on behalf of today's panel, we'd like to thank you for your participation in todays earnings call and thank you for using our service have a wonderful day you may now disconnect.

Speaker Change: The conference recording has stopped.

Speaker Change: We're sorry your conferences ending now please hang up.

John T. Stankey: But I think the fundamentals under what's occurring in the business segment are largely technology driven. I think we've known for a long time that traditional voice has a shelf life. And ultimately, it was going to get replaced with integrated communication services and, and, you know, as a service capabilities that run over the top of IP. I think what we saw is that, a bit, during the pandemic, there was a suppression of change.

John T. Stankey: For whatever reason, people were out of the office. It wasn't a priority; people didn't want to mess around with their communications infrastructure while they were working hard to accommodate, you know, a different hybrid work environment. And now we're kind of seeing that evolution kind of pick up with a degree of street esteem.

John T. Stankey: There are probably some good business reasons for this; people are rationalizing office space, moving things around, they're working differently, and they're evaluating the kind of technology they want in place as a result of that. And that's, from my point of view, why we're seeing a little bit of that step up in that voice transition. You know, I think we're, I'm going to try to do some work with you broadly, not just specific to business, but we'll give you some transparency and visibility of what's left in the legacy businesses and what's going on around those things as we move through this year. I think we're working on maybe some ways to schedule some of that for you, so you kind of get a sense of what's going on there. I understand your desire to want to understand it.

Speaker Change: [music].

John T. Stankey: I think what I would balance that with is, as we stressed multiple times this morning, those things that we're investing in right now. We've got a really good, strong, solid growth business, and those growth businesses are built on 5G and fiber. So, the endgame is really no different. We're shifting to build a company that is good at selling 5G and fiber to businesses, and selling 5G and fiber to businesses, not just at the top end of the market for the Fortune 1000 but across the continuum of the market.

John T. Stankey: That's a bit of a transition for AT&T, because I would say where we've made our bread and butter over the last decade, rightly or wrongly, has been at the top end of the market. As we shift and generate more revenues and more share out of the mid-portion of the market, we're having to rebuild some muscle and some distribution in the right product mix to attack that. And we can do that. And the end game is, we will catch this decline, and we'll ultimately catch the decline with connectivity-based services, both in fiber and 5G. We're just going through that transition to make that happen.

John T. Stankey: And unfortunately, as you know, some of the historic voice services are really high-margin services. They're being replaced with good-margin services, but not quite as high. And, you know, it's going to be a little bit painful for a couple quarters as we move through this transition. But I have ultimate confidence that the AT&T brand plays incredibly well in business. All of our research suggests that.

John T. Stankey: I have very high confidence that when we walk in and talk to businesses of any size about using AT&T for either their wireless or fixed connectivity, we're high on the consideration set and can win that business. And I have confidence that there is another generation of incremental services that go on top of that connectivity, as I alluded to in my opening remarks. And what we're doing with Dynamic Defense is a good example, which is an overlay incremental service that comes on top of the basic transport that allows us to scrub traffic on behalf of the customer to improve their security posture.

John T. Stankey: I think there are a lot more of those things that can come along in the middle market, given the lack of sophistication, and the lack of ability to have, you know, full-time staff dedicated to those things. And I think that's just, you know, natural for us to extend our capabilities into that space.

John T. Stankey: And I'm long-term bullish that it's the right thing for us to be in both the fixed and the wireless market, given our brand presence, our distribution channel capabilities, and how we build products. Operator, we have time for one last question. Our last question in queue will come from the line of Walter Piecyk of LightShed. Please go ahead.

Operator: Thanks, John, I just want to get your kind of fresh views on the fixed wireless market. If you look at Verizon, they've added a percentage point of overall wireless growth using fixed wireless. T-Mobile has added, I think, 160 base stations to the White House.

John T. Stankey: We're seeing advertisements for, I guess, I forget what you call it, free air or something like that. What do you think in terms of the growth opportunity here and if you were able to get some additional spectrum, or maybe even with your existing spectrum, as you've seen the usage of from some of your early learning? It can't be as broad of an opportunity for you as it has been for Verizon and T-Mobile. Good morning, Walt.

John T. Stankey: I think the short answer to the last part of your question is I don't intend to promote it in the market in the manner that Verizon and T-Mobile are promoting it in the market. And I just, you know, I sit on the sidelines and I observe.

John T. Stankey: I also see them doing some things right now to try to manage the dynamics around those products that are reflective of what I believe the ultimate outcome was going to be and what I've been saying for a period of time, which is that wireless networks aren't particularly the best place. Take a single family home that streams hours and hours of video a day and try to serve them with a, you know, kind of $50 a month product or service. And I just don't see that as sustainable or healthy growth or returns for the business. And I've been pretty consistent in saying that, and I'm still consistent in saying that.

John T. Stankey: And that's why we're making a choice in our capital allocation to invest more heavily in fiber as the basis for which to make an investment that we think has a long runway and a long annuity stream and is a technology that has the flexibility to deal with what we know is going to be continuing calls and demands for growth for high-performance networking in homes and businesses. Now, having said that, I've also been very, very clear that there is a place for fixed wireless in our portfolio, and I don't believe my point of view on this has changed in any way, shape, or form, nor are our executions any different from that.

Speaker Change: [music].

John T. Stankey: I've said from the start that there are many businesses that do not have the characteristics of single-family homes, and as a result of that, fixed wireless can be a really effective way of meeting their needs, and doing so at a value proposition, price, and performance that makes sense for them, especially when we start to think about those companies that have a convergence of both fixed and mobility needs. It's natural in those cases, and I'd like to participate in that market aggressively, and I will go after it as aggressively as my competitors in picking up any of those business customers that I can on a national basis, and I think that's a margin-agreed decision within the context of how we're allocating capital between spectrum investments and fiber investments. I've also said that in the consumer space, there are places where I would apply the technology. I gave you a couple of specific examples.

John T. Stankey: We have some places where we have a good copper DSL base that we're in the process of deploying fiber, and in some cases, fixed wireless can give better performance than what our copper network can deliver, and we know that we'll be 12 months, 18 months from fiber deployment, and we may want to hold some customers, offering them a better service, and we'll use it as a bridging or hold strategy for those customers that are high value I've indicated that we will use it as an opportunity for us to turn down our footprint, so where I've got small numbers of data customers in place, I need to get them off of fixed infrastructure that I ultimately want to shutter because that allows me to turn down a geography that is a low utilization geography and a low profitable geography on the fixed side, and I can turn out the lights, walk away, and take cost out of the business.

John T. Stankey: I will do that, and I've also said we have some select markets where our penetration levels and mobility are low and our spectrum position is high, and we may choose in those markets to do some incremental marketing to do, as you indicated, buy some incremental growth that we believe has a longer runway. So that's how the team is operating around this, but in the end, when all those plays are put together, no, I don't think you're going to see us have the same posture that two of our competitors do because our posture is different.

Operator: We're investing in fiber, and I don't see myself moving into the market just to buy spectrum so that I can change the operating posture I just described to you. I will thank everyone for joining us. Operator, you can go ahead and close out the call. Ladies and gentlemen, that does conclude our conference call for today. On behalf of today's panel, we'd like to thank you for your participation in today's earnings call and thank you for using our service. Have a wonderful day.

Speaker Change: [music].

Operator: You may now disconnect. The conference recording has stopped. We're sorry, your conference is ending now. Please hang up.

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