Q2 2024 AT&T Inc Earnings Call

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Unknown Executive: Your conference will begin momentarily. Please continue to hold. Transcription by ESO. Translation by — Thank you for standing by. Welcome to AT&T's second quarter 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.

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Speaker Change: Amir Rozwadowski, Pascal Desroches, Unknown Executive, Amir Rozwadowski

Amir Rozwadowski, Pascal Desroches, Unknown Executive, Amir Rozwadowski

Operator: Thank you for standing by.

Brett Feldman: Welcome to AT&T's second quarter 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.

Speaker Change: Thank you for standing by. Welcome to AT&T's 2nd Quarter 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 for questions.

Unknown Executive: Following the presentation, the call will be open to questions. If you would like to ask a question, please press 1 and then 0, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing 1 and then 0.

Operator: Following the presentation, the call will be open for questions. If you would like to ask a question, please press one and then zero, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing one and then zero.

If you would like to ask a question, please press 1 and then 0, and you will be placed in the question queue.

Brett Feldman: If you are in the question queue and would like to withdraw your question, you can do so by pressing 1 and then 0. And as a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.

Operator: And, as a reminder, this conference is being recorded.

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

Brett Feldman: I would now like to turn the conference call over to your host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.

Brett Joseph Feldman: Thank you, and good morning, everyone. Welcome to our second quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T.

Brett Feldman: Thank you, and good morning everyone. Welcome to our second quarter 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. As such, they are subject to risks and uncertainties described in AT&T's SEC filings, and results may differ materially.

Brett Feldman: Thank you and good morning everyone. Welcome to our second quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T.

Brett Feldman: Joining me on the call today are John Stanky, our CEO, and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our Safe Harbor statement. It says that some of our comments today may be forward-looking; as such, they're subject to risks and uncertainties. Describe the AT&T's SEC filings; results may differ materially.

Speaker Change: Joining me on the call today are John Stankey, our CEO , and Pascal Desroches, our CFO .

Speaker Change: 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.

Brett Feldman: Additional information, as well as our earnings materials, are available on the Investor Relations website.

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.

Speaker Change: 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 ? Thank you, Brett. I appreciate you joining the call.

John Stankey: With that, I'll turn the call over to John Stanky.

John Stankey: John? Thank you, Brett. I appreciate you joining the call. Hard to believe we are already halfway through the year, but we are. And our team delivered solid second quarter results as we continue to grow the right way, by efficiently adding high-value wireless and broadband subscribers. Our strong start to the year is built on the foundation of what our team has accomplished over the past four years. As a result of this hard work, we're now repositioned around our connectivity strengths. This puts us on a clear path to becoming the leading provider of converged 5G and fiber services.

John T. Stankey: Thank you, Brett. I appreciate you joining the call. It's hard to believe we are already halfway through the year, but we are, and our team delivered solid second-quarter results as we continue to grow the right way by efficiently adding high-value wireless and broadband subscribers. A strong start to the year is built on the foundation of what our team has accomplished over the past four years. As a result of this hard work,

John T. Stankey: Hard to believe we are already halfway through the year, but we are, and our team delivered solid second quarter results as we continue to grow the right way by efficiently adding high-value wireless and broadband subscribers.

John T. Stankey: Our strong start to the year is built on the foundation of what our team has accomplished over the past four years.

John T. Stankey: We're now repositioned around our connectivity strength, which puts us on a clear path to becoming the leading provider of converged 5G and fiber services. Since Pascal will go through the quarter in detail, I'd like to spend some time highlighting how our team's execution of our investment-led strategy is driving consistent results and Mobility. We delivered 419,000 postpaid phone net ads in the second quarter, and 768,000 during the first half of the year.

John T. Stankey: As a result of this hard work, we're now repositioned around our connectivity strengths.

John T. Stankey: This puts us on a clear path to becoming the leading provider of converged 5G and fiber services.

John Stankey: Since Pascal will go through the quarter in detail, I'd like to spend some time highlighting how our team's execution of our investment-led strategy is driving consistent results. In mobility, we delivered 419,000 post-paid phone net ads in the second quarter, and 768,000 during the first half of the year. This put us modestly ahead of last year's pace despite ongoing wireless market normalization, and we're not just growing customers; our mobility EBITDA grew by more than 5% in the second quarter, driven by more than 3% growth in service revenue and 100 basis points of service margin expansion. We're delivering consistent results by keeping the customer the center of everything we do.

John T. Stankey: Since Pascal will go through the quarter in detail, I'd like to spend some time highlighting how our team's execution of our investment-led strategy is driving consistent results.

Pascal Desroches: In mobility, we delivered 419,000 postpaid phone net ads in the second quarter and 768,000 during the first half of the year.

John T. Stankey: This put us modestly ahead of last year's pace despite ongoing wireless market normalization. We're not just growing numbers. Our mobility EBITDA grew by more than 5% in the second quarter, driven by more than 3% growth in service revenue and 100 basis points of service margin expansion. We're delivering consistent results by keeping the customer at the center of everything we do. It's a winning play that we continue to run. The efficient first-half growth we achieved in our mobility business positions us well for the back half of the year when we expect higher activity levels driven by the availability of new devices and features, seasonal purchasing activity, and promotional activities. Consumer Wireline.

Pascal Desroches: This put us modestly ahead of last year's pace despite ongoing wireless market normalization.

Pascal Desroches: And we're not just growing customers.

Pascal Desroches: Our Mobility EBITDA grew by more than 5% in the second quarter, driven by more than 3% growth in service revenue and 100 basis points of service margin expansion.

Pascal Desroches: We're delivering consistent results by keeping the customer at the center of everything we do. It's a winning play that we continue to run.

John Stankey: It's a winning play that we continue to run. The efficient first half growth we achieved in our mobility business positions us for the back half of the year when we expect higher activity levels driven by the availability of new devices and features, seasonal purchasing activity, and promotional cycles. In consumer wireline, we added broadband subscribers for the fourth consecutive quarter, driven by consistent growth in AT&T Fiber and early success with AT&T Internet Air. Once again, this story is about growing both customers and profitability as our consumer wireline business delivered more than 7% EBITDA growth during the second quarter.

Pascal Desroches: The efficient first half growth we achieved in our mobility business positions us well for the back half of the year when we expect higher activity levels driven by the availability of new devices and features, seasonal purchasing activity, and promotional cycles.

John T. Stankey: We added broadband subscribers for the fourth consecutive quarter, driven by consistent growth in AT&T Fiber and early success with AT&T Internet Air. Once again, this story is about growing both customers and profitability, as our consumer wireline business delivered more than 7% EBITDA growth during the second quarter. This was driven by approximately 18% growth in fiber revenues.

Pascal Desroches: In Consumer Wireline, we added broadband subscribers for the fourth consecutive quarter, driven by consistent growth in AT&T Fiber and early success with AT&T Internet Air.

Pascal Desroches: Once again, this story is about growing both customers and profitability as our consumer wireline business delivered more than 7% EBITDA growth during the second quarter.

John Stankey: This was driven by approximately 18% growth in fiber revenues and improved operating leverage as we transition from legacy networks to advanced broadband infrastructure. While some portions of our business are still being pressured as customers transition off legacy voice and data services, our significant investment in 5G and fiber and consistent execution is driving durable growth across the large majority of our business. I expect this performance to continue, putting this on track to deliver on our full year financial guidance. The durable trends in 5G and fiber are being driven by more than the solid individual execution within each business.

Pascal Desroches: This was driven by approximately 18% growth in fiber revenues and improved operating leverage as we transition from legacy networks to advanced broadband infrastructure.

John T. Stankey: While some portions of our business are still being pressured as customers transition off legacy voice and data services, our significant investment in 5G and fiber and consistent execution is driving durable growth across the large majority of our business. I expect this performance to continue, putting us on track to deliver on our full year of financial guidance.

Pascal Desroches: While some portions of our business are still being pressured as customers transition off legacy voice and data services, our significant investment in 5G and fiber and consistent execution is driving durable growth across the large majority of our business.

Pascal Desroches: I expect this performance to continue, putting us on track to deliver on our full year of financial guidance.

John T. Stankey: Durable trends in 5G and fiber are being driven by more than solid individual execution within each business. We believe the success of our fiber business is driving growth and mobility, and vice versa. Consumers increasingly prefer to purchase mobility and broadband together as a converged service. For example, today, nearly 4 out of every 10 AT&T Fiber households also choose AT&T as their wireless service. As a result, our share of post-paid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average, and our fiber.

Pascal Desroches: The durable trends in 5G and fiber are being driven by more than the solid individual execution within each business.

John Stankey: We believe the success of our fiber business is driving growth in mobility and vice versa as consumers increasingly prefer to purchase mobility and broadband together as a converged service. For example, today nearly 4 out of every 10 AT&T Fiber households also choose AT&T as their wireless provider. As a result, our share of postpaid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average. In our fiber business, we continue to achieve key penetration milestones faster than we anticipated and considerably faster than the fiber providers that do not operate wireless networks, based on publicly available data.

Pascal Desroches: We believe the success of our fiber business is driving growth and mobility, and vice versa.

Pascal Desroches: As consumers increasingly prefer to purchase mobility and broadband together as a converged service.

Pascal Desroches: For example, today nearly 4 out of every 10 AT&T Fiber households also choose AT&T as their wireless provider.

Pascal Desroches: As a result, our share of post-paid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average.

John T. Stankey: We continue to achieve key penetration milestones faster than we anticipated, considerably faster than the fiber providers that do not operate wireless networks based on publicly available data. A key reason for this strong performance is our ability to sell fiber to our mobile customers. Additionally, we are able to reach new broadband customers through our substantial mobile distribution. The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks at scale.

Pascal Desroches: Unknown Speaker, in our fiber business.

Pascal Desroches: We continue to achieve key penetration milestones faster than we anticipated, and considerably faster than the fiber providers that do not operate wireless networks based on publicly available data.

John Stankey: A key reason for the strong performance is our ability to sell fiber to our mobile customers. Additionally, we're able to reach new broadband customers who are substantial mobile distribution channels. The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks at scale. We expect this to drive greater returns on invested capital in both our mobility and broadband businesses than either would be expected to achieve as standalone operations.

Pascal Desroches: A key reason for this strong performance is our ability to sell fiber to our mobile customers.

Pascal Desroches: Additionally, we're able to reach new broadband customers through our substantial mobile distribution channels.

Pascal Desroches: The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks at scale.

John T. Stankey: We expect this to drive greater returns on invested capital in both our mobility and broadband businesses than either would be expected to achieve as standalone operations. While our convergence strategy began with a focus on our owned fiber footprint, we also see attractive opportunities to expand the availability of AT&T fiber and our converged offers outside of AT&T. This includes the continued scaling of our gigapower joint venture to Capital Light Arrangements with other providers of commercial open access fiber.

Pascal Desroches: Over time, we expect this to drive greater returns on invested capital in both our mobility and broadband businesses than either would be expected to achieve as stand-alone operations.

John Stankey: While our convergent strategy began with a focus on our own fiber footprint, we also see attractive opportunities to expand the availability of AT&T Fiber and our converged offers outside of it. This includes the continued scaling of our Gigapower joint venture and through capital-wide arrangements with other providers of commercial open access fiber networks. We expect the continued expansion of AT&T Fiber, both in footprint and outside of it, will enable us to drive significant growth with converged customers. Ultimately, our convergent strategy closely aligns with our primary focus over the last four years: growing in a durable, sustainable, and efficient way.

Pascal Desroches: While our convergence strategy began with a focus on our owned fiber footprint, we also see attractive opportunities to expand the availability of AT&T fiber and our converged offers outside of it.

Pascal Desroches: This includes the continued scaling of our Gigapower joint venture and through capital light arrangements with other providers of commercial open access fiber networks.

John T. Stankey: We expect the continued expansion of AT&T fiber, both in its footprint and outside of it, will enable us to drive significant growth with converged customers. Ultimately, our convergence strategy closely aligns with our primary focus over the last four years, growing in a durable, sustainable, and efficient way. We still have a lot to accomplish as we execute this strategy, but I'm encouraged by our momentum and see a long runway of growth with 5G and fiber together. More importantly, I like the distance between us and our competitive set.

Pascal Desroches: We expect the continued expansion of AT&T fiber, both in footprint and outside of it, will enable us to drive significant growth with converged customers.

Pascal Desroches: Ultimately, our convergence strategy closely aligns with our primary focus over the last four years.

John Stankey: We still have a lot to accomplish as we execute this strategy, but I am encouraged by our momentum and see a long runway of growth with 5G and fiber together. More importantly, I like the distance between us and our competitive set with respect to our positioning to organically dress more customers more profitably.

Pascal Desroches: growing in a durable, sustainable, and efficient way.

Pascal Desroches: We still have a lot to accomplish as we execute this strategy, but I am encouraged by our momentum and see a long runway of growth with 5G and fiber together.

Pascal Desroches: More importantly, I like the distance between us and our competitive set with respect to our positioning to organically dress more customers more profitably.

John T. Stankey: With respect to our positioning to organically attract more customers and make more profit, our commitment to our investment-led strategy has played a pivotal role in our success and made AT&T the largest capital investor in the U.S. connectivity infrastructure since 2019. In addition to our ongoing network investment, we continue to reduce our net debt and leverage due to a combination of higher EBITDA and growing free cash flow. We expect these trends to continue and remain on pace to meet our target of net debt to adjusted EBITDA in the two and a half times range. The first half of next year.

John Stankey: Our commitment to our investment-led strategy has played a pivotal role in our success in made AT&T the largest capital investor in the US connectivity infrastructure since 2019. In addition to our ongoing network investment, we continue to reduce our net debt and leverage due to a combination of higher EBITDA and growing free cash flow. We expect these trends to continue and remain on pace to meet our target of net debt to adjusted EBITDA in the two-and-a-half times range in the first half of next year. This should provide us with greater financial flexibility to support sustained investment in growth, as well as enhanced shareholder returns.

Pascal Desroches: Our commitment to our investment-led strategy has played a pivotal role in our success and made AT&T the largest capital investor in the U.S. connectivity infrastructure since 2019.

Pascal Desroches: In addition to our ongoing network investment, we continue to reduce our net debt and leverage due to a combination of higher EBITDA and growing free cash flow.

Pascal Desroches: We expect these trends to continue and remain on pace to meet our target of net debt to adjusted EBITDA in the two and a half times range in the first half of next year.

John T. Stankey: This should provide us with greater financial flexibility to support sustained investment and growth, as well as enhanced shareholder return. We're excited about what all this means for the future of AT&T. Given that our direction remains constant and our performance consistent, I'm going to avoid belaboring what we've been discussing for a number of quarters now and turn it over to Pascal.

Pascal Desroches: This should provide us with greater financial flexibility to support sustained investment and growth, as well as enhanced shareholder returns.

John Stankey: We are excited about what all this means for the future of AT&T.

Pascal Desroches: We're excited about what all this means for the future of AT&T.

John Stankey: Given that our direction remains constant and our performance consistent, I am going to avoid belaboring what we have been discussing for a number of quarters now and turn it over to Pascal.

Pascal Desroches: And given that our direction remains constant and our performance consistent, I'm going to avoid belaboring what we've been discussing for a number of quarters now and turn it over to Pascal. Pascal?

Pascal Desroches: Thank you, John, and good morning, everyone. Let's start by reviewing our second quarter financial summary on 5-7. Second quarter results were in line with our expectations, with revenues down slightly as decline in business wildlife service revenue and low margin mobility equipment revenues offset growth in higher margin wireless service revenues and fiber revenues. Adjusted EBITDA was up 2.6% for the quarter as growth in mobility, consumer wireless line in Mexico, which collectively drove more than 80% of our total revenue in the quarter, were partially offset by continued declines in business wireless line. In the first half, adjusted EBITDA grew 3.4%, and we continue to expect adjusted EBITDA growth in the 3% range for the full year.

Pascal Desroches: Thank you, John. And good morning, everyone. Let's start by reviewing our second quarter financial summary on slide seven. Second quarter results were in line with our expectations, with revenues down slightly as declines in business wireline service revenue and low margin mobility equipment revenues offset growth in higher margin wireless service revenues and fiber. Adjusted EBITDA was up 2.6% for the quarter as growth in mobility and consumer wireline in Mexico, which collectively drove more than 80% of our total revenue in the quarter, were partially offset by continued In the first half, adjusted EBITDA grew 3.4%, and we continue to expect adjusted EBITDA growth in the 3% range for the full year. Adjusted EPS was $0.57 compared to $0.63 in the year-ago quarter.

Pascal Desroches: Thank you, John . And good morning, everyone. Let's start by reviewing our second quarter financial summary on slide 7.

Pascal Desroches: Second quarter results were in line with our expectations with revenues down slightly as decline in business wireline service revenue and low margin mobility equipment revenues offset growth in higher margin wireless service revenues and fiber revenues.

Pascal Desroches: Adjusted EBITDA was up 2.6% for the quarter as growth in mobility, consumer wireline in Mexico, which collectively drove more than 80% of our total revenue in the quarter, were partially offset by continued declines in business wireline.

Pascal Desroches: In the first half, adjusted EBITDA grew 3.4%, and we continue to expect adjusted EBITDA growth in the 3% range for the full year.

Pascal Desroches: A Just EPS was 57 cents compared to 63 cents in the year-ago quarter. Consistent with one queue, the quarter included about 9 cents of aggregated EPS headwinds from the four items we discussed earlier this year. For the full year, our expectations remain for a Just EPS in the range of $2.15 to $2.25. We generated second quarter free cashflow of $4.6 billion, up nearly $400 million year over year. This is the result of sustained growth in adjusted EBITDA, improved conversion of EBITDA into free cash flow, and lower capital investment. Capital investment for the quarter was $4.9 billion, down $1 billion compared to the prior year, primarily as a result of lower payments for vendor financing.

Pascal Desroches: Adjusted EPS was $0.57 compared to $0.63 in the year-ago quarter.

Pascal Desroches: Consistent with 1Q, the quarter included about $0.09 of aggregated EPS headwinds from the four items we discussed earlier this year. For the full year, our expectations remain for adjusted EPS in the range of $2.15 to $2.25. We generated second quarter free cash flow of $4.6 billion, up nearly $400 million year over year. This is the result of sustained growth in adjusted EBITDA, improved conversion of EBITDA into free cash flow, and lower capital investment. Capital investment for the quarter was $4.9 billion, down $1 billion compared to the prior year, primarily as a result of lower payments for vendor financing.

Pascal Desroches: Consistent with 1Q, the quarter included about 9 cents of aggregated EPS headwinds from the four items we discussed earlier this year.

Pascal Desroches: For the full year, our expectations remain for adjusted EPS in the range of $2.15 to $2.25.

Pascal Desroches: We generated second quarter free cash flow of $4.6 billion, up nearly $400 million year-over-year. This is the result of sustained growth in adjusted EBITDA, improved conversion of EBITDA into free cash flow, and lower capital investment.

Pascal Desroches: Capital investment for the quarter was $4.9 billion, down $1 billion compared to the prior year, primarily as a result of lower payments for vendor financing.

Pascal Desroches: Capital expenditures were $4.4 billion, up approximately $100 million compared to the prior year. We remain on track for capital investments into $21 to $22 billion range for the year, with higher spending in the back half of the year as we ramped our wireless network monetization. The quarter also included lower net impact from securitization of $1.5 billion relative to last year's second quarter.

Pascal Desroches: Capital expenditures were $4.4 billion, up approximately $100 million compared to the prior year. We remain on track for capital investments in the $21 to $22 billion range for the year, with higher spending in the back half of the year as we ramp our wireless network modernization. The quarter also included a lower net impact from securitization of $1.5 billion relative to last year's second quarter.

Pascal Desroches: Capital expenditures were $4.4 billion, up approximately $100 million compared to the prior year.

Pascal Desroches: We remain on track for capital investments in the 21 to 22 billion dollar range for the year, with higher spending in the back half of the year as we ramp our wireless network modernization.

Pascal Desroches: The quarter also included lower net impact from securitization of $1.5 billion relative to last year's second quarter.

Pascal Desroches: Now, let's look at our Mobility Operating Results on Slide 8. For the quarter, we delivered 419,000 post-paid phone net ads, up from 326,000 a year ago. This improvement was driven by a nine basis point decline in churn to 0.70%. Additionally, we grew mobility service revenues by 3.4% driven by strong execution and our balance go to market. Postpaid phone ARPU was $56.42, up 1.4% year-over-year, largely driven by higher ARPU on Legacy Plus.

Pascal Desroches: Now let's look at our mobility operating results on slide 8. For the quarter, we delivered 419,000 post-paid phone net ads, up from 326,000 a year ago. This improvement was driven by a nine basis point decline in turn to 0.70%. We grew mobility service revenues by 3.4% driven by strong execution and our balanced go to market strategy. Post-paid phone output was $56,042, up 1.4% year over year, largely driven by higher output on legacy plans. As expected, service revenue growth was partially offset by lower equipment revenues, with a post-paid upgrade rate of 2.9%, which was down slightly from 3.1% last year.

Pascal Desroches: Now, let's look at our Mobility Operating Results on Slide 8.

Pascal Desroches: For the quarter, we delivered 419,000 post-paid phone net ads, up from 326,000 a year ago.

Pascal Desroches: This improvement was driven by a nine basis point decline in churn to 0.70%. We grew mobility service revenues by 3.4%, driven by strong execution and our balanced go-to-market strategy.

Pascal Desroches: Post-paid phone ARPU was $56.42, up 1.4% year-over-year, largely driven by higher ARPU on legacy plans.

Pascal Desroches: As expected, service revenue growth was partially offset by lower equipment revenues, with a postpaid upgrade rate of 2.9%, which was down slightly from 3.1% last year. For the year, we continue to expect modest post-paid phone output growth and mobility service revenue growth of 3%. Mobility EBITDA of $9.2 billion grew 5.3% or by more than $450 million year-over-year as we converted over 85% of our service revenue growth into EBITDA. During the first half of 2024, Mobility EBITDA grew 6.1%, and we continue to expect Mobility EBITDA growth in the higher end of the mid-single-digit range for the full year.

Pascal Desroches: As expected, service revenue growth was partially offset by lower equipment revenues, with a post-paid upgrade rate of 2.9%, which was down slightly from 3.1% last year.

Pascal Desroches: For the year, we continue to expect modest post-paid phone output growth and mobility service revenue growth into 3% range. Mobility EBITDA of 9.2 billion grew 5.3% or by more than $450 million year over year as we converted over 85% of our service revenue growth into EBITDA. During the first half of 2024, mobility EBITDA grew 6.1%, and we continue to expect mobility EBITDA growth in the higher end of the mid single-digit range for the full year. As John noted during his remarks on mobility outlook, anticipates higher activity levels in the back half consistent with seasonal trends.

Pascal Desroches: For the year, we continue to expect modest post-paid phone output growth and mobility service revenue growth in the 3% range.

Pascal Desroches: Mobility EBITDA of $9.2 billion grew 5.3% or by more than $450 million year-over-year as we converted over 85% of our service revenue growth into EBITDA.

Pascal Desroches: During the first half of 2024, mobility EBITDA grew 6.1%, and we continue to expect mobility EBITDA growth in the higher end of the mid-single-digit range for the full year.

Pascal Desroches: As John noted during his remarks, our mobility outlook anticipates higher activity levels in the back half consistent with seasonal trends. In particular, we anticipate higher marketing spend in the third quarter compared to last year. We also expect to see greater benefits from our announced pricing actions in 4Q versus 3Q. Based on our strong subscriber and EBITDA growth through the first half of the year, we believe our mobility business is well positioned to capitalize on a more dynamic wireless market in the back half while achieving our financial targets.

Pascal Desroches: As John noted during his remarks, our mobility outlook anticipates higher activity levels in the back half consistent with seasonal trends. In particular, we anticipate higher marketing spend in the third quarter compared to last year.

Pascal Desroches: In particular, we anticipate higher marketing spending the third quarter compared to last year. We also expect to see greater benefits from our announced pricing actions in 4Q versus 3Q. Based on our strong subscriber and EBITDA growth through the first half of the year, we believe our mobility business is well positioned to capitalize on a more dynamic wireless market in the back half while achieving our financial tariff.

John T. Stankey: We also expect to see greater benefits from our announced pricing actions in 4Q vs. 3Q.

John T. Stankey: Based on our strong subscriber and EBITDA growth through the first half of the year, we believe our mobility business is well-positioned to capitalize on a more dynamic wireless market in the back half while achieving our financial targets. Now let's move to consumer wireline on slide 9.

Pascal Desroches: Now, let's move to consumer wireline on slide 9. Our growth in consumer wireline was once again led by fiber subscriber growth, which has consistently yielded strong returns. Overall, we added 52,000 total broadband subscribers in the quarter. This is the fourth consecutive quarter of positive broadband net gains, and we expect this trend to continue. When we have fiber, we win, and we added 233,000 89,000 AT&T fiber subscribers in the quarter. Our 2Q AT&T fiber net ads are consistent with the three primary drivers of quarterly net ad variability that we've previously shared. These are the pace at which we put you fiber locations into service, which is the largest variable in any given quarter as new inventory we're able to serve, can fluctuate.

Pascal Desroches: Now, let's move to consumer wireline on slide 9. Our growth in consumer wireline was once again led by fiber subscriber growth, which has consistently yielded strong returns. Overall, we added 52,000 total broadband subscribers in the quarter.

John T. Stankey: Our growth in consumer wireline was once again led by fiber subscriber growth, which has consistently yielded strong returns.

Pascal Desroches: This is the fourth consecutive quarter of positive broadband net gains, and we expect this trend to continue. Where we have fiber, we win, and we added 239,000 AT&T Fiber subscribers in a quarter. Our two QAT&T FiberNet ads are consistent with the three primary drivers of quarterly net ad variability that we've previously shared. These are the pace at which we put new fiber locations into service, which is the largest variable in any given quarter, as new inventory we're able to serve can fluctuate. Second, overall broadband market dynamics, which have remained fairly stable. And finally, typical seasonality.

John T. Stankey: Overall, we added 52,000 total broadband subscribers in the quarter. This is the fourth consecutive quarter of positive broadband net gains, and we expect this trend to continue.

John T. Stankey: Where we have fiber, we win, and we added 239,000 AT&T Fiber subscribers in a quarter.

Speaker Change: Our two QAT&T FiberNet ads are consistent with the three primary drivers of quarterly net ad variability that we've previously shared.

Speaker Change: These are the pace at which we put new fiber locations into service, which is the largest variable in any given quarter, as new inventory we're able to serve can fluctuate.

Pascal Desroches: Secondly, overall broadband market dynamics, which have remained fairly stable, and finally, typical seasonality. We expect these to remain the primary drivers of quarterly trend in AT&T Fiber net ads in the back half of the year, and as a reminder, the third quarter typically has favorable seasonality relative to the second quarter. We now pass nearly 28 million consumer and business locations with fiber, and we may not track the past 30 million plus fiber locations by the end of 2025. As we stated before, the better-than-expected returns were seen on our fiber investments, potentially expanding the opportunity to go beyond our initial build targets by roughly 10 to 15 million additional locations.

Speaker Change: Second, overall broadband market dynamics, which have remained fairly stable.

Pascal Desroches: We expect these to remain the primary drivers of quarterly trends in AT&T's five Burnett ads in the back half of the year. And, as a reminder, the third quarter typically has favorable seasonality relative to the second. We've now passed nearly 28 million consumer and business locations with fiber and remain on track to pass 30 million plus fiber locations by the end of 2025. As we stated before, the better than expected returns we're seeing on our fiber investments potentially expand the opportunity to go beyond our initial build targets by roughly 10 to 15 million additional locations.

Speaker Change: And finally, typical seasonality. We expect these to remain the primary drivers of quarterly trends in AT&T's five Burnett ads in the back half of the year. And, as a reminder, the third quarter typically has favorable seasonality relative to the second quarter.

Speaker Change: We've now passed nearly 28 million consumer and business locations with fiber and remain on track to pass 30 million plus fiber locations by the end of 2025.

Speaker Change: As we stated before, the better than expected returns we're seeing on our fiber investments potentially expands the opportunity to go beyond our initial build targets by roughly 10 to 15 million additional locations.

Pascal Desroches: This assumes similar build parameters and a regulatory environment that remains attracted to building infrastructure. We are also encouraged by early performance of AT&T Internet Air, and our successive proactively migrating customers with legacy copper-based internet connections onto this fixed wireless service. We now have AT&T Internet Air and parts of 137 markets with nearly 350,000 total consumer subscribers, including 139,000 adage during the quarter. Second quarter broadband revenues grew 7% due to strong fiber revenue growth of approximately 18%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber ARPU of $69 was up $2.30 year over year, with intake ARPU remaining above $70.

Pascal Desroches: This assumes similar build parameters and a regulatory environment that remains attractive to building institutions. We are also encouraged by the early performance of AT&T Internet Air and our success in proactively migrating customers with legacy copper-based internet connections onto this fixed wireless service. We now have AT&T Internet Air in parts of 137 markets with nearly 350,000 total consumer subscribers, including 139,000 added during the quarter.

Speaker Change: This assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure.

Speaker Change: We are also encouraged by early performance of AT&T Internet Air and our success in proactively migrating customers with legacy copper-based internet connections onto this fixed wireless service.

Speaker Change: We now have AT&T Internet Air in parts of 137 markets with nearly 350,000 total consumer subscribers, including 139,000 added during the quarter.

Pascal Desroches: Second quarter broadband revenues grew 7% due to strong fiber revenue growth of approximately 18%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber ARPU of $69 was up $2.30 year over year, with intake ARPU remaining above $70.

Speaker Change: Second quarter broadband revenues grew 7% due to strong fiber revenue growth of approximately 18%.

Speaker Change: For the full year, we continue to expect broadband revenue growth of 7% plus.

Speaker Change: Fiber ARPU of $69 was up $2.30 year over year with intake ARPU remaining above $70.

Pascal Desroches: Consumer wireline EBITDA grew 7.1% as growth in broadband revenues and ongoing cost transformation continued to improve profitability.

Pascal Desroches: Consumer wireline EBITDA grew 7.1% as growth in broadband revenues and ongoing cost transformation continue to improve profitability. We still expect consumer wireline EBITDA to grow in the mid to high single-digit range this year. Now, let's cover business wireline on slide 10. Business Wireline EBITDA was down 13.9% due to continued industry-wide secular declines in legacy voice services consistent with the trends we discussed last. The reported decline in EBITDA slightly improved in 2Q versus the first quarter.

Speaker Change: Consumer wireline EBITDA grew 7.1% as growth in broadband revenues and ongoing cost transformation continue to improve profitability.

Pascal Desroches: We still expect consumer wireline EBITDA to grow in the mid to high single-digit range this year.

Speaker Change: We still expect consumer wireline EBITDA to grow in the mid to high single-digit range this year.

Pascal Desroches: Now, let's cover business wireline on flight 10. Business wireline EBITDA was down 13.9% due to continued industry-wide secular decline in legacy voice services, consistent with the trends we discussed last week. quarter. The report of decline in EBITDA is slightly improved in 2Q versus the first quarter. This primarily represents benefits from favorable timing of anticipated items and early traction on cost-saving initiatives. Looking into the back half of the year, I want to remind you that we've benefited from approximately a hundred million of IP sales in the third quarter of last year that are not expected to record the next quarter.

Speaker Change: Now, let's cover business wireline on slide 10.

Speaker Change: Business Wireline EBITDA was down 13.9% due to continued industry-wide secular declines in legacy voice services consistent with the trends we discussed last quarter.

Speaker Change: The reported decline in EBITDA slightly improved in 2Q versus the first quarter.

Pascal Desroches: This primarily represents benefits from favorable timing of anticipated items and early traction on cost savings. Looking into the back half of the year, I want to remind you that we benefited from approximately 100 million in IP sales in the third quarter of last year that are not expected to recur next quarter. So, the year-on-year trend in business while on EBITDA is likely to see some pressure in 3Q before improving in 4Q as comparisons ease.

Speaker Change: This primarily represents benefits from favorable timing of anticipated items and early traction on cost-saving initiatives.

Speaker Change: Looking into the back half of the year, I want to remind you that we benefited from approximately 100 million of IP sales in the third quarter of last year that are not expected to recur next quarter.

Pascal Desroches: So, the year-on-year trend in business while on EBITDA is likely to see some pressure in 3Q before improving in 4Q as comparisons ease. Also, I'd like to note that 2Q results include less than one month of revenues from our cybersecurity business prior to decontalinating its operations into a joint venture. On average, this low margin business contributed about a hundred million in quarterly revenues. The key point is that business waterline is performing in line with the outlook we provided last quarter. So, for the full year, we still expect business waterline EBITDA to decline in the mid-teens range.

Speaker Change: So, the year-on-year trend in business while on EBITDA is likely to see some pressure in 3Q before improving in 4Q as comparisons ease.

Pascal Desroches: Also, I'd like to note that 2Q results included less than one month of revenues from our cybersecurity business prior to deconsolidating its operations into a joint venture. On average, this low-margin business contributed about $100 million in quarterly revenue. The key point is that Business Wireline is performing in line with the outlook we provided last quarter. So, for the full year, we still expect Business Wireline EBITDA declines in the mid-teens range. While near-term declines in legacy voice revenues are likely to weigh on business wireline EBITDA trends for the remainder of the year, our 5G and fiber expansion continue to present attractive growth opportunities in business solutions. This includes sustained growth in FirstNet, which now has more than 6 million total connections.

Speaker Change: Also, I'd like to note that 2Q results included less than one month of revenues from our cyber security business prior to deconsolidating its operations into a joint venture.

Speaker Change: On average, this low margin business contributed about $100 million in quarterly revenues.

Speaker Change: The key point is that Business Wireline is performing in line with the outlook we provided last quarter. So, for the full year, we still expect Business Wireline EBITDA declines in the mid-teens range.

Pascal Desroches: While near-term declines and legacy voice revenues are likely to weigh on business waterline EBITDA trends for the name of the year, R5G and fiber expansion continue to present attractive growth opportunities in business solutions. This includes sustained growth in First Net, which now has more than 6 million total connections. Similarly, we're excited about the potential we have with emerging growth products like AT&T Internet Air for Business, which we launched nationwide, and Dynamic Defense. Now, let's move to slide 11 for an update on our capital allocation strategy.

Speaker Change: While near-term declines in legacy voice revenues are likely to weigh on business wireline EBITDA trends for the remainder of the year, our 5G and fiber expansion continue to present attractive growth opportunities in business solutions.

Speaker Change: This includes sustained growth in FirstNet, which now has more than 6 million total connections.

Pascal Desroches: Similarly, we're excited about the potential we have with emerging growth products like AT&T Internet Air for Business, which we launched nationwide, and Dynamic Defense. Now, let's move to slide 11 for an update on our capital allocations. Our approach to capital allocation remains consistent and deliberate.

Speaker Change: Similarly, we're excited about the potential we have with emerging growth products like AT&T Internet Air for Business, which we launched nationwide, and Dynamic Defense.

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

Pascal Desroches: Our approach to capital allocation remains consistent and deliberate, where successfully balancing efficient growth with long-term investments in delivering converts, network services to more customers, paying down debt, and returning value to shareholders. We remain focused on deleveraging and have reduced our net debt by about $2 billion year-to-date. At the end of June, net debts are just EBITDA was below 2.9 times. We're making steady progress on attaining our target in the two-and-a-half times range in the first half of 2025. We continue to address near-term materials with cash on hand, and this quarter we paid 2.2 billion of low-term debt maturities.

Pascal Desroches: We're successfully balancing efficient growth with long-term investments in delivering converged network services to more customers. Paying Down Debt and Returning Value to Shareholders We remain focused on deleveraging and have reduced our net debt by about $2 billion year to date. At the end of June, our net debt to adjust EBITDA was below 2.9 times.

Speaker Change: Our approach to capital allocation remains consistent and deliberate.

Speaker Change: We're successfully balancing efficient growth with long-term investments in delivering converged network services to more customers.

Speaker Change: Paying Down Debt, and Returning Value to Shareholders

Speaker Change: We remain focused on deleveraging and have reduced our net debt by about $2 billion year-to-date.

Speaker Change: At the end of June , net debt to Adjusted EBITDA was below 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.

Pascal Desroches: We're making steady progress on achieving our target in the two and a half times range in the first half of 2025. We continue to address near-term maturities with cash on hand, and this quarter, we repaid $2.2 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 at a rated average rate of 4.2%. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $700 million compared to the first quarter. Additionally, the second quarter net impact from securitization facilities was a $700 million use of cash.

Speaker Change: We continue to address near-term maturities with cash on hand, and this quarter we repaid $2.2 billion of long-term debt maturities.

Pascal Desroches: Looking forward, our debt maturities are very manageable, and we are in a great position with more than 95 percent of our long-term debt fixed, with a rated average rate of 4.2 percent. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about 700 million versus the first quarter. Additionally, the second quarter net impact from securitization facilities was a 700 million dollar use of cash. These efforts highlight the improving quality of free cash flow we're delivering. We expect to continue reducing our aggregate net balance of direct supplier and vendor financing on a year-over-year basis, which should lower our interest expense and continue to improve cash flow readability over time.

Speaker Change: 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 a rated average rate of 4.2%.

Speaker Change: In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $700 million versus the first quarter. Additionally, the second quarter net impact from securitization facilities was a $700 million use of cash.

Pascal Desroches: These efforts highlight the improving quality of free cash flow we're delivering. We expect to continue reducing our aggregate net balance of direct supplier and vendor financing on a year-over-year basis, which should lower our interest expense and continue to improve cash flow ratability over time. Direct TV distributions in the quarter were about 740 million, and we continue to expect Direct TV cash distributions to decline at a similar rate to 2023 or by about 20% annually.

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

Speaker Change: We expect to continue reducing our aggregate net balance of direct supplier and vendor financing on a year-over-year basis, which should lower our interest expense and continue to improve cash flow ratability over time.

Pascal Desroches: Direct-TV distributions in the quarter were about $740 million, and we continue to expect Direct-TV cash distributions to decline at a similar rate to 2023, or by about 20% annually. We generated 4.6 billion of free cash loan in the quarter and 7.7 billion in the first half of the year. Free cash flows up to 1.5 billion compared to the first half of last year, which is consistent with our goal of driving more radical free cash flow. Looking into the second half of the year, we expect cash taxes to be a billion dollars higher compared to the second half of last year.

Speaker Change: Direct TV distributions in the quarter were about $740 million, and we continue to expect direct TV cash distributions to decline at a similar rate to 2023 or by about 20% annually.

Pascal Desroches: We generated $4.6 billion of free cash flow in the quarter and $7.7 billion in the first half of the year. Free cash flow is up $2.5 billion compared to the first half of last year, which is consistent with our goal of driving more ratable free cash flow. Looking into the second half of the year, we expect cash taxes to be a billion dollars higher compared to the second half of last year. We also expect to incur a one-time payment of $480 million in the third quarter related to our wireless network transformation.

Speaker Change: We generated $4.6 billion of free cash flow in the quarter and $7.7 billion in the first half of the year.

Speaker Change: Free cash flow is up $2.5 billion compared to the first half of last year, which is consistent with our goal of driving more routable free cash flow.

Speaker Change: Looking into the second half of the year, we expect cash taxes to be a billion dollars higher compared to the second half of last year.

Pascal Desroches: We also expect to incur a one-time payment of $480 million in the third quarter related to our wireless network transformation. Overall, we're on pace to deliver on our full-year free cash flow guidance in the 17-18 billion dollar range.

Speaker Change: We also expect to incur a one-time payment of $480 million in the third quarter related to our wireless network transformation.

Pascal Desroches: Overall, we're on pace to deliver on our full year free cash flow guidance of 17 to 18 billion dollars. To close, I'm very pleased with our team's performance in the first half of the year, and we're on pace to deliver on all of our full-year financial guidance. Brett, that's our presentation. We're now ready for the Q&A. Thank you, Pascal.

Speaker Change: Overall, we're on pace to deliver on our full year free cash flow guidance in the 17 to 18 billion dollar range.

Pascal Desroches: To close, I'm very pleased with our team's performance in the first half of the year, and we're on pace to deliver on all of our full-year financial guidance.

Speaker Change: To close, I'm very pleased with our team's performance in the first half of the year, and we're on pace to deliver on all of our full-year financial guidance.

Brett Feldman: Brett, that's our presentation. We're now ready for the Q&A.

Brett Feldman: Operator, we're ready to take the first question. Our first question will come from the line of John Hodulik of UBS. Please go ahead.

Operator: Thank you, Pascal. Operator, we're ready to take the first question.

Brett Feldman: Brett, that's our presentation. We're now ready for the Q&A. Thank you, Pascal. Operator, we're ready to take the first question. Our first question will come from the line of John Hodulik of UBS. Please go ahead.

John Christopher Hodulik: Our first question will come from the line of John Hudlook, a VBS. Please go ahead. Great. Thanks, guys. A couple of if I could. First, John, you talked about higher activity levels in the second half in wireless, and obviously there's a lot of concern about upgrade rates with the new iPhone. I mean, are the comments that you made just a function of sort of typical sees now? Are you expecting that a sort of a new upgrade sort of initiative? And what does that mean? If so, what does that mean for the level of concern we've been seeing in profitability and sort of overall competition in the same?

John Christopher Hodulik: Great. Thanks, guys. A couple if I could.

John T. Stankey: First, John, you talk about higher activity levels in the second half of wireless, and obviously, there's a lot of concern about upgrade rates with the new iPhone. I mean, are the comments that you made just a function of sort of typical seasonality? Are you expecting a sort of new upgrade, [inaudible] That's number one. And then, number two, you had some comments about giga power and the, you know, potential open access relationships. I'd just like to get any color you can give us on how that, Unknown Attendee, Amir Rozwadowski, Igal Elbaz, Rony Abovitz, Shashank Modi, William Kennard, AT&T Inc. Good morning, John, how are you?

John Christopher Hodulik: Great, thanks guys.

John Christopher Hodulik: A couple, if I could. First, John , you talk about higher activity levels in the second half in wireless, and obviously there's a lot of concern about upgrade rates with the new iPhone. I mean, are the comments that you made just a function of sort of typical seasonality, or are you expecting a sort of a new upgrade?

Speaker Change: sort of initiative? And what does that mean? If so, what does that mean for the

John Stankey: That's number one.

Speaker Change: The level of churn we've been seeing in profitability and sort of overall competition in the space. That's number one.

John Stankey: And then number two, you know, you had some comments about gig-a-power and the potential open access relationships. It just relates to gig-a-power, any color you can get us on how that relationship or partnership is doing in terms of rollout and customer uptake. And then, is there room for more of these relationships with other third-party open access providers? Are you talking to anyone else, and how big could that opportunity be? Thanks.

Speaker Change: And then number two, you know, you had some comments about gigapower and the, you know, potential open access relationships.

Speaker Change: I'd just like to get any color you can give us on how that.

Speaker Change: relationship or partnership is doing in terms of rollout and customer uptake? And then, is there room for more of these relationships with other third party open access providers? Are you talking to anyone else and how big could that opportunity be? Thanks.

John Stankey: Good morning, John. How are you? Yeah.

John T. Stankey: So on your first question, you know, first, I'd start out by saying, whatever happens going forward, you know, we've been focused on ensuring that we try to set up the business to respond to what the customer wants to do with their accounts and keep that focus of what we think our strategy ought to be and how we go to market. And I think it's important to understand that, you know, whatever happens going forward is going to be a factor in how customers decide to do things.

John Stankey: So, on your first question, you know, first I start out by saying whatever happens going forward, you know, we've been focused on ensuring that we try to set up the business to respond to what the customer wants to do with their accounts and keep that a focus of what we think our strategy ought to be and how we go to market. And I think it's important to understand that, you know, whatever happens going forward is going to be a factor of how customers decide to do things. And, you know, I think we'll be positioned as a company to deal with that either way.

Speaker Change: Good morning John , how are you? So on your first question, you know, first I'd start out by saying whatever happens going forward, you know, we've been focused on ensuring that we try to set up the business to

Speaker Change: Respond to what the customer wants to do with their accounts and keep that focus of

Speaker Change: What we think our strategy ought to be and how we go to market. And I think it's important to understand that, you know, whatever happens going forward is going to be a factor of how customers decide to do things. And, you know, I think we'll be positioned as a company to deal with that.

John T. Stankey: And, you know, I think we'll be positioned as a company to deal with that. Either way, there is seasonality. First of all, as you know, when we get into a new device cycle coming out from typically one of the handset providers, there's, you know, a little bit of a suppression effect that occurs. A month or two before they go to market. And then, you know, there's an increase in acceleration that occurs.

John Stankey: There is seasonality, first of all, as you know. When we get into a new device cycle coming out from typically one of the hands-up providers, there's, you know, a little bit of a suppression effect that occurs. as a month or two before they go to market, and then there's an increase in acceleration that occurs. And as you heard both Pascal and I talk about, we've expected that that cycle is going to continue. And I think we're in a good position with our guidance to be able to adjust whichever way it goes.

Speaker Change: either way, there is seasonality, first of all, as you know, when we get into

Speaker Change: A new device cycle coming out from typically one of the handset providers. There's, you know, a little bit of a suppression effect that occurs.

John T. Stankey: And as you heard, both Pascal and I talk about. We've expected that that cycle is going to continue, and I think we're in a good position with our guidance to be able to adjust to whichever way it goes. I've looked at some of the notes that have been written recently about. Transcribed by https://otter.ai. You typically don't have an entire account, at least in how we built our customer base.

Speaker Change: a month or two before they go to market. And then, you know, there's a increase in acceleration that occurs. And as you heard both Pascal and I talk about,

Pascal Desroches: We've expected that that cycle is going to continue, and I think we're in a good position with our guidance to...

John Stankey: I've looked at some of the notes that have been written recently about sizing and looking at this particular dynamic. And I think that they're directionally consistent when you start thinking about the reality that we have accounts that have discrete handsets that mature in their cycles at different times. You typically don't have an entire account, least in how we built our customer base that gets to an upgrade cycle all at the same time. So we're able to kind of look at history and understand a little bit about it. And if the customer decides that there's meaningful features in the new devices, we're going to respond to it.

Speaker Change: Be able to adjust to whichever way it goes. I've looked at some of the notes that have been written recently about

Speaker Change: and looking at this particular dynamic. And I think that they're directionally consistent when you start thinking about the reality that we have accounts that have discrete handsets that mature in their cycles at different times.

Speaker Change: You typically don't have an entire account at least in how we built our customer base that

Speaker Change: gets to a upgrade cycle all at the same time.

Speaker Change: So we're able to kind of look at history and understand a little bit about it. And if the customer decides that there's meaningful features in the new devices, we're gonna respond to it, we're gonna deal with it. And I feel like we're in pretty good shape to make that happen one way or another. Now, whether or not...

John Stankey: We're going to deal with it. I feel like we're in pretty good shape to make that happen one way or another.

John Stankey: Now, whether or not there's something more compelling in this cycle, frankly, none of us know exactly what's going to kind of. We do have some reference points; there have been other AI devices that have come into the handset ecosystem over the last couple of months. I haven't seen anything in them that suggests to me it's going to cause customers to immediately say this is world-changing for them, but it doesn't mean that somebody doesn't unlock the key at some point. Typically, these feature enhancements take one or two cycles to get them right and ultimately bring them forward, but time will tell; remains to be seen.

John T. Stankey: [inaudible] There's something more compelling in this cycle; frankly, none of us know exactly what's going to come out. We do have some reference points; there have been other AI devices that have come into the handset ecosystem over the last couple of months. I haven't seen anything in them that suggests to me it's going to cause customers to immediately say this is world changing for them, but it doesn't mean that somebody doesn't unlock the key at some point. Typically, these feature enhancements take one or two cycles to get them right and ultimately bring them forward, but time will tell.

Speaker Change: There's something more compelling in this cycle. Frankly, none of us know exactly what's going to come out. We do have some reference points. There have been other AI devices that have come into the handset ecosystem over the last couple of months.

Speaker Change: I haven't seen anything in them that...

Speaker Change: Suggests to me it's going to cause customers to Immediately say this is world changing for them But it doesn't mean that somebody doesn't unlock the key at some point typically these these feature enhancements take One or two cycles to get them right and ultimately bring them forward, but time will tell remains to be seen

John T. Stankey: I would also say that there are a lot of ways you can experience AI without necessarily having to necessarily, (inaudible). When you look at our performance for the overall company, as well as for mobility, we are running ahead halfway through the year of the full-year guidance that we gave, and so whatever the environment is, I feel like we are incredibly well-positioned for it. Your question about where we are with GigaPower, I'm going to defer the answer to your question.

John Stankey: I would also say that there's a lot of ways you can experience AI without having to necessarily change out hardware, per se. I mean, we're already seeing that in ways that AI implemented a research and browsers and things like that. So customers get comfortable with it and start to adopt it. We'll watch, and I think we'll go through the cycle on that. There's a little bit of spike at the front end, and then it flows down a little bit later. We've been through those cycles before, and we'll do fine, Pascal.

Speaker Change: I would also say that there's a lot of ways you can experience AI without having to necessarily

Speaker Change: change out hardware per se. I mean, we're already seeing that in ways that AI is implemented into search and browsers and things like that. So how customers get comfortable with it and start to adopt it.

Speaker Change: We'll watch and I think we'll go through the cycle and if there's a little bit of spike at the front end and then it slows down a little bit later.

Pascal Desroches: I don't know if you want to add anything to that.

Pascal Desroches: You know, John, I would just add one thing: when you look at our performance for the overall company, as well as mobility, we are running ahead halfway through the year of the full year guidance that we gave. And so, whatever the environment is, I feel like we are incredibly well positioned for it. On your question about where we are with giga power.

Pascal Desroches: We've been through those cycles before, and we'll do fine. Pascal, I don't know if you want to add anything to that. You know, John , I would just add one thing. When you look at our performance for the overall company,

Pascal Desroches: As well as mobility, we are running ahead halfway through the year of the full year guidance that we gave. And so, whatever the environment is, I feel like we are incredibly well positioned for it.

John Stankey: I'm going to defer the answer to your question. I plan. I think I told you when we started this, I mean, owed good insight and transparency on the data to the investment community around how we perform.

Speaker Change: Your question about where we are with giga power, I'm gonna defer the answer to your question. I plan, I think I told you when we started this, I mean, owed.

John T. Stankey: Good insight and transparency on the data to the investment community around how we perform, and I kind of put a benchmark out there, and we did that that said we needed 18 months to go through what I consider to be a reasonable cycle of investment. Transcripts provided by Transcription Outsourcing, LLC, giving you the kind of insight you'd like.

John Stankey: And I kind of put a benchmark out there, and we did that, that said we needed 18 months to go through what I considered to be a reasonable cycle of investment. Turning the product up, getting into markets and penetrating it, getting enough data to understand how we're performing, and we will be at that point right about it.

Speaker Change: Good insight and transparency on the data to the investment community around how we perform. And I kind of put a benchmark out there. And we did that that said we needed 18 months to go through what I consider to be a reasonable cycle of investment.

Speaker Change: turning the product up, getting into markets and penetrating it, getting enough data to understand.

John Stankey: Communicopia and I expect I'll probably spend a little bit of my time at that session giving you the kind of insight you'd like, and I would tell you I'm looking forward to that opportunity to have that conversation. and my belief is, we have a lot of opportunity to grow profitably on fiber and convergence and a variety of different models, and it's go back to the remarks I just made. We understand how to sell both products together.

Speaker Change: How we're performing, and we will be at that point, right about at Communicopia, and I expect I'll probably spend a little bit of my time at that session.

John T. Stankey: And I would tell you, I'm looking forward to that opportunity to have that conversation. And my belief is that we have a lot of opportunity to grow profitably on fiber and convergence in a variety of different models. And that goes back to the remarks I just made.

Speaker Change: giving you the kind of insight you'd like. And I would tell you, I'm looking forward to that opportunity to have that conversation.

Speaker Change: And my belief is...

Speaker Change: We have a lot of opportunity to grow profitably on fiber and convergence in a variety of different models.

John T. Stankey: We understand how to sell both products together, number one. And I think as I move around the industry, one of the things I pick up, which is being shared with those that we can partner with, is that people notice that we seem to have a formula that's different in its capabilities and its effectiveness than maybe what they see occurring in other pockets around the United States. And so I think we are acknowledged to be pretty competent in this area, and I'd like to make my bets in that regard.

Speaker Change: And it's, go back to the remarks I just made.

John Stankey: Number one, and I think as I move around the industry, one of the things I pick up, I'm being shared with those that we can partner with is I think people notice that we seem to have a formula that's different in its capabilities and its effectiveness and maybe what they see occurring in another pocket, pockets around the United States. And I think we are acknowledged of being pretty competent in this area, and I'd like to press my bets in that regard. And we've done things such as, as you would expect, we do. One, we're not selling fixed wireless broads but probably across the footprint, so I think our competitive positioning with partners looks a little bit different than some.

Speaker Change: We understand how to sell both products together, number one. And I think as I move around the industry, one of the things I pick up, I'm

Speaker Change: Being shared with those that we can partner with is I think people notice that we seem to have a formula

Speaker Change: that's different in its capabilities and its effectiveness than maybe what they see occurring in other pockets around the United States. And so

Speaker Change: I think we are acknowledged as being pretty competent in this area.

John T. Stankey: And we've done things such as you would expect we would do. One, we're not selling fixed wireless broadly across the footprint. So I think our competitive positioning with partners looks a little bit different than some. Also, because we did gigapower, we built the back office for gigapower that already has a wholesale relationship structure that works with AT&T and the gigapower entity where we make that available to others. And if somebody wants to use them,

Speaker Change: And I'd like to press my bets in that regard. And we've done things such as

Speaker Change: As you would expect we do. One, we're not selling fixed wireless broadly across the footprint. So I think our competitive positioning with partners looks a little bit different than some.

John Stankey: Two, because we did Gigapower, we built the back office for Gigapower that already has a wholesale relationship structure that works with AT&T and the Gigapower entity where we make that available to others. If somebody wants to use that infrastructure and use it as a means to jointly market our products and services where our wireless can help their fixed assets. We view that as being a very helpful dynamic of somebody who is trying to get scale. So I do see further runway and opportunity there for us to do more, and we're active in that space, and you should expect that as we move forward and we continue this race to convergence.

Speaker Change: 2. Because we did GigaPower, we built a back office for GigaPower that already has a wholesale relationship structure that works with AT&T and the GigaPower entity where we make that available to others and if somebody wants to use

John T. Stankey: That infrastructure and use it as a means to jointly market our products and services where our wireless can help their fixed assets. We view that as being a very helpful dynamic of somebody who's trying to get scale. So, I do see further runway and opportunity there for us to do more, and we're active in that space, and you should expect that as we move forward.

Speaker Change: that infrastructure and use it as a means to jointly market our products and services where our wireless can help their fixed assets. We view that as being a very helpful dynamic of somebody who's trying to get scale.

Speaker Change: So I do see further runway and opportunity there for us to do more, and we're active in that space, and you should expect that as we move forward and we continue this race to convergence, it's one of the tools we're going to do to put distance between ourselves and everybody else.

John T. Stankey: It's one of the tools we're going to use to put distance between ourselves and everybody else. All right, operator, we'll take the next question, please. Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead.

John Stankey: It's one of the tools we're going to do to put distance between ourselves and everybody else.

Operator: All right, operator. We'll take the next question, please.

Simon Flannery: Our next question comes from Simon Flannery of Morgan Stanley. Please go ahead. Thank you. Good morning.

Simon William Flannery: And how that flows through to CapEx, etc. Thanks. Good morning, Simon.

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

Speaker Change: Our next question comes from Simon Flannery of Mortgage Stanley. Please go ahead.

Simon Flannery: I think we managed to get this far without mentioning ACP. I wonder if you could just give us an update on what you've seen so far. What do you expect in the third quarter? And then coming back to the comment about in-reach and fiber, you've talked a few times about the 10 to 15. I think you're almost at 28 million locations, pretty near that 30 million. So help us understand where you are on that evaluation process and what should we expect in terms of you giving us a new kind of map for the next three years or whatever, and then how that flows through to CapEx etc.

Simon William Flannery: Thank you. Good morning. I think we managed to get this far without mentioning ACP. I wonder if you could just give us an update on what you've seen so far, what to expect in the third quarter. And then coming back to the comment about in-region fiber, you've talked a few times about the 10 to 15, I think you're almost at 28 million locations, pretty near that.

Speaker Change: 30 million. So help us understand where you are on that evaluation process. And what should we expect in terms of you giving us a new kind of map for the next three years or whatever, and how that flows through to CapEx, etc. Thanks.

Simon Flannery: Thanks.

Pascal Desroches: Good morning, Simon. I'm ACP. I think we indicated to you probably last quarter, maybe even quarter. We thought it would be here. Yeah, that we would be effective at working through this. We didn't see it as being material or significant, and I characterized it. We saw no reason we continue to be able to deliver on our commitments back to you. And that is in fact happening and will happen. We are most of the way through the ACP effect. Has there been an effect? Sure, a little bit. It's not the sole reason we're a little bit down on Dick's broadband this quarter.

John T. Stankey: On ACP, I think we indicated to you, probably last quarter, maybe in the quarter before the year, yeah, that we would, we would be effective at working through this, and I characterized it as, we saw no reason we should continue to be able to deliver on our commitments back to you, and that is, in fact, happening and will happen. We are most of the way through the ACP effect. Has there been an effect?

Speaker Change: Good morning, Simon. On ACP, I think we indicated to you, probably last quarter, maybe even the quarter before that, that we would be effective at working through this. We didn't see it as being material or significant, and I characterized it.

Speaker Change: We saw no reason we continue to be able to deliver on our commitments back to you, and that is in fact happening and will happen.

John T. Stankey: Sure, a little bit. But it's not the sole reason we're a little bit down on fixed broadband this quarter. There are other reasons moves are continuing to be a bit suppressed. Unknown Speaker, Unknown Attendee, Unknown Attendee, Unknown Speaker, Unknown Speaker, prepaid business performed this quarter.

Speaker Change: We are most of the way through the ACP effect. Has there been an effect? Sure, a little bit. It's not the sole reason we're a little bit down on fixed broadband this quarter. There's other reasons, moves are continuing to be a bit suppressed.

Pascal Desroches: There's other reasons moves are continuing to be a bit suppressed. Is one of them seasonally? Second quarter tends to be down a bit. But we had a little bit of an impact because of some adjustments that were made going to that, but the vast majority of our customers. Most importantly, we know who these customers are, right? Because we know that they're getting the discount through a transition process, and we feel fine about it. I'm pretty proud and pleased with our prepaid business. It had some impacts from ACP associated with it, but I think if you look at where we were with churn and where we were with gross ads and net ads in that space, I think we came through it and demonstrated that we had good quality customers who still need to use the service one way or the other, and we've accommodated them.

Speaker Change: is one of them. Seasonally, second quarter tends to be down a bit.

Speaker Change: But we had a little bit of an impact because of some adjustments that were made going through that, but the vast majority of our customers

Speaker Change: Most importantly, we know who these customers are, right, because we know that they're getting the discount, are through a transition process, and we feel fine about it. I'm pretty proud and pleased with how our prepaid business

John T. Stankey: It had some impacts from ACP associated with it, but I think if you look at where we were with churn and where we were with gross ads and net ads in that space, I think we came through it and demonstrated that we had good quality customers who still needed to use the service one way or the other; we accommodated them. So we still have a couple people hanging out there on some what I will call transitional promotions. I expect that there'll be a little bit of shrinkage in some of those transitional promotions.

Speaker Change: Performed this quarter. It had some impacts from ACP associated with it, but...

Speaker Change: I think if you look at where we were with churn and where we were with gross ads and net ads in that space,

Speaker Change: I think we came through it and demonstrated that we had good quality customers who still need to use the service one way or the other.

Pascal Desroches: So we still got a couple people hanging out there on some what I will call transitional promotions. I expect that there'll be a little bit of strength in some of those transitional promotions. They're, they're all following our expectations as we calculated what we thought the impacts are going to be; they're all consistent with the guidance that we have been giving you.

Speaker Change: We've accommodated them. So we still got a couple people hanging out there on some what I will call transitional promotions

John T. Stankey: They're all following our expectations as we calculated what we thought the impacts were going to be. They're all consistent with the guidance that we have been giving you. So I wish we hadn't had to go through this with our customer base.

Speaker Change: I expect that there will be a little bit of a shrink in some of those transitional promotions. They're all following...

Speaker Change: Our expectations as we calculated what we thought the impacts were going to be, they're all consistent.

Pascal Desroches: So I wish we hadn't had to go through this with our customer base. We did, but I think we've handled it well, and we're largely through the impacts at this juncture and moving on to do other good growth.

Speaker Change: With the guidance that we have been giving you so I wish we hadn't had to go through this with our customer base We did but I think we've handled it Well, and we're largely through the impacts at this juncture and you know moving on to do other good growth

John T. Stankey: We did, but I think we've handled it well and we're largely through the impacts at this juncture and, you know, moving on to do other good growth. In terms of where we are, you know, we've been very clear that we'll give you kind of an update, on our capital allocation strategy as we approach this two and a half times Unknown Speaker, Unknown Attendee, Amir Rozwadowski, Craig Moffett, Simon Flandery, Peter Supino, Simon Flandery, William Kennard, Amir Rozwadowski, Peter Supino, Shashank Modi, William Kennard, What you need in terms of moving forward, and I don't think there's going to be any shots in this, our priorities remain the same.

Pascal Desroches: In terms of where we are, you know, we've been very clear that we'll give you kind of an update on our capital allocation strategy as we approach this two and a half times just in that debt to EBITDA ratio in the first half of next year. I would expect that as we go through our normal cycle toward the end of the year here, as we start to give guidance for next year, you'll get what you need in terms of moving forward, and I don't think there's going to be any shocks in this. Our priorities remain the same.

Speaker Change: In terms of where we are, you know, we've been very clear that we'll give you kind of an update on our capital allocation strategy as we approach this two and a half times

Speaker Change: Justin, that debt to EBITDA ratio in the first half of next year, I would expect that as we go through our normal cycle toward the end of the year here, as we start to give guidance for next year, you'll get

Speaker Change: What you need in terms of moving forward and I don't think there's going to be any shocks in this our priorities remain the same We want to make sure we can continue to grow the business

Pascal Desroches: We want to make sure we can continue to grow the business. That's, you know, first and foremost, I want to leave a business to whoever sits in my chair later that has a good strong sustainable franchise that can be healthy and that the next generation of individuals that work at this company feel confident, proud about where the company's going to go and will invest in a way that we make sure that we have that capability and that kind of a franchise built. Then, of course, we want to continue to maintain our commitments to our bond holders and our dividend, and those are, you know, what I would say the top three. But, as you know, we'll have some optionality to go beyond that as we get into next year, and I think we'll be very delivered about that.

John T. Stankey: We want to make sure we can continue to grow the business. That's, you know, first and foremost, I want to leave a business to whoever sits in my chair later that has a good, strong, sustainable franchise that can be healthy, and that the next generation of individuals that work at this company feel confident and proud about where the company is going to go. And we'll invest in a way that we make sure that we have that capability and that kind of a franchise built. Then, of course, And those are, you know, what I would say the top three, but as you know, we'll have some optionality to go beyond that as we get into next year.

Speaker Change: That's, you know, first and foremost, I want to leave a business to whoever sits in my chair later that has a good, strong, sustainable franchise that can be healthy and that the next generation of individuals that work at this company

Speaker Change: feel confident and proud about where the company is going to go. And we'll invest in a way that we make sure that we have that, that capability and that kind of a franchise built, then, of course, we want to continue to maintain our commitments.

Jim Schneider: And I think we'll be very deliberate about that. The board is being very deliberate about it right now; we're spending multiple cycles on it. We're spending a lot of time looking at scenarios. I think we'll continue to invest in growth in this business at some level in some way. But I also believe we have the option to change our formula around how we return to shareholders, and I think you'll see us employ the right approach to that. We're ready for the next question. Our next question will come from the line of Jim Schneider of Goldman Sachs. Please go ahead.

Speaker Change: to our bondholders and our dividend. And those are, you know, what I would say the top three, but as you know, we'll have some optionality to go beyond that.

Pascal Desroches: The board is being very delivered about it right now. We're spending multiple cycles on it. We're spending a lot of time looking at scenarios. I think we'll continue to invest in growth in this business. It's some level in some way, but I also believe we have optionality to change our formula around how we return to shareholders, and I think you'll see us employ the right approach to that. Thank you.

Speaker Change: As we get into next year, and I think we'll be very deliberate about that, the board is being very deliberate about it right now, we're spending multiple cycles on it.

Speaker Change: We're spending a lot of time looking at scenarios. I think we'll continue to invest in growth in this business at some level in some way, but I also believe we have optionality to change our formula around how we return to shareholders and I think you'll see us employ the right approach to that.

Jim Schneider: Our next question will come from the line of Jim Schneider of Goldman Snacks. Please go ahead. Good morning. Thanks for taking my question.

Speaker Change: We're ready for the next question.

Speaker Change: Our next question will come from the line of Jim Schneider of Goldman Sachs. Please go ahead.

John T. Stankey: Good morning. Thanks for taking my question. Two, if I may. First, on the fiber side, relative to the long-term fiber passing target of 40-45 million, which we talked about, can you help us understand whether you're seeing stronger returns and actually accelerating the pace of build-outs from here? And then, secondly, in terms of internet air, you mentioned that it's now available for business nationally.

Jim Schneider: If I may, first on the fiber side, relative to the long-term fiber passing target of 45 million, which we talked about, can you help us understand whether you're seeing stronger returns and actually accelerating the pace of buildouts from here and how roughly would you expect that pace of additions or passing to add to trend in 2025. And then secondly, in terms of Internet air, you mentioned that it's now available for business nationally. Does that imply that the run rate of net ads could accelerate materially in the common quarters, and how much headroom do you see in your overall network capacity relative to adding business fixed wireless subscribers?

Jim Schneider: Good morning. Thanks for taking my question.

Jim Schneider: Took if I may

Jim Schneider: First, on the fiber side, relative to the long-term fiber passing target of $40 to $45 million, which we talked about, can you help us understand whether you're seeing stronger returns and actually accelerating the pace of build-outs from here? And how roughly would you expect that pace of additions or passings to trend in 2025? And then secondly, in terms of internet air, you mentioned that it's now available for business nationally.

John T. Stankey: Does that imply that the run rate of net ads could accelerate materially in the coming quarters? And how much headroom do you see in your overall network capacity relative to adding business fixed wireless subscribers? Thank you. Hi, good morning, Jim.

Speaker Change: Does that imply that the run rate of net ads could accelerate materially in the coming quarters? And how much headroom do you see in your overall network capacity relative to adding business fixed wireless subscribers? Thank you.

Jim Schneider: Thank you.

Jim Schneider: Hi, good morning, Jim. So our fiber targets assignment, alluded to earlier, it's 30 million passing by next year, and we're well on our way to doing that, and you can check the box that that's going to occur. And as I just said, I expect that with what we've been seeing and the performance of fiber, and I've been pretty clear about this for our in-region, organically developed and built fiber. Our returns on the overall investment portfolio have been better than we expected when we kind of started into this process and you know, called the 2014-15 timeframe.

John T. Stankey: So our fiber targets, as Simon alluded to earlier, are 30 million passes by next year, and we're well on our way to doing that, and you can check the box if that's going to occur. And as I just said, I expect that, with what we've been seeing and the performance of fiber, and I've been pretty clear about this for our in-region organically developed and built fiber. Our returns on the overall investment portfolio have been better than we expected when we kind of started this process in the, you know, call it the 2014-15 timeframe.

Speaker Change: Hi, good morning, Jim. So

Speaker Change: Our fiber targets, as Simon alluded to earlier, it's 30 million passings by next year and we're well on our way to doing that and you know you can check the box if that's going to occur and as I just said I expect that

Speaker Change: With what we've been seeing and the performance of fiber and I've been pretty clear about this for our in region organically developed and built fiber

Speaker Change: Our returns on the overall investment portfolio have been better than we expected when we kind of started into this process in the

John T. Stankey: And we're giving you some additional insight this quarter as you now understand what some of the strengths are as we get into these markets where we begin to have some scale on the fiber footprint that we can jointly market, both wireless and fixed together. But that's a really powerful combination for us. And that return characteristic, I would say, is still, you know, in the early innings.

John T. Stankey: And we're giving you some additional insight this quarter as you now understand what some of the strengths are as we get into these markets where we begin to have some scale on the fiber footprint that we can jointly market both wireless and fixed together. But that's a really powerful combination for us, and that return characteristic, I would say, is still, you know, call it in the early earnings. We still have a ways to go, as you saw by the numbers we put out there. It's great progress. It's clearly, I think, probably as strongest in the industry, but there's still a lot of headroom in there.

Speaker Change: You know, call up the 2014-15 timeframe, and we're giving you some...

Speaker Change: Additional insight this quarter, as you now understand.

Speaker Change: What some of the strengths are as we get into these markets where we begin to have some scale on the fiber footprint that we can jointly market.

Speaker Change: both wireless and fixed together, that that's a really powerful combination for us. And that return characteristic, I would say is still, you know, call it in the early innings, we still have a ways to go, as you saw by the numbers we put out there, it's great progress.

John T. Stankey: We still have a ways to go, as you saw from the numbers we put out there. It's great progress. It's clearly, I think, probably the strongest in the industry, but there's still a lot of headroom in there.

John T. Stankey: And I think to the extent that we fine-tune that play and we begin to bring in some of the product innovation that we want that's joint between these things and the service, we can do even better and improve that return. You know, my comment to Simon or my answer to Simon's question: do I think we're going to continue to invest in growth moving forward and move beyond 30, 30 million passes? I think the answer to that is probably exactly what that number is and at what pace.

John Stankey: And I think, to the extent that we find to in that play, and we begin to bring in some of the product innovation that we want, that's joined between these things in the service innovation. We can do even better and improve that return. Hence, you know, my comment to Simon's, my answer to Simon's question. Do I think we're going to continue to invest and grow moving forward and move beyond 30 million pass? And I think the answer to that is probably exactly what that number is in pace. We'll give you a little bit more color as we get into a latter part of this year, and I make sure that we've got the board 100% where we were all in the same mindset around that.

Speaker Change: It's clearly, I think, probably the strongest in the industry, but there's still a lot of headroom in there. And I think to the extent that we fine-tune that play and we begin to bring in some of the product innovation that we want, that's joint between these things, and the service innovation.

John T. Stankey: We'll give you a little bit more color as we get into the latter part of this year, and I'll make sure that we've got the board 100% where we are all in the same mindset around that. And as I said, we're going through that process right now to make sure we're deliberate. I think one of the things that you should keep in mind as we go through this is what I said to John.

Speaker Change: We can do even better and improve that return.

Speaker Change: You know my comment to Simon's or my answer to Simon's question Do I think we're going to continue to invest in growth moving forward and move beyond 30 30 million passings? I think the answer to that is probably

Speaker Change: Exactly what that number is and pace will give you a little bit more color as we get into the latter part of this year and I make sure that we've got the board 100% where we were all in the same mindset around that. And as I said, we're going through that process right now to make sure we're deliberate.

John Stankey: And, as I said, we're going to that process right now to make sure we're deliberate. I think one of the things that you should keep in mind is, we go through that is what I said to John. We have a lot of tools, of which we can go in and put a good converged offer in place in a lot of ways to do it. And I think because our financial returns have been as strong as they are, there's, you know, a lot of capital out there available, and people want an able partner. And there's a lot of ways we can go by doing this, whether that's through capital line approaches with straight wholesale and becoming a good partner to others that are building.

Speaker Change: I think one of the things that you should keep in mind as we go through that is what I said to John . We have a lot of tools of which we can go in and put a good converged offer in place and a lot of ways to do it.

John T. Stankey: We have a lot of tools with which we can go in and put a good converged offer in place, and there are a lot of ways to do it, and I think because our financial returns have been as strong as they are. There's, you know, a lot of capital out there available, and people want an able partner. And there are a lot of ways we can go about doing this, whether that's through capital light approaches with straight wholesale and becoming a good partner to others that are building or doing, you know, partnership arrangements or doing organic build. And I think we're going to take advantage of all three.

John T. Stankey: And we can do that in a way that drives really good returns back into the business that everybody looks at and says, that makes a lot of sense. In terms of where we are on the internet error run rate, you should expect that we're going to continue to grow, and you'll see improvements, and our rates associated with that. But I don't want you to take that and say that it's an artifact of a change in strategy.

Speaker Change: And I think because...

Speaker Change: Our financial returns have been as strong as they are. There's, you know, a lot of capital out there available and people want an able partner and

Speaker Change: There's a lot of ways we can go about doing this, whether that's through capital light approaches with straight wholesale and becoming a good partner to others that are building.

John T. Stankey: Or doing, you know, partnership arrangements are doing organic build, and I think we're going to take advantage of all three. And we can do that the way that drives really good returns back into the business that everybody looks at and says that makes a lot of sense.

Speaker Change: or doing, you know, partnership arrangements or doing organic build. And I think we're going to take advantage of all three. And we can do that the way that drives really good returns back into the business that everybody looks at and says that makes a lot of sense.

John Stankey: In terms of where we are on the internet air run. You should expect that we're going to continue to grow, and you'll see improvements in our rates associated with that. But I don't want you to take that and say that that's an artifact that would change and strategy. We are executing the strategy we put out, and again, I don't want to sound like a broken record, but I've articulated that our strategies a bit different than others. We're not broadly offering Internet air everywhere we do business. We're being selective in how we do that. We're doing it in places where it makes sense to aid our transition from legacy technology to new technology that helps us take cost out of the business.

Speaker Change: In terms of where we are on the internet error run rate, you should expect that we're going to continue to grow and you'll see improvements.

Speaker Change: In our rates associated with that.

Speaker Change: But I don't want you to take that and say...

John T. Stankey: We are executing the strategy we put out. And again, I don't want to sound like a broken record, but I've articulated that our strategy is a bit different than others. We're not broadly offering internet air everywhere we do business.

Speaker Change: that that's an artifact of a change in strategy, we are executing the strategy we put out. And again, I don't want to sound like a broken record, but I've articulated

Speaker Change: That our strategy is a bit different than others. We're not broadly offering internet air everywhere we do business.

John T. Stankey: We're being selective in how we do that. We're doing it in places where it makes sense to aid our transition from legacy technology to new technology that helps us take cost out of the business. We're doing it in places where we have them. As I said last quarter, any place the right business customer wants to buy it, we'll sell it. And that means whether we've got capacity or not, the business product is a different product. The business product has different usage characteristics. The business product has different ARPU characteristics, and the business product has different characteristics around how you can bundle and serve multiple products together.

Speaker Change: We're being selective in how we do that. We're doing it in places where it makes sense to aid our transition from legacy technology to new technology that helps us take cost out of the business. We're doing it in places where we have

John Stankey: We're doing it in places where we have very valid capacity that we can be confident will be long-lived in nature and not something that we end up having to incrementally invest in two years out after we sell into the market. We're doing it as I said last quarter. Any place right business customer wants to buy it, will sell it, and that means whether we've got capacity or not. The business product is a different product. The business product has different usage characteristics. The business product has different our food characteristics, and the business product has different characteristics around how you can bundle and serve multiple products together.

Speaker Change: A very fallow capacity that we can be confident will be long-lived in nature and not something that we end up having to incrementally invest in two years out after we sell into the market.

Speaker Change: We're doing it, as I said last quarter, any place the right business customer wants to buy it, we'll sell it. And that means, whether we've got capacity or not, the business product is a different product. The business product has different usage characteristics.

Speaker Change: The business product has different ARPU characteristics and the business product has different characteristics around how you can bundle and serve multiple products together.

John T. Stankey: And so I feel very comfortable in a nationwide offer on business that when we pick up the right customer there and how we employ that capability. Either for primary or backup that we can profitably add it to other portfolios and into our service offerings and reinvest in that in a way that makes sense for the business. So you'll continue to see a scale further in the business market where we're still getting the distribution tuned and honed in that space, and I would expect you to see improvement in our numbers in the business segment as we move forward in the coming quarters.

John T. Stankey: And so I feel very comfortable with a nationwide business offer, that when we pick up the right customer there and how we employ that capability, either for primary or backup, we can profitably add it to other portfolios and into our service offerings and reinvest in it in a way that makes sense for the business. So you'll continue to see us scale further in the business market. We're still getting the distribution tuned and honed in that space, and I would expect you to see improvement in our numbers in the business segment as we move forward in the coming quarters. Thank you.

Speaker Change: And so I feel very comfortable in a nationwide offer on business that when we pick up the right customer there and how we employ that capability, either for primary or backup.

Speaker Change: That we can profitably add it to other portfolios and into our service offerings and reinvest in it in a way that makes sense for the business.

Speaker Change: You'll continue to see a scale further in the business market. We're still getting the distribution tuned and honed in that space, and I would expect you to see improvement in our numbers in the business segment as we move forward in the coming quarters.

Pascal Desroches: Thank you.

Operator: Are you ready for the next question, Operator? Our next question will come from the line of David Barden of Bank of America. Please go ahead.

David Barden: Our next question will come from the line of David Barden, of Bank of America. Please go ahead. Hey guys, thanks so much for taking the questions. John, I wanted to maybe go back to something you just said, which was that there's a race to convergence in the market, and I think that not everyone agrees that that's a true statement, that maybe it's more of a race for AT&T to exploit the opportunity it has in its footprint. To converge as much as possible, you mentioned that you've got a 500 basis point market share advantage in the areas where you've deployed fiber.

Speaker Change: Thank you.

Speaker Change: Are you ready for the next question, operator? Our next question will come from the line of David Barden of Bank of America. Please go ahead.

David Barden: Hey, guys, thanks so much for taking the questions. Um, John, I wanted to maybe go back to something you just said, which was that there is a race to convergence in the market. And I think that not everyone agrees that that's a true statement, that maybe it's more of a race for AT&T to exploit the opportunity it has in its footprint to converge as much as possible. You mentioned that you've got a 500 basis point market share advantage in the areas where you've deployed fiber.

David Barden: Hey guys, thanks so much for taking the questions, um John I wanted to maybe go back to something you you just said which was that there's a race to convergence

Speaker Change: Unknown Speaker In the market, and I think that not everyone agrees that that's a true statement that maybe it's more of a race for AT&T to exploit the opportunity it has in its in its footprint to converge as much as possible. You mentioned

Amir Rozwadowski: Amir Rozwadowski

David Barden: Could you kind of share more data that would support your argument that, you know, that there should be a race to convergence, that AT&T is in a unique position to take advantage of these economics beyond simply market share.

Speaker Change: that you've got a 500 basis point market share advantage in the areas where you've deployed fiber. Could you kind of share more data?

David Barden: Could you kind of share more data that would support your argument that, you know, there should be a race to convergence, that AT&T is in a unique position to take advantage of these economics beyond simply market share? And then, if I could, the second question would be: you know, there's been a series of events over the course of the year, network outages, data breaches, disclosures about previous data breaches. Is there anything that we need to know about how that's impacting either your go-to-market or the possibility of future financials? Thank you. Hi Dave, good morning.

Speaker Change: that would support your argument that, you know, that there should be a race to convergence, that AT&T is in a unique position.

David Barden: And then if I could, the second question would be, you know, there's been a series of events over the course of the year: network outages, data breaches, disclosures about previous data breaches. Is there anything that we need to know about how that's impacting either your go to market or the possibility of future financials? Thank you.

Speaker Change: to take advantage of these economics beyond simply market share. And then, if I could, the second question would be.

Speaker Change: You know, there's been a series of events over the course of the year.

Speaker Change: Network Outages, Data Breaches, Disclosures about Previous Data Breaches.

Speaker Change: Is there anything that we need to know about how that's impacting either your go-to-market or the possibility of future financials? Thank you.

John Stankey: Hi, good morning, Dave. So look, you will get more and more as we move forward over time. I think it gave you just a lot of insight with what we shared today, and I'm not necessarily going to tick off other things that we look at, but you should conclude a couple of things. One, are combined customers are happier customers. They have lower turn, and they have longer lifetime values. Why erase the convergence? Because that's a good way to make money, and it's a good way to keep customers in the fold. And I don't know; I hope not everybody believes that's the right strategy.

John T. Stankey: So, Look, I think I gave you just a lot of insight with what we shared today, and I'm not necessarily going to tick off the other things that we look at, but you should conclude a couple things. One.

Speaker Change: Hi, good morning, Dave. So...

Speaker Change: Look, you will get more and more as we move forward over time. I think I gave you just a lot of insight with what we shared today, and I'm not necessarily going to tick off other things that we look at, but you should conclude a couple things.

John T. Stankey: Our combined customers are happier customers. They have lower churn, and they have longer lifetime values. Why raise the convergence?

Speaker Change: Our combined customers are happier customers. They have lower churn and they have longer lifetime values. Why a race to convergence? Because that's a good way to make money. And it's a good way to keep customers in the fold.

John T. Stankey: Because that's a good way to make money. And it's a good way to keep customers in the fold. I don't know I, I hope not everybody believes that's the right strategy. But I think it is.

John Stankey: I think it is we're going to continue to push the pedal on it because we're uniquely positioned to do it well. And that's what I think is the exciting thing about this company. We have an opportunity for great organic growth and organic investment that allows us to control our own destiny. And when part of that is constructed around a share take dynamic, we don't necessarily have to tire ourselves to the overall growth of the market. And whether or not there's growth in fixed broadband connections, we can play into, we just want somebody else's connection. And I think we're demonstrating that we can do that effectively.

John T. Stankey: We're going to continue to push the pedal on it because we're uniquely positioned to do it well. And that's what I think is the exciting thing about this company. We have an opportunity for great organic growth and organic investment that allows us to control our own destiny. And when part of that is, you know, constructed around a share take dynamic, we don't necessarily have to tie ourselves to the overall growth of the market, and whether or not there's growth and fixed broadband connections we can play into, we just want somebody else's connection.

Speaker Change: I don't know, I...

Speaker Change: I hope not everybody believes that's the right strategy. I think it is. We're going to continue to push the pedal on it because we're uniquely positioned to do it well.

Speaker Change: And that's what I think is the exciting thing about this company. We have an opportunity for great organic growth and organic investment.

Speaker Change: that allows us to control our own destiny. And when part of that is, you know, constructed around a share take dynamic, we don't necessarily have to tie ourselves

Speaker Change: To the overall growth of the market and whether or not there's, you know, growth and fixed broadband connections We can play into we just want somebody else's connection

John T. Stankey: And I think we're demonstrating that we can do that effectively. So maybe that's why it's more important to me than somebody else who's already a dominant player in the space and wants to, you know, think about it in a different, a different lens. And when I say race, I mean, this race is going to take place over years.

John Stankey: So maybe that's why it's more important to me than somebody else who's already a dominant player in the space and wants to think about it in a different, different lens. And when I say race, I mean this race is going to take place over years. It's not going to take place in a quarter or a year or two years. It's a reordering of assets. And I think if it's done right, it's going to be really, really effective. I think customers are another driver behind this race. I don't think customers intuitively love to have more relationships in their life with suppliers of critical services to them than they have to.

Speaker Change: And I think we're demonstrating that we can do that effectively. So maybe that's why it's more important to me than somebody else who's already a dominant player in the space and wants to, you know, think about it in a different a different lens.

John T. Stankey: It's not going to take place in a quarter or a year or two years. It's a reordering of assets. And I think if it's done right, it's going to be really, really effective. I think customers are another driver behind this race. I don't think customers intuitively love to have more relationships in their lives with suppliers of critical services to them than they have to. I think they'd like to have, you know, a few trusted relationships if it works well.

Speaker Change: And when I say race, I mean this race is going to take place over years. It's not going to take place in a quarter or a year or two years.

Speaker Change: It's a reordering of assets. And I think if it's done right, it's going to be really, really effective. I think customers are another driver behind this race. I don't think customers intuitively love to have more relationships in their life with

John Stankey: I think they like to have, you know, if you trusted relationships, if it works well. And so whoever figures that out over time. whoever can give the customer a great value and ensure for them that wherever they go around the globe at whatever time either through organic, owned and operated relationships or third-party aggregation can be the one place somebody goes to get that connectivity. I think that's a winning combination, and I believe the person that does that the best will ultimately return the best in this industry and gain scale the best. So that's my rationale behind it and where we're going, and I think that's our true north of how we think about orienting this company, how we're thinking about product development, how we're thinking about how we want to structure pricing plans.

Speaker Change: Suppliers of critical services to them, and they have to, I think they'd like to have, you know, a few trusted relationships if it works well. And so whoever figures that out over time.

John T. Stankey: And so whoever figures that out over time and can give the customer great value and ensure for them that wherever they go around the globe at whatever time, either through organic, owned and operated relationships or third party aggregation, can be the one place that somebody goes to get that connectivity.

Speaker Change: Whoever can give the customer great value and ensure for them that wherever they go around the globe at whatever time, either through organic owned and operated relationships or third party aggregation.

John T. Stankey: I think that's a winning combination and I believe the person that does that the best will ultimately return the best in this industry and gain the most scale. So that's my rationale behind it and where we're going. And I think that's our true north of how we think about orienting this company, how we think about product development, how we think about how we want to structure pricing plans. We're just keeping that in the back of our minds over the next decade because I think that's where the management team needs to go and what needs to happen. And I understand this will be a race that we fight, you know, year after year after year; it's not quarter after quarter after quarter. Um, look, going to your second question.

Speaker Change: can be the one place that somebody goes to get that connectivity. I think that's a winning combination. And I believe the person that does that the best.

Speaker Change: will ultimately return the best in this industry and gain scale the best. So that's my rationale behind it and where we're going. And I think it's our true north of

Speaker Change: How we think about orienting this company, how we're thinking about product development, how we're thinking about how we want to structure pricing plans.

John T. Stankey: We're just keeping that in the back of our mind over the next decade because I think that's where the management team needs to go and what needs to happen. And I understand this will be a race that we fight, you know, year after year after year; it's not quarter after quarter after quarter.

Speaker Change: We're just keeping that the back of our mind over the next decade because I think that's where the management team needs to go And what needs to happen and I understand this will be a race that we fight, you know year after year after year It's not quarter after quarter after quarter

John Stankey: Look, going to your second question, there's nobody more disappointed that we have to actually address your question and work through these issues than I am. And I know that all of my co-workers here share that same disappointment that we've had some instances where we've let down customers. Now, having said that, I think we've done the right things in responding to it. We care about our reliability; we care about how well we run this business from a privacy and a data security perspective. I think we know how to do those things. We are operating in an incredibly dynamic environment on two fronts: one, we're changing a lot in our business.

John T. Stankey: There's nobody more disappointed that we have to actually address your question and work through these issues than I am. And I know that all of my co-workers here share that same disappointment that we've had some instances where we've let down customers. Now, having said that,

Speaker Change: Going to your second question.

Speaker Change: There's nobody more disappointed that we have to actually address your question and work through these issues than I am, and I know that.

Speaker Change: All of my co-workers here share that same disappointment that we've had some instances where we've let down customers.

John T. Stankey: I think we've done the right things in responding to it. We care about our reliability. We care about how well we run this business from a privacy and data security perspective. I think we know how to do those things.

Speaker Change: Now, having said that, I think we've done the right things in responding to it. We care about our reliability, we care about how well we run this business from a privacy and a data security perspective.

John T. Stankey: We are operating in an incredibly dynamic environment on two fronts. One, we're changing a lot in our business, which is necessary. And I'm proud of the changes we've been making. I'm proud of the progress we're making, but it comes with a lot of moving parts. And two, the threat environment we're in is a really, really difficult environment, and it's probably going to get even more difficult some of the geopolitical dynamics that are going on or putting pressure on that.

Speaker Change: I think we know how to do those things. We are operating in an incredibly dynamic environment on two fronts. One, we're changing a lot in our business.

John Stankey: Which is necessary, and I'm proud of the changes we've been making, and I'm proud of the progress we're making, but it comes with a lot of moving parts. And two, the threat environment we're in is a really, really difficult environment. And it's going to get probably more difficult. Some of the geopolitical dynamics that are going on are putting pressure on that. Good companies, just like ours, are all having to learn some new things and are seeing new threats and new environments that they have to adjust to. And unfortunately, because we have a big large customer base, I think there's a little bit more focus put on that kind of missteps or issues and learnings that we might go through versus some others from time to time.

Speaker Change: which is necessary. And I'm proud of the changes we've been making. And I'm proud of the progress we're making. But it comes with a lot of moving parts.

Speaker Change: And two, the threat environment we're in is a really, really difficult environment, and it's going to get probably more difficult. Some of the geopolitical dynamics that are going on are putting pressure on that.

John T. Stankey: Good companies, just like ours, are all having to learn some new things and are seeing new threats and new environments that they have to adjust to. And unfortunately, because we have a big, large customer base, I think there's a little bit more focus on the kind of missteps or issues and learnings that we might go through versus some others from time to time. But everybody's dealing with this problem.

Speaker Change: Good companies, just like ours, are all having to learn some new things and are seeing new threats and new environments that they have to adjust to.

Speaker Change: And unfortunately, because we have a big, large customer base, I think there's a little bit more focus put on that.

John T. Stankey: What I'm proud of is how we've dealt with it. We've been responsive. We've done it in a way that I think we've taken good action to learn from those things internally. We've been transparent with our customers about what the circumstances are. I think we've stood behind our product in those instances, and from all the evidence that I see data-wise, in a way that we are doing as good a job maintaining our customers' confidence as I could hope.

John Stankey: But everybody's dealing with this problem. What I'm proud of is how we dealt with it. We've been responsive; we've done it in a way that I think we've taken good action to learn from those things internally. We've been transparent with our customers around what the circumstances are. I think we stood behind our product and those instances. We are, I think, navigating that from a communications perspective. From all evidence that I see data-wise, in a way that we are doing is good at job maintaining our customers' confidence as I could hope. And I'm not dismissing the issue in any way, shape, or form.

Speaker Change: Kind of missteps or issues and learnings that we might go through versus some others from time to time

Speaker Change: But everybody's dealing with this problem. What I'm proud of is how we've dealt with it. We've been responsive. We've done it in a way that I think we've taken good action to learn from those things internally.

Speaker Change: We've been transparent with our customers around what the circumstances are. I think we've stood behind our product in those instances.

Speaker Change: We are, I think, navigating that from a communications perspective from all evidence that I see data-wise in a way that we are doing as good a job maintaining our customers' confidence as I could hope.

John T. Stankey: And I'm not dismissing the issue in any way, shape, or form. I view it as very, very important. It's clearly something I don't ever wish to go through, but we've handled it about as well as we can go through it.

John Stankey: I view it as very, very important. It's clearly something I don't ever wish to go through. But we've handled it about as well as we can going through it, and as I've indicated to you, and as Pascal indicated to you, we feel confident in our financial guidance going forward. We feel confident in our public statements and filings that we've made on these subjects, where we described the fact that these are not material to the performance of the business. And that's where we stand today, and we're going to continue to describe every day to do better and not have this conversation again.

Speaker Change: And I'm not dismissing the issue in any way, shape, or form.

Speaker Change: I don't ever wish to go through, but we've handled it about as well as we can going through it. And as I've indicated to you, and as Pascal indicated to you, we feel confident in our financial guidance going forward.

John T. Stankey: And as I've indicated to you, and as Pascal indicated to you, we feel confident in our financial guidance going forward. We feel confident in our public statements and filings that we've made on these subjects, where we describe the fact that these are not material to the performance of the business. And that's where we stand today, and we're going to continue to strive every day to do better and not have this conversation again. Thanks, Sean.

Pascal Desroches: We feel confident in our public statements and filings that we've made on these subjects where we Describe the fact that these are not material over the performance of the business

Sean: And that's where we stand today. And we're going to continue to strive every day to do better and not have this conversation again. Thanks, Sean.

John Stankey: Thanks, Sean.

Sebastiano Carmine Petti: We're ready for our next question. Our next question comes from the line of Sebastiano Petti of J.P. Morgan. Please go ahead.

Sebastiano Carmine Petti: Our next question comes from the line of Sebastiano Petti of J.P. Morgan, please go ahead. Hi, thanks for taking the question, Pascal. I just want to see if I could, if we could follow up perhaps on the, I believe it was $480 million, one-timer to, in the back half of the year that you anticipate from the wireless transformation. Maybe a little bit of color on what that is.

Speaker Change: Are we ready for our next question? Our next question comes from the line of Sebastiano Petti of J.P. Morgan. Please go ahead.

Pascal Desroches: Hi, thanks for taking the question, Pascal. I just want to see if we could follow up perhaps on the $480 million one-timer to the back half of the year that you anticipate from the wireless transformation, maybe a little bit of color on what that is. And perhaps, you know, was this fully contemplated within guidance at the beginning of the year.

Sebastiano Carmine Petti: Hi, thanks for taking the question, Pascal. I just wanted to see if I could, if we could follow up perhaps on the, I believe it was $480 million one-timer.

Speaker Change: to in the back half of the year that you anticipate from the wireless transformation. Maybe a little bit of color on what that is, perhaps what was fully contemplated within guidance at the beginning of the year? And then an additional question for John . Just try to help us think about...

Pascal Desroches: We're perhaps, you know, was this fully contemplated within guidance at the beginning of the year.

Pascal Desroches: And then an additional question for John, just try to help us think about where we are from an FCC perspective with a lack of spectrum authority. [inaudible] Hey Sebastiano. In terms of the payment we expect to make, as we've said, we reported late last year that we were entering into a new agreement, and that as part of that, we'd be phasing out the use of one of our vendors, and we expected some level of termination payment associated with that, and whether or not that was contemplated in our guidance, I'm not going to get into. But we are very comfortable sitting here today that we are Hi Sebastiano.

Sebastiano Petti: And then an additional question for John, just trying to help us think about, you know, given where we are from an FCC perspective with a lack of spectrum authority, maybe lack of a pipeline as well on the spectrum inside. How are you and the team perhaps thinking about, you know, spend and augmentation of the wireless network or how you're planning around that, just kind of given, given those two dynamics. Thank you.

John T. Stankey: you know, given where we are from an FCC perspective

Amir Rozwadowski: Unknown Executive, Amir Rozwadowski

Pascal Desroches: Hey, Sebastiano, in terms of the payment we expect to make, we've said we reported late last year that we were entering into a new agreement and that, as part of that, we'd be facing out one of the use of one of our vendors, and we expected some level of determination payment associated with that. And whether or not that was contemplating our guides, I'm not going to get into, but we are very comfortable sitting here today that we are going to be able to pay that and still deliver on up to your commitment.

Sebastiano Carmine Petti: Hey, Sebastiano.

Speaker Change: In terms of the payment we expect to make, as we've said, we reported late last year that we were entering into a new agreement and that as part of that we'd be phasing out

Speaker Change: One of the use of one of our vendors and

Speaker Change: We expected some level of termination payment associated with that.

Speaker Change: and a few.

Speaker Change: Whether or not that was contemplated in our guides, I'm not going to get into, but we are very comfortable sitting here today that we are going to be able to pay that and still deliver on our full year commitments.

John Stankey: Hi Sebastiano, so to answer your question, first of all, I think it's important to frame that it starts with a point of view that we view capacity as being a fixed resource that has to be managed very, very carefully. And so made some comments earlier about our point of view around fixed wireless and how we deploy that spectrum and where we deploy that capacity. I mean, it ties into a point of view of how do we invest in the network moving forward and how do we monetize that scarce resources effectively as we can. And that's part of our planning, and look, the good news is we put a lot of capacity out there over the course of the last couple of years, and we have a little bit more to go, but we're using that wisely.

John T. Stankey: So to answer your question, first of all, I think it's important to frame that it starts with a point of view that we view capacity as being a fixed resource that has to be managed very, very carefully. And so we made some comments earlier about our point of view on fixed wireless. How we deploy that spectrum and where we deploy that capacity, I mean, it ties into a point of view of, How do we invest in the network moving forward? And how do we monetize that scarce resource as effectively as we can?

Speaker Change: Hi, Sebastiano. So to answer your question, first of all,

Speaker Change: I think it's important to frame that it starts with a point of view that we view capacity

Speaker Change: As being a fixed resource that has to be managed very, very carefully, and so made some comments earlier about our point of view around fixed wireless and

Speaker Change: how we deploy that spectrum and where we deploy that capacity. I mean, it ties into a point of view of how do we invest in the network moving forward? And how do we monetize that scarce resource as effectively as we can? And that's part of our planning. And look, the good news is

John T. Stankey: And that's part of our planning. And look, the good news is We put a lot of capacity out there over the course of the last couple of years, and we have a little bit more to go, but we're using that wisely, we're being very deliberate around how we deploy it, we want to make sure we give ourselves the longest runway to return as we can, and I think our strategies are directly proportional to that, and I don't think you should disconnect our investment in fiber from the fact that, you know, we've got spectrum planning issues to do, and I'll get to maybe that part in just a minute, we think that, A good way to pick up high density traffic in places is to do it over fiber, not to do it over wireless. And so that's a that's a difference.

Speaker Change: We've put a lot of capacity out there over the course of the last couple years and we have a little bit more to go, but we're using that wisely. We're being very deliberate around how we deploy it.

John T. Stankey: We're being very delivered around how we deploy it. We want to make sure we give ourselves the longest runway to return as we can. And I think our strategies are directly proportional to that, and I don't think you should disconnect our investment in fiber from the fact that we've got spectrum planning issues to do, and I'll get to maybe that part in just a minute. We think that a good way to pick up high-density traffic in places is to do it over fiber, not to do it over wireless. And so that's a difference, and maybe my point of view on today's question: convergence and how the market develops over time, and trying to be deliberate in how we do capital allocation.

Speaker Change: We want to make sure we give ourselves the longest runway to return as we can. And I think our strategies are directly proportional to that. And I don't think you should disconnect our investment in fiber from the fact that, you know, we've got spectrum planning issues to do. And I'll get to maybe that part in just a minute. I think that

John T. Stankey: And maybe my point of view on today's question convergence and how the market develops over time and trying to be deliberate in how we do capital allocation. Now, in the near term, I expect we're going to be using every trick in the book, as we historically do, to ensure that we can deal with the 30% growth. One trick in the book is that you continue to advocate for policy change. And I've been pretty vocal.

Speaker Change: A good way to pick up high-density traffic in places is to do it over fiber, not to do it over wireless. And so that's a difference in maybe my point of view on today's question, convergence, and how the market develops over time, and trying to be deliberate in how we do capital allocation.

John Stankey: Now, in the near term, I expect we're going to be using every trick in the book, as we historically do, to ensure that we can deal with the 30% growth. One trick in the book is you continue to advocate for policy change. And I've been pretty vocal. I mean, I go and look in some of the comments I've made. I've gone out of my way to walk into some public forums to say that I do not think spectrum policy in this country is on the right path right now. And that change could come possibly with a change of posture from the existing administration, which may get tweaked and adjusted by a new leader or by an administration change.

Speaker Change: Now, in the near term, I expect we're going to be using every trick in the book, as we historically do, to ensure that we can deal with the 30% growth. One trick in the book is you continue to advocate for policy change.

John T. Stankey: I mean, I go and look at some of the comments I've made, I've gone out of my way to walk into some public forums to say that I do not think spectrum policy in this country is on the right path right now.

Speaker Change: And I've been pretty vocal. I mean, I go and look and some of the comments I've made, I've gone out of my way to walk into some public forums to say that I do not think spectrum policy in this country is on the right path right now.

John T. Stankey: And that change could come possibly with a change of posture from the existing administration, which may get tweaked and adjusted by a new leader or by an administration change. And that's important because I think there are things we can do from a policy side to improve the availability of spectrum, which is the most effective way to increase capacity in a network. And we'll continue to advocate for and push for those changes as we move forward.

Speaker Change: That change could come possibly with a change of posture.

Speaker Change: From the existing administration, which may get tweaked and adjusted by a new leader or by an administration change. And that's important because I think there are things we can do from a policy side.

John Stankey: And that that's important because I think there are things we can do from a policy side to improve the availability of spectrum, which is the most effective way to increase capacity in a network. And we'll continue to advocate, push for those changes as we move forward. Second, there are some options in the secondary market, some of them that will be available through normal course. And frankly, some others that could be made available if there were some policy and spectrum adjustments made to how particular spectrum assets that have been put into the speculator market that they're out there could potentially be used and put to use.

Speaker Change: to improve the availability of Spectrum, which is the most effective way to increase capacity in a network. And we'll continue to advocate and push for those changes as we move forward.

John T. Stankey: Second, there are some options in the secondary market, some of them that will be available through the normal course, and frankly, some others that could be made available if there were some policy and spectrum adjustments made to how particular spectrum assets that have been put into the speculator market that are out there could potentially be used and put to use.

Speaker Change: There are some options in the secondary market, some of them that will be available through normal course, and frankly, some others that could be made available if there were some policy and spectrum adjustments.

Speaker Change: Spectrum assets that have been put into the speculator market, they're out there, could potentially be used and put to use and I think good policy for this country right now.

John Stankey: And I think good policy for this country right now would be that for everything that we have licensed, that we want it to actually be invested in and turned into service. And it seems to me that that would be a good thing, especially when this country is behind other countries like China and other regions of the world in getting licensed spectrum into service. So I would suggest that if we look at that, there's some near-term opportunity to use existing licensed spectrum that's out there by just tweaking some rules and doing some things differently to get investment in it and actually get capacity.

John T. Stankey: And I think a good policy for this country right now would be that for everything that we have licensed, we want it to actually be invested in and turned into service. And it seems to me that that would be a good thing, especially when this country is behind other countries like China and other regions of the world in getting licensed spectrum into service. So I would suggest that if we look at that, there's some near-term opportunity to use existing licensed spectrum that's out there by just tweaking some rules and doing some things differently to get investment in it and actually get capacity.

Speaker Change: It would be that for everything that we have licensed, that we want it to actually be invested in and turned into service. And it seems to me that that would be a good thing, especially when this country

Speaker Change: is behind.

Speaker Change: Other countries like China and other regions of the world and getting licensed spectrum into service. So

Speaker Change: I would suggest that if we look at that, there's some near-term opportunity to use existing license spectrum that's out there by just tweaking some rules and doing some things differently to get investment in it and actually get capacity in it.

John T. Stankey: Third, we talked about what we're doing around O-RAN, and I think if you go back to my comments, I shared with you that one of the reasons we think that it's so critical that we open these interfaces up and we take this step is to participate in the next generation of wireless deployments. It's in more distributed radiation points rather than macro sites to get the benefits of openness in the cost curves and flexibility.

John Stankey: Third, we talked about what we're doing around O-RAN. And I think if you go back to my comments, I shared with you that one of the reasons we think that it's so critical that we open these interfaces up. But we take this step is to play in the next generation of wireless deployment. It's in more distributed radiation points rather than macro sites, and to get the benefits of openness in the cost curves and the flexibility. Busting those interfaces open and getting a multi-vendor environment and then using our dense fiber assets, we're deploying is a match made in heaven to be able to deal with that growth in a more cost-effective way.

Speaker Change: Third, we talked about what we're doing around O-RAN, and I think if you go back to my comments

Speaker Change: I shared with you that one of the reasons we think that it's so critical that we open these interfaces up and we take this step

Speaker Change: is to play in the next generation of wireless deployment. It's in more distributed radiation points rather than macro sites, and to get the benefits of openness in the cost curves and the flexibility.

John T. Stankey: Busting those interfaces open and getting a multi-vendor environment and then using our dense fiber assets that we're deploying is a match made in heaven to be able to deal with that growth in a more cost-effective way. And so that's a deliberate aspect of our strategy as to why we're doing O-RAN the way we're doing, why we're thinking about O-RAN as busting open the smaller cell structure to get more innovation, more providers, and how to then layer that on top of the fact that we're putting denser fiber reaches into our network that allows us to take advantage of that.

Speaker Change: Busting those interfaces open and getting a multi-vendor environment, and then using our dense fiber assets that we're deploying is a match made in heaven to be able to deal with that growth in a more cost-effective way. And so that's a deliberate aspect of our strategy as to why we're doing O-RAN the way we're doing.

John Stankey: And so that's a deliberate aspect of our strategy is to why we're doing O-RAN the way we're doing why we're thinking about O-RAN is busting open the smaller cell structure to get more innovation, more providers. And how to then layer that on top of the fact that we're putting dancer fiber reaches into our network that allows for us to take advantage of that. That allows for more efficient growth of capacity as we move forward.

Speaker Change: Why we're thinking about O-RAN is busting open the smaller cell structure to get more innovation, more providers, and how to then layer that on top of the fact that we're putting denser fiber reaches into our network that allows for us to take advantage of that.

John T. Stankey: That allows for more efficient growth of capacity as we move forward. So I would tell you that I think we've got a lot of tools in place to be able to do this, but it starts with market discipline around how you sell the product and service. And I feel like we're in pretty good shape around our mix of fixed and mobile assets and how we're thinking about that evolution of conversion. All right, I think we're ready for our next question, operator. Our next question comes from the line of Michael Rollins of Citi. Please go ahead.

Operator: So I would tell you that I think we've got a lot of tools in place to be able to do this, but it starts with market discipline around how you sell the product and service. And I feel like we're in a pretty good shape around our mix of fixed and mobile assets and how we're thinking about that evolution of convergence.

Speaker Change: That allows for a more efficient growth of capacity as we move forward.

Speaker Change: So, I would tell you that I think we've got a lot of tools in place to be able to do this, but it starts with...

Speaker Change: market discipline around how you sell the product and service. And I feel like we're in a pretty good shape around our mix of fixed and mobile assets and how we're thinking about that evolution of convergence.

Operator: I think we're ready for our next question, operator.

Michael Rollins: Our next question comes from the line of Michael Rollins of City. Please go ahead. Thanks and good morning. Two topics, if I could.

Speaker Change: All right, I think we're ready for our next question, Operator. Our next question comes from the line of Michael Rollins of Citi. Please go ahead.

Michael Ian Rollins: Thanks and good morning. Two topics, if I could. First, on mobility.

Michael Rollins: First, on mobility, just curious if you could further unpack what are the strengths in the post-paid phone that ads came from during the quarter, and if you're seeing any changes in the competitive landscape with some of the adjustments to the promotional strategies from some of the cable and MNO competitors.

Michael Ian Rollins: Thanks, and good morning. Two topics, if I could. First, on mobility, just curious if you could further unpack where the strength in the post-paid phone net ads came from during the quarter, and if you're seeing any changes in the competitive landscape with some of the adjustments to the promotional strategies from some of the cable and M&O competitors.

Michael Rollins: And second, on the cost structure, curious if you could share your progress on the multi-year cost-cutting targets, and how you're looking at the durability for EBITDA growth on a consolidated basis to potentially outpace the consolidated service revenue performance. Thanks.

Speaker Change: And second, on the cost structure, I'm curious if you could share your progress on the multi-year cost-cutting targets and how you're looking at the durability for EBITDA growth on a consolidated basis.

Speaker Change: to potentially outpace the consolidated service revenue performance. Thanks.

John Stankey: Hi, Michael. So look, I would tell you the story really isn't a whole lot different than it's been. We're intercepting customers and channels where we think we can make a difference in where we can add them profitably. You can look at the macro numbers, and you'll notice one of the things that's occurring is we're growing a little bit faster in the business segment on wireless than we are in the consumer segment. Part of why we grow better in businesses is because we're doing better in some of the government, public safety, first responder structures, and that's a help of what's occurring there. As we get their large enterprise relationships, do the right thing in that space that can help us grow a little bit quicker.

John T. Stankey: Just curious if you could further unpack where the strength in the postpaid phone net ads came from during the quarter, and if you're seeing any changes in the competitive landscape with some of the adjustments to the promotional strategies from some of the cable and M&O competitors. And second, on the cost structure, curious if you could share your progress on the multi-year cost cutting targets and how you're looking at the durability of EBITDA growth on a consolidated basis to potentially outpace the consolidated service revenue performance. Hi Michael. So, look, I would tell you, the story really isn't a whole lot different than it has been.

John T. Stankey: We're targeting customers and channels where we think we can make a difference and where we can add value profitably. You can look at the macro numbers, and you'll notice one of the things that's happening is we're growing a little bit faster in the business segment on wireless than we are in the consumer segment. And part of why we grow better in business is because we're doing better in some of the government, public safety, you know, first responder structures. And, you know, that's a help to what's occurring there.

Speaker Change: Hi, Michael.

Speaker Change: So.

Speaker Change: Look I would tell you the story really isn't a whole lot different than it's been. We're intercepting customers and channels.

Speaker Change: where we think we can make a difference and where we can add them profitably. You can look at the macro numbers and you'll notice one of the things that's occurring is we're growing a little bit faster in the business segment.

Speaker Change: on wireless than we are in the consumer segment and part of why we grow better in business is because we're doing better in some of the

Speaker Change: Government, public safety, you know, first responder structures, and, you know, that's that's a help of what's occurring there. And as we get the large enterprise relationships

John T. Stankey: And as we get the large enterprise relationships, do the right thing in that space, that can help us grow a little bit quicker. But our intercept channels around how we've been picking up customers in the consumer space are, they've been strong, and they've gotten a little bit stronger. We've been able to demonstrate that we can work with them on a quarter to quarter basis and do some things to tweak how we're going to market and make them more successful. And I think you're going to see that if you went and dissected it, we got a little bit from a lot of different places; we didn't just get it from one.

John Stankey: But our intercept channels around how we've been picking up customers in the consumer space are strong; they've gotten a little bit stronger. We've been able to demonstrate that we can work with them on a quarter-to-quarter basis and do some things to tweak how we're going to market and make them more successful, and I think you're going to see that if you went and dissected that, we got a little bit from a lot of different places. We didn't just get it from one, and I'm particularly pleased that we're really not just driving this, as I've said before, from very aggressive low-ball national offers with low price entry points to be able to pick up those customers.

Speaker Change: do the right thing in that space that can help us grow a little bit quicker. But our intercept channels around how we've been picking up customers in the consumer space.

Speaker Change: They've been strong. They've gotten a little bit stronger. We've been able to demonstrate that we can work with them

Speaker Change: on a quarter to quarter basis and do some things to tweak.

Speaker Change: How we're going to market and make them more successful and I think you're going to see that if you went and

Speaker Change: dissected that we got a little bit from a lot of different places we didn't just get it from one

John T. Stankey: And I'm particularly pleased that, as I've said before, from very aggressive, low-ball national offers with, you know, low price entry points to be able to pick up those customers. When you look at our growth of converged services, you should conclude that we're getting incrementally better quarter over quarter around marketing to our consolidated basis of either wireless no broadband or broadband no wireless.

Speaker Change: And I'm particularly pleased that, you know, we're really not just driving this, as I've said before, from very aggressive, low ball national offers with, you know, low price entry points to be able to pick up those customers.

John Stankey: When you look at our growth of Converge Services, you should conclude that we're getting incrementally better quarter over quarter around marketing to our consolidated basis of either wireless, no broadband, or broadband or wireless. So, as all those things come together, that's why we did a bit better, and we'll continue to take that where we can as long as we can take it profitably. Where we are on kind of costs, look, I just point to the fact that we're continuing to get margin accretion in our business, and you're seeing it, and you're getting margin accretion that outstrips service revenue growth because we're managing the cost structure more effectively.

Speaker Change: When you look at our growth of converged services...

Speaker Change: You should conclude that we're getting incrementally better, quarter over quarter, around marketing to our consolidated basis of either wireless, no broadband, or broadband, no wireless.

John T. Stankey: So as all those things come together, that's why we did a bit better. And we'll continue to take that where we can as long as we can take it profitably. Unknown Speaker, where we are at some kind of cost.

Speaker Change: So as all those things come together, that's why we did a bit better, and we'll continue to take that where we can as long as we can take it profitably.

John T. Stankey: Look, I just point to the fact that we're continuing to get margin accretion in our business, and you're seeing it, and you're getting margin accretion that outstrips service revenue growth because we're managing the cost structure more effectively. And I don't go to sleep at night worrying about not having more opportunities to run the business more effectively. I think we have opportunities as we reposition this business to be a 5g and fiber provider.

Speaker Change: Where we are on, kind of, costs...

Speaker Change: Look, I just point to the fact that we're continuing to get margin accretion in our business.

Speaker Change: And you're seeing it, and you're getting margin accretion that outstrips the service revenue growth because we're managing the cost structure more effectively.

John Stankey: And I don't go to sleep at night worrying about not having more opportunities to run the business more effectively. I think we have opportunities as we reposition this business to be a 5G and fiber provider. There's a lot of infrastructure and a lot of overheads that are built up to make this business what it was over a century. And on a base of technology that was great when it was available, and it served its time, but it's not going to be the technology that takes us forward into the next decade. And so, we're getting better every year.

Speaker Change: And I don't go to sleep at night worrying about not having more opportunities to run the business more effectively.

Speaker Change: I think we have

Speaker Change: Opportunities as we reposition this business to be a 5G and fiber provider.

Speaker Change: There's a lot of infrastructure and a lot of overheads that have been built up to make this business what it was over a century.

John T. Stankey: You know, there's a lot of infrastructure and a lot of overheads that have been built up to make this business what it was over a century ago, and on a base of technology that, you know, was great when it was available, and it served its time. But it's not going to be the technology that takes us forward into the next decade.

Speaker Change: And on a base of technology that, you know, was great when it was available and it served its time. But it's not going to be the technology that takes us forward into the next decade. And so we're getting better every year.

John Stankey: We're mining out those costs. We continue to make progress on the regulatory front. It's a state-by-state battle, but we're making progress on the regulatory front and getting the flexibility to change those cost structures. I think this management team has done an exceptional job of retooling our labor structure around these things. And I feel really good about what we've been able to do. And I think we're positioning this company for an opportunity for growth and a sustainable franchise movie. We're going forward that we'll give people an opportunity for great careers advancing that I feel really good about.

John T. Stankey: And so we're getting better every year at mining out those costs. We continue to make progress on the regulatory front. It's a state-by-state battle, but we're making progress on the regulatory front and getting the flexibility to change those cost structures. I think this management team has done an exceptional job of retooling our labor structure around these things, and I feel really good about what we've been able to do. I think we're positioning this company for an opportunity for growth and a sustainable franchise moving forward that will give people an opportunity for great careers that It's hard work.

Speaker Change: at mining out those costs.

Speaker Change: We continue to make progress on the regulatory front. It's a state-by-state battle, but we're making progress on the regulatory front and getting the flexibility to change those cost structures.

Speaker Change: I think this management team has done an exceptional job of retooling our labor structure around these things, and I feel really good about what we've been able to do, and I think we're positioning this company for an opportunity.

Speaker Change: For growth and a sustainable franchise moving forward that will give people an opportunity for great

John Stankey: It's hard work. We still got a ways to go, but we're getting there. And technology is working in our favor right now. When I said earlier that we put a lot of fiber out there. I've mentioned it to you. We are seeing the benefits on our operating costs as a result of that. And I don't mean to be a dead horse, but as I said, I wish I was. Early in my career right now, operating in our network organization because what we see in failure rates and reliability and on-time performance. And what we're able to do to avoid misdeployments because the network just works the right way.

John T. Stankey: We've still got a ways to go, but we're getting there, and technology is working in our favor right now. When I said earlier that we put a lot of fiber out there, I've mentioned it to you. We are seeing the benefits in our operating costs as a result of that, and I don't mean to be a dead horse, but as I said, I wish I was early in my career right now operating in our network organization because what we see in failure rates and reliability and on-time performance and what we're able to do to avoid missed appointments because the network just works the right way and we're not dealing with unexpected things makes for an operating environment that is far more cost-effective than it's ever been, and we're getting help with technology on the software side, and that software is allowing us to do more that's taking labor out of our labor-intensive processes that allow us to serve customers better and have them walk away feeling better about their experience with AT&T, so we're making good progress.

Speaker Change: careers advancing that I feel really good about. It's hard work. We still got a ways to go but we're getting there.

Speaker Change: And technology is working in our favor right now. When I said earlier that, you know, we put a lot of fiber out there, I've mentioned it to you.

Speaker Change: We are seeing the benefits in our operating costs as a result of that, and I don't mean to be a dead horse, but as I said, I wish I was early in my career right now operating in our network organization, because what we see in failure rates and reliability

Speaker Change: An on-time performance and what we're able to do to avoid missed appointments because the network just works the right way and we're not dealing with unexpected things makes for an operating environment that is far more cost effective.

John Stankey: And we're not dealing with unexpected things; makes for an operating environment that is far more cost effective than it's ever been. And we're getting help with technology on the software side. And that software is allowing us to do more; that's taking labor out of our labor-intensive processes that allows us to serve customers better and have them walk away feeling better about their experience with AT&T. So we're making good progress. We're going to continue to do that. And I would tell you, I think we can continue to take cost out of this business. Continue to improve our consumer margins.

Speaker Change: And we're getting help with technology on the software side.

Speaker Change: And that software is allowing us to do more that's taking labor out of our labor-intensive processes.

Speaker Change: That allows us to serve customers better and have them walk away feeling better about their experience with AT&T. So we're making good progress We're going to continue to do that and I would tell you I think we can continue to take cost out of this business

John T. Stankey: We're going to continue to do that, and I would tell you I think we can continue to take costs out of this business, continue to improve our consumer margins, continue to hold what I think are some of the best competitive margins in the wireless industry, and grow the business. All right, operator. We have time for one more question. Our last question will come from the line of Bryan Kraft of Deutsche Bank. Please go ahead.

John Stankey: Continue to hold what I think are some of the best competitive margins in the wireless industry and grow the business.

Speaker Change: Continue to improve our consumer margins, continue to hold what I think are some of the best competitive margins in the wireless industry, and grow the business.

Brian Kraft: Our last question will come from the line of Brian Kraft of Deutsche Bank. Please go ahead. Thanks. Good morning. I have a question just on the industry. Investors are growing concerned over the potential for a volume slowdown in the wireless industry. And also that perhaps the industry has taken as much pricing power as it can for a while, leaving minimal room for further pricing actions. I just want to ask, what are you seeing in the market as it relates to these issues? Do you share any of these concerns on either volumes or pricing power? Thank you.

Speaker Change: Operator, we have time for one more question.

Speaker Change: Our last question will come from the line of Bryan Kraft of Deutsche Bank. Please go ahead.

Bryan D. Kraft: Thanks. Good morning. I have a question just on the industry. Investors are growing concerned over the potential for a volume slowdown in the wireless industry and also that perhaps the industry has taken as much pricing power as it can for a while, leaving minimal room for further pricing actions. I just want to ask, you know, what you are seeing in the market as it relates to these issues? Do you share any of these concerns about either volumes or pricing power? Thank you.

Bryan D. Kraft: Good morning. I have a question just on the industry. Investors are growing concerned over the potential for a volume slowdown in the wireless industry, and also that perhaps the industry has taken as much pricing power as it can for a while, leaving minimal room for further pricing actions.

Speaker Change: I just want to ask, you know, what are you seeing in the market as it relates to these issues? Do you share any of these concerns on either volumes or pricing power? Thank you.

John Stankey: Yeah, I don't mean to sound like a broken record again, Brian, but I'm going to. I think we've been talking about the fact that we saw volumes moderating in the market for a period of time. And I think what we're seeing this year, even though we're a little bit ahead of the first half of last year, I still expect we're going to see a little bit moderating volumes and aggregate in the industry. And that's been all part and parcel to our guidance and our expectations moving forward with you. I would go back to the fact I think what makes our circumstances unique is yes, we have part of our business that's focused on the fact that you want the industry to continue to grow.

John T. Stankey: Yeah, I don't mean to sound like a broken record again, Brian, but I'm going to talk about the fact that we saw volumes moderating in the market for a period of time. And I think what we're seeing this year, even though we're a little bit ahead of the first half of last year, I still expect we're going to see a little bit of moderating volumes in aggregate in the industry, and that's all part and parcel to our guidance and our expectations moving forward with you.

Bryan D. Kraft: Yeah, I don't mean to sound like a broken record again, Bryan, but I'm going to I think we've been

Speaker Change: We're talking about the fact that we saw volumes moderating in the market for a period of time and I think what we're seeing this year, even though we're a little bit ahead of

Speaker Change: First half of last year, I still expect we're going to see a little bit moderating volumes in aggregate in the industry.

John T. Stankey: I would go back to the fact that, I think, what makes our circumstances unique is that yes, we have part of our business that's focused on the fact that you want the industry to continue to grow, and it is doing that. It is doing that because people need to use more of your product.

Bryan D. Kraft: That's been all part and parcel to our guidance and our expectations moving forward with you.

Bryan D. Kraft: I would go back to the fact, I think what makes our circumstances unique is...

Bryan D. Kraft: Yes, we have part of our business that's focused on the fact that you want the industry to continue to grow.

John Stankey: And it's doing that. It's doing that because people need to use more of your product. They'll pay you more for better performance and more features. And we're certainly seeing that, but we also have a share take opportunity, and that share take opportunity allows us to create our own growth by ultimately winning customers from others. And that's part of our formula that's been effective moving forward.

John T. Stankey: They'll pay you more for better performance and more features, and we're certainly seeing that, but we also have a share-take opportunity, and that share-take opportunity allows us to create our own growth by ultimately winning customers from others, and that's part of our formula that's been effective moving forward. And, boy, we got the formula figured out in the mid-part of the business market, which we continue to work really hard on and haven't gotten quite where I'd like to get.

Bryan D. Kraft: And it's doing that. It's doing that because people need to use more of your product. They'll pay you more for better performance and more features, and we're certainly seeing that. But we also have a share-take opportunity, and that share-take opportunity allows us to create our own growth by...

John Stankey: And boy, if we get the formula figured out in the mid part of the business market, which we continue to work really hard on and haven't gotten quite where I'd like to get. I think that could be another great opportunity for us to show incremental improvement in our performance.

Bryan D. Kraft: ultimately winning customers from others. And that's part of our formula that's been

Bryan D. Kraft: have been effective moving forward.

John T. Stankey: I think that could be another great opportunity for us to show incremental improvement in our performance. Look, what I would also tell you is, do I think that, ultimately, we're going to see a situation where the quality of growth is examined more carefully? Yeah, I do.

Speaker Change: Boy, if we get the formula figured out in the mid part of the business market, which we continue to work really hard on and haven't gotten quite where I'd like to get, I think that could be another great opportunity for us to show incremental improvement in our performance.

John Stankey: Look, what I would also tell you is, do I think that ultimately we're going to see a situation where the quality of growth is examined more carefully? Yeah, I do, and I feel really good about what we've done around that. I think the quality of growth that we're bringing forward in this quarter, you can tie a direct relationship to customers that are coming on the payroll to ultimately EBIT of growth in this business. And they're all paying; they're all doing the right thing, and I'll take that quality of growth going forward. I don't worry about the circumstances; I don't get nervous about it because we've been doing that for many, many quarters.

Speaker Change: Look, what I what I would also tell you is

Speaker Change: Do I think that ultimately...

Speaker Change: We're going to see a situation where

Speaker Change: The quality of growth.

John T. Stankey: And I feel really good about what we've done around that. I think the quality of growth that we're bringing forward in this quarter, you can tie a direct relationship to customers that are coming on the payroll to ultimately even growth in this business. And they're all paying.

Speaker Change: is examined more carefully. Yeah, I do. And I feel really good about what we've done around that. I think the quality of growth that we're bringing forward in this quarter, you can tie a direct relationship to customers that are coming on the payroll to ultimately even a growth in this business.

John T. Stankey: They're all doing the right thing, and I'll take that quality of growth going forward. I don't worry about the circumstances. I don't get nervous about it, because we've been doing that for many, many quarters. It's not an adjustment to our plan.

Speaker Change: And they're all paying, they're all doing the right thing, and I'll take that quality of growth going forward.

Speaker Change: I don't worry about the circumstances. I don't get nervous about it because we've been doing that for many, many quarters. It's not an adjustment to our plan. We're going to continue to go find those quality customers with a competitive offering and bring them in.

John Stankey: It's not an adjustment to our plan. We're going to continue to go find those quality customers with a competitive offering and bring them in, and that will ultimately sustain the business going forward. And I don't think this is an issue of price increases for price increases. Say, we've been able to demonstrate more value to a customer; we've been able to give them more things; we've been able to do more for them on their accounts. We have continued room to be able to do that to differentiate the product and service, and when we deliver that value, ultimately command some improvement in ARPAs moving forward.

John T. Stankey: We're going to continue to find those quality customers with a competitive offering and bring them in. And that will ultimately sustain the business going forward. And I don't think this is an issue of price increases for price increases sake.

Speaker Change: And that will ultimately sustain the business going forward. And I don't think this is a issue of price increases for price increases sake, we've been able to demonstrate more value to a customer, we've been able to give them more things, we've been able to do more for them on their accounts.

Speaker Change: We have continued room to be able to do that, to differentiate the product and service, and when we deliver that value, ultimately command some improvement in ARPUs moving forward.

John Stankey: With that, Brett, I'm going to thank everybody for their time this morning. I appreciate it. As I said in my opening remarks, it feels like we're in a little bit of a repeat and rinse-and-repeat cycle here. That's a good thing. We've been pretty consistent in our approach. I don't have a lot of new things to tell you about how we've been executing around things other than we're doing what we did the previous quarter.

John T. Stankey: We've been able to demonstrate more value to a customer because we've been able to give them more things. We've been able to do more for them on their accounts, and we have continued room to be able to do so to differentiate the product and service. And when we deliver that value, we ultimately command some improvement in ARPUs moving forward. With that, Brett, I'm going to thank everybody for their time this morning. I appreciate it. As I said in my opening remarks, it feels like we're in a little bit of a repeat and rinse and repeat cycle here. That's a good thing.

Speaker Change: With that, Brett, I'm going to thank everybody for their time this morning. Appreciate it. As I said in my opening remarks,

Brett Feldman: It feels like we're in a little bit of a repeat and rinse and repeat cycle here. That's a good thing.

John T. Stankey: We've been pretty consistent in our approach. I don't have a lot of new things to tell you about how we've been executing on things other than that we are doing what we did the previous quarter. And I don't mean to belabor it, but I think, at the end of the day, that was clearly one of the objectives of this management team, which was to get to something that allows us week in and week out, month in and month out, quarter in and quarter out to try to manage the same set of issues and get incrementally better. And I think you're seeing that happen in this company right now. And that focus has been helpful for us over time. And I think we still have more miles to run in actually improving that place.

Brett Feldman: We've been pretty consistent in our approach. I don't have a lot of new things to tell you about how we've been executing around things other than we're doing what we did the previous quarter.

John Stankey: And I don't mean to belabor it, but I think at the end of the day, that was clearly one of the objectives of this management team, which was to get to something that allows us week in and week out, month in and month out, quarter in and quarter out, to try to manage the same set of issues and get incrementally better. And I think you're seeing that happen in this company right now, and that focus is helpful for us over time. And I think we still have more miles to run and actually improving that place.

Brett Feldman: And I don't mean to belabor it, but I think at the end of the day...

Brett Feldman: That was clearly one of the objectives of this management team, which was to get to something that allows us week in and week out, month in and month out, quarter in and quarter out, to try to manage the same set of issues and get incrementally better, and I think you're seeing that happen in this company right now.

Brett Feldman: And that focus is helpful for us over time, and I think we still have more miles to run in actually improving that place. So thank you for your time, and thank you for your interest in AT&T, and I hope everybody enjoys the balance of their summer. All right, operator, you can close out the call. Thanks, everyone.

Brett Feldman: So thank you for your time, and thank you for your interest in AT&T.

Unknown Executive: So thank you for your time and thank you for your interest in AT&T. And I hope everybody enjoys the balance of their summer. Operator, you can close out the call. Thanks, everyone. 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 teleconference call and have a wonderful day. You may now, We're sorry, your conference is ending now. Please hang up...

Operator: I hope everybody enjoys the balance of their summer.

Operator: And I hope you can close out the call. Thanks, everyone.

Operator: Ladies and gentlemen, that doesn't include our conference call for today on behalf of the day's panel. We'd like to thank you for your participation in today's teleconference 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 today's teleconference call. Have a wonderful day. You may now disconnect.

Operator: Have a wonderful day.

Operator: You may now disconnect.

Speaker Change: Amir Rozwadowski, Pascal Desroches, Unknown Executive, Amir Rozwadowski

Speaker Change: Subs by www.zeoranger.co.uk

Speaker Change: Amir Rozwadowski, Pascal Desroches, Unknown Executive, Amir Rozwadowski

Operator: Or, sorry, your conference is ending now. Please hang up.

Speaker Change: Amir Rozwadowski, Pascal Desroches, Unknown Executive, Amir Rozwadowski

Speaker Change: Amir Rozwadowski, Pascal Desroches, Unknown Executive, Amir Rozwadowski

Operator: Thank you. .

Speaker Change: We're sorry, your conference is ending now. Please hang up.

Operator: Thank you for standing by.

Unknown Executive: Unknown Executive, Unknown Attendee, Amir Rozwadowski, Rony Abovitz, Shashank Modi, William Kennard, AT&T Inc., Unknown Executive, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Welcome to AT&T's second quarter 2024 earnings call. At this time, all participants are in If you should require assistance during the call, please press star, then zero, and an operator will assist you offline. Following the presentation, the call will be open to questions. If you would like to ask a question, please press 1 and then 0, and you will be placed in the question queue. If you are in the question queue and would like to withdraw your question, you can do so by pressing 1 and then 0.

Brett Feldman: Welcome to AT&T's second quarter 2024 earnings call.

Brett Feldman: At this time, all participants are now, over to your host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.

Speaker Change: Thank you for standing by. Welcome to AT&T's second quarter 2024 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: If you should require assistance during the call, please press star then zero and an operator will assist you offline.

Speaker Change: Following the presentation, the call will be open for questions.

Speaker Change: If you would like to ask a question, please press 1 and then 0, and you will be placed in the question queue.

Brett Feldman: If you are in the question queue and would like to withdraw your question, you can do so by pressing 1 and then 0. And as a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.

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

Brett Joseph Feldman: Thank you and good morning, everyone. Welcome to our second quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T.

Brett Feldman: Thank you and good morning, everyone. Welcome to our second quarter 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. As such, they are subject to risks and uncertainties described in AT&T's SEC filings, and results may differ materially.

John T. Stankey: 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? Thank you, Brett. It's hard to believe we are already halfway through the year, but we are, and our team delivered solid second quarter results as we continue to grow the right way by efficiently adding high-value wireless and broadband subscribers. A strong start to the year is built on the foundation of what our team accomplished over the past year.

Brett Feldman: Thank you and good morning everyone. Welcome to our second quarter 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 .

Brett Joseph Feldman: Joining me on the call today are John Stankey, our CEO, and Pascal Derroche, our CFO.

Brett Feldman: Before we begin, I need to call your attention to our Safe Harbor statement. It says that some of our comments today may be forward-looking; as such, they're subject to risks and uncertainties described in AT&T's SEC filings. Results may differ materially. Additional information, as well as our earnings materials, are available on the Investor Relations website.

Speaker Change: 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.

Speaker Change: 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 ? Thank you, Brett. I appreciate you joining the call.

John T. Stankey: With that, I'll turn the call over to John Stankey. Thank you, Brett. I appreciate you joining the call. Hard to believe we are already halfway through the year, but we are. And our team delivered solid second quarter results as we continue to grow the right way by efficiently adding high-value wireless and broadband subscribers. Our strong start to the year is built on the foundation of what our team has accomplished over the past four years. As a result of this hard work, we're now repositioned around our connectivity strengths. This puts us on a clear path to becoming the leading provider of converged 5G and fiber services.

John T. Stankey: Hard to believe, we are already halfway through the year, but we are, and our team delivered solid second quarter results as we continue to grow the right way by efficiently adding high value wireless and broadband subscribers.

John Stankey: Since Pascal will go through the quarter in detail, I'd like to spend some time highlighting our team's execution of our investment lead strategy is driving consistent results. In mobility, we delivered 419,000 post-paid phone net ads in the second quarter, in 768,000 during the first half of the year. This put us modestly ahead of last year's pace, despite ongoing wireless market normalization. And we're not just growing customers. Our mobility EBITDA grew by more than 5% in the second quarter driven by more than 3% growth in service revenue and 100 basis points of service margin expansion. We're delivering consistent results by keeping the customer the center of everything we do.

John T. Stankey: It's a winning play that we continue to run. The efficient first half growth we achieved in our mobility business positions us for the back half of the year when we expect higher activity levels driven by the availability of new devices and features, seasonal purchasing activity, and promotional cycles.

John Stankey: In consumer wireless, we added broadband subscribers for the fourth consecutive quarter driven by consistent growth in AT&T Fiber and early success with AT&T Internet Air. Once again, the story is about growing both customers and profitability as our consumer wireless business delivered more than 7% EBITDA growth during the second quarter. This was driven by approximately 18% growth in fiber revenues and improved operating leverage as we transition from legacy networks to advanced broadband infrastructure. While some portions of our business are still being pressured as customers transition off legacy voice and data services. Our significant investment in 5G and fiber, and consistent execution, is driving durable growth across the large majority of our business.

John Stankey: I expect this performance to continue, putting this on track to deliver on our full year financial guidance. The durable trends in 5G and fiber are being driven by more than the solid individual execution within each business. We believe the success of our fiber business is driving growth in mobility and vice versa. As consumers increasingly prefer to purchase mobility and broadband together as a converged service. For example, today nearly 4 out of every 10 AT&T fiber households also choose AT&T as their wireless provider. As a result, our share of post-paid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national lab.

John Stankey: In our fiber business, we continue to achieve key penetration milestones faster than we anticipated and considerably faster than the fiber providers that do not operate wireless networks, based on publicly available data. The key point here is that our proven ability to drive higher share in both mobility and broadband through converged service penetration is the true benefit of owning and operating both 5G and fiber networks of scale. Over time, we expect this to drive greater returns on invested capital in both our mobility and broadband businesses than either would be expected to achieve as standalone operations.

John Stankey: While our convergent strategy began with a focus on our own fiber footprint, we also see attractive opportunities to expand the availability of AT&T Fiber and our converged offers outside of it. This includes the continued scaling of our Gigapower joint venture and through capital-wide arrangements with other providers of commercial open access fiber networks. We expect the continued expansion of AT&T Fiber, both in footprint and outside of it, will enable us to drive significant growth with converged customers. Ultimately, our convergent strategy closely aligns with our primary focus over the last four years: growing in a durable, sustainable, and efficient way.

John Stankey: We still have a lot to accomplish as we execute this strategy, but I am encouraged by our momentum and see a long runway of growth with 5G and fiber together. More importantly, I like the distance between us and our competitive set with respect to our positioning to organically dress more customers more profitably.

John T. Stankey: Our commitment to our investment-led strategy has played a pivotal role in our success in made AT&T the largest capital investor in the US connectivity infrastructure since 2019. In addition to our ongoing network investment, we continue to reduce our net debt and leverage due to a combination of higher EBITDA and growing free cash flow. We expect these trends to continue and remain on pace to meet our target of net debt to adjusted EBITDA in the two-and-a-half times range in the first half of next year. This should provide us with greater financial flexibility to support sustained investment and growth, as well as enhanced shareholder returns.

John T. Stankey: We are excited about what all this means for the future of AT&T.

John Stankey: Given that our direction remains constant and our performance consistent, I am going to avoid belaboring what we have been discussing for a number of quarters now and turn it over to Pascal.

Pascal Desroches: Thank you, John, and good morning, everyone. Let's start by reviewing our second quarter financial summary on 5.7. Second quarter results were in line with our expectations, with revenues down slightly as decline in business wildlife service revenue and low margin mobility equipment revenues offset growth in higher margin wireless service revenues and fiber revenues. Consumer wireline in Mexico, which collectively drove more than 80% of our total revenue in the quarter, were partially offset by continued decline in business wireline. In the first half, adjusted EBITDA grew 3.4%, and we continue to expect adjusted EBITDA growth in the 3% range for the full year.

Pascal Desroches: Adjusted EPS was 57 cents compared to 63 cents in the year-ago quarter. Consistent with 1Q, the quarter included about 9 cents of aggregated EPS headwinds from the four items we discussed earlier this year. For the full year, our expectations remain for adjusted EPS in the range of $2.15 to $2.25. We generated second quarter free cash flow of 4.6 billion, up nearly 400 million year over year. This is the result of sustained growth in adjusted EBITDA, improved conversion of EBITDA into free cash flow, and lower capital investment. Capital investment for the quarter was 4.9 billion, down 1 billion compared to the prior year, primarily as a result of lower payments for vendor financing.

Pascal Desroches: Capital expenditures were 4.4 billion, up approximately 100 million compared to the prior year.

Pascal Desroches: We remain on track for capital investments into $21 to $22 billion range for the year, with higher spending in the back half of the year as we ramped our wireless network modernization. The quarter also included lower net impact from securitization of $1.5 billion relative to last year's second quarter.

Pascal Desroches: Now, let's look at our mobility operating results on slide 8. For the quarter, we delivered 419,000 post-paid phone net ads, up from 326,000 a year ago. This improvement was driven by a nine basis point decline in turn to 0.70%. We grew mobility service revenues by 3.4% driven by strong execution and our balanced go to market strategy. Post-paid phone output was 56,000, 42 cents, up 1.4% year over year, largely driven by higher output on legacy plans. As expected, service revenue growth was partially offset by lower equipment revenues, with a post-paid upgrade rate of 2.9%, which was down slightly from 3.1% last year.

Pascal Desroches: For the year, we continue to expect modest post-paid phone output growth and mobility service revenue growth into 3% range. Mobility EBITDA of 9.2 billion grew 5.3% or by more than 450 million dollars year over year, as we converted over 85% of our service revenue growth into EBITDA. Dye. During the first half of 2024, Mobility EBDIG grew 6.1%, and we continue to expect Mobility EBDIG growth in the higher end of the mid-single-digit range for the full year.

Pascal Desroches: As John noted during his remarks, our Mobility Outlook anticipates higher activity levels in the back half, consistent with seasonal trends. In particular, we anticipate higher marketing spend on the third quarter compared to last year. We also expect to see greater benefits from our announced pricing actions in 4Q versus 3Q. Based on our strong subscriber and EBDIG growth through the first half of the year, we believe our Mobility Business is well positioned to capitalize on a more dynamic wireless market in the back half while achieving our financial targets.

Pascal Desroches: Now, let's move to consumer wireline on slide 9. Our growth in consumer wireline was once again led by fiber subscriber growth, which has consistently yielded strong returns. Overall, we added 52,000 total broadband subscribers in the quarter. This is the fourth consecutive quarter of positive broadband net gains, and we expect this trend to continue. Where we have fiber, we win, and we added 239,000 AT&T Fiber subscribers in the quarter. Our 2Q AT&T Fiber net ads are consistent with the three primary drivers of quarterly net ad variability that we previously shared. These are the pace at which we put you fiber locations into service, which is the largest variable in any given quarter as new inventory we're able to serve, can fluctuate.

Pascal Desroches: Second, overall broadband market dynamics, which have remained fairly stable. And finally, typical seasonality.

Pascal Desroches: We expect these to remain the primary drivers of quarterly trend in AT&T Fiber net ads in the back half of the year, and as a reminder, the third quarter typically has favorable seasonality relative to the second quarter. We now pass nearly 28 million consumer and business locations with fiber, and we may not track the past 30 million plus fiber locations by the end of 2025. As we stated before, the better-than-expected returns we're seeing on our fiber investments potentially expand the opportunity to go beyond our initial build targets by roughly 10 to 15 million additional locations.

Pascal Desroches: This assumes similar build parameters and a regulatory environment that remains attractive to building infrastructure.

Pascal Desroches: We are also encouraged by early performance of AT&T Internet Air, and are successively proactively migrating customers with legacy copper base internet connections onto this fixed wireless service. We now have AT&T Internet Air and parts up 137 markets with nearly 350,000 total consumer subscribers, including 139,000 added during the quarter. Second quarter broadband revenues grew 7% through the strong fiber revenue growth of approximately 18%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber Rpool of $69 was up $2.30 year-over-year, with intake Rpool remaining above $70. Consumer Waterline EBITDA grew 7.1% as growth in broadband revenues and ongoing cost transformation continued to improve profitability.

Pascal Desroches: We still expect consumer waterline EBITDA to grow in the mid to high single-digit range this year.

Pascal Desroches: Now, let's cover the business waterline on slide 10. Business waterline EBITDA was down 13.9% due to continued industry-wide secular decline in legacy voice services, consistent with the trends we discussed last quarter. The report of decline in EBITDA slightly improved in 2Q versus the first quarter. This primarily represents benefits from favorable timing of anticipated items and early traction on cost saving initiatives.

Pascal Desroches: Looking into the back half of the year, I want to remind you that we've benefited from approximately 100 million of IP sales in the third quarter of last year that are not expected to record next quarter. So, the year-on-year trend in business waterline EBITDA is likely to see some pressure in 3Q before improving in 4Q as comparisons ease.

Pascal Desroches: Also, I'd like to note that 2Q results include less than one month of revenues from our cybersecurity business prior to deconsolidating its operations into a joint venture. On average, this low margin business contributed about 100 million in quarterly revenues. The key point is that business waterline is performing in line with the outlook we provided last quarter. So, for the full year, we still expect business waterline EBITDA declines in the mid-teens range.

Pascal Desroches: While near-term declines in legacy voice revenues are likely to weigh on business waterline EBITDA trends for the remainder of the year, our 5G and 5G expansion continue to present attractive growth opportunities in business solutions. This includes sustained growth in First Net, which now has more than 6 million total connections. Similarly, we're excited about the potential we have with emerging growth products like AT&T Internet Air for Business, which we launched nationwide, and dynamic defense.

Pascal Desroches: Now, let's move to slide 11 for an update on our capital allocation strategy. Our approach to capital allocation remains consistent and deliberate, with successfully balancing efficient growth with long-term investments in delivering converts, network services to more customers, paying down debt, and returning value to shareholders. We remain focused on leveraging and have reduced our net debt by about $2 billion due to date. At the end of June, net debts are just EBITDA was below 2.9 times. We're making steady progress on achieving our target in the two-and-a-half times range in the first half of 2025. We continue to address near-term maturities with cash on hand, and this quarter will be paid 2.2 billion of long-term debt maturities.

Pascal Desroches: Looking forward, our debt maturities are very natural, and we are in a great position with more than 95% of our long-term debt fixed, with a rated average rate of 4.2%. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about 700 million versus the first quarter. Additionally, the second quarter net impact from securitiesization facilities was a 700 million-dollar use of cash. These efforts highlight the improving quality of free cash flow we're delivering. We expect to continue reducing our ad-git net balance of direct supplier and vendor financing on a year-over-year basis, which should lower our interest, expand and continue to improve cash flow rate of ability over time.

Pascal Desroches: Direct TV distributions from the quarter were about 740 million, and we continue to expect Direct TV cash distributions declined at a similar rate to 2023 or by about 20% annually. We generated 4.6 billion of free cash flow into quarter and 7.7 billion in the first half of a year. Free cash flows up to a half billion compared to the first half of last year, which is consistent with our goal of driving more radical free cash flow.

Pascal Desroches: Looking into the second half of the year, we expect cash taxes to be a billion dollars higher compared to the second half of last year. We also expect to incur a one-time payment of $180 million in the third quarter related to our wireless network transformation. Overall, we're on pay for deliver on our full-year free cash flow guidance in the 17 to 18 billion-dollar range.

Pascal Desroches: To close, I'm very pleased with our team's performance in the first half of the year, and we're on track to deliver on all of our full-year financial guidance.

Brett Feldman: That's our presentation. We're now ready to be Q&A.

Operator: Thank you, Pascal. Operator, we're ready to take the first question.

John Hodulik: Our first question will come from a line of John Hudlick of UBS. Please go ahead. Great, thank you guys. A couple of I could first, John, you talked about higher activity level in the second half in wireless. Obviously, there's a lot of concern about upgrade rates with the new iPhone.

John Stankey: The comments that you made, just a function of sort of typical seasonality, are you expecting a sort of a new upgrade to the mission? What does that mean? If you already did that mean for the level of insurance we've been seeing and profitability and overall competition in the same.

John Stankey: That's number one.

John Stankey: And then number two, you know, had some comments about Giga Power and the potential open access relationships. I just relate to the Giga Power. Any colleague can get us on how that relationship or partnership is doing in terms of rollout and customer update. And then, is there room for more of these relations? Is there other part of open access providers? Are you talking to anyone else? And how big of that? Virginia.

John Stankey: Good morning, John. How are you? So on your first question, you know, first I start out by saying whatever happens going forward, you know, we've been focused on ensuring that we try to set up the business to respond to what the customer wants to do with their accounts and keep that at focus of what we think, our strategy ought to be and how we go to market. I think it's important to understand that, whatever happens going forward, is going to be a factor of how customers decide to do things, and I think we'll be positioned as a company to deal with that either way.

John Stankey: There is seasonality, first of all, as you know, when we get into a new device cycle coming out from typically one of the handset providers. There's a little bit of a suppression effect that occurs a month or two before they go to market, and then, you know, there's an increase in acceleration that occurs. As you heard both Pascal and I talk about, we've expected that that cycle is going to continue, and I think we're in a good position with our guidance to be able to adjust to whichever way it goes. I've looked at some of the notes that have been written recently about sizing and looking at this particular dynamic, and I think that they're directionally consistent.

John T. Stankey: When you start thinking about the reality that we have accounts that have discrete handsets of mature and their cycles at different times, you typically don't have an entire account, least in how we build our customer base that gets to a upgrade cycle all at the same time. So we're able to kind of look at history and understand a little bit about it, and if the customer decides that there's meaningful features on the new devices, we're going to respond to it. We're going to deal with it, and I feel like we're pretty good shaped to make that happen one way or another.

John Stankey: Now, whether or not there's something more compelling in this cycle, frankly, none of us know exactly what's going to kind of. We do have some reference points; there have been other AI devices that have come into the handset ecosystem over the last couple of months. I haven't seen anything in them that suggests to me it's going to pause customers to immediately say this is world changing for them, but it doesn't mean that somebody doesn't unlock the key at some point. Typically, these feature enhancements take one or two cycles to get them right and ultimately bring them forward, but time will tell; remains to be seen.

John Stankey: I would also say that there's a lot of ways you can experience AI without having necessarily change out hardware, per se. I mean we're already seeing that in ways that AI's implemented in discerning browsers and things like that. So customers get comfortable with it and start to adopt it. We'll watch, and I think we'll go through the cycle on that. There's a little bit of spike at the front end, and then it flows down a little bit later. We've been through those cycles before, and we'll do fine past go.

John Stankey: I don't know if you want to add anything to that.

Pascal Desroches: John, I would just add one thing. When you look at our performance for the overall company, as well as mobility, we are running ahead halfway through the year of the full-year guidance that we gave. So whatever the environment is, I feel like we are incredibly well positioned for.

John Stankey: On your question about where we are with Gigapower, I'm going to defer the answer to your question. I plan, I think I told you when we started this, I mean, old.

John Stankey: Good insight and transparency on the data to the investment community around how we perform, and I kind of put a benchmark out there, and we did that to say, we needed 18 months to go through what I considered to be a reasonable cycle of investment, turning the product up, getting in the markets and penetrating it, getting in up data to understand how we're performing, and we will be at that point right about it, I'm in a copia, and I expect I'll probably spend a little bit of my time at that session, giving you the kind of insight you'd like, and I would tell you, I'm looking forward to that opportunity to have that conversation, and my belief is we have a lot of opportunity to grow profitably on fiber and convergence in a variety of different models, and it's go back to the remarks I just made.

John Stankey: We understand how to sell both products together, number one, and I think, as I move around the industry, one of the things I pick up, I'm being shared with those that we can partner with, is I think people notice that we seem to have a formula that's different in its capabilities and its effectiveness, and maybe what they see occurring in another pocket, pockets around the United States, and so I think we are acknowledged of being pretty competent in this area, and I'd like to press my bets in that regard. And we've done things such as you would expect we do. One, we're not selling fixed wireless broadly across the footprint, so I think our competitive positioning with partners looks a little bit different than some, too, because we did Gigapower. We built a back office for Gigapower that already has a wholesale relationship structure that works with AT&T and the Gigapower entity where we make that available to others. And if somebody wants to use that infrastructure and use it as a means to jointly market our products and services where our wireless can help their fixed assets, we view that as being a very helpful dynamic of somebody who's trying to get scale. So I do see further runway and opportunity there for us to do more, and we're active in that space, and you should expect that as we move forward. And we continue this race to convergence; it's one of the tools we're going to do to put distance between ourselves and everybody else.

Operator: All right, operator, we'll take the next question, please.

Simon Flannery: Our next question comes from five in flanaries of boarded Stanley. Please go ahead. Thank you, good morning. I think we managed to get this far without mentioning ACP. I wonder if you could just give us an update on what you've seen so far. What do you expect in the third quarter? And then coming back to the comment about in reach and fiber, you've talked a few times about the 10 to 15. I think you're almost at 28 million locations, pretty near that 30 million.

Simon Flannery: So help us understand where you are on that evaluation process and what should we expect in terms of you giving us a new map for the next three years or whatever, and how that flows through to cap access, etc.

Pascal Desroches: Mornin Simon, I'm ASRP. I think we indicated to you probably last quarter, maybe in the quarter, because we thought it would be a year, yeah, that we would be effective at working through this. We didn't see it as being material or significant, and I characterize it. We saw no reason we continue to be able to deliver on our commitments back to you, and that is in fact happening and will happen.

Pascal Desroches: We are most to the way through the ACP effect, has there been an effect, sure a little bit, it's not the sole reason we're a little bit down on takes broad down this quarter, there's other reasons. Moves are continuing to be a bit suppressed, is one of them seasonally. Second quarter tends to be down a bit. But we had a little bit of an impact because of some adjustments that were made going to that, but the vast majority of our customers, most importantly, we know who these customers are, right, because we know that they're getting the discount.

Pascal Desroches: Our through a transition process and we feel fine about it. I'm pretty proud and pleased with our prepaid business, perform this quarter. It had some impact from ACP associated with it, but I think if you look at where we were with churn and where we were with gross ads and that ads in that space, I think we came through it, a demonstrated that we had, you know, good quality customers is still need to use the service one way or the other. We've, we've accommodated them, so we still got a couple people hanging out there on some, what I will call transitional promotions.

Pascal Desroches: I expect that there'll be a little bit of shrink, and some of those transitional promotions, they're all following our expectations as we calculated what we thought the impacts are going to be. They're all consistent with the guidance that we have been giving you.

Pascal Desroches: So, I wish we hadn't had to go through this with our customer base. We did, but I think we handled it well, and we're largely through the impacts at this juncture and moving on to do other good growth.

Pascal Desroches: In terms of where we are, you know, we've been very clear that we'll give you kind of an update on our capital allocation strategy as we approach this two and a half times. Just admit that the EBITDA ratio in the first half and next year. I would expect that as we go through our normal cycle toward the end of the year here, as we start to give guidance for next year, you'll get what you need in terms of moving forward. And I don't think there's going to be any shots in this; our priorities remain the same.

Pascal Desroches: We want to make sure we can continue to grow the business.

Pascal Desroches: That's, you know, first and foremost, I want to leave a business to whoever sits in my chair later that has a good, strong, sustainable franchise. It can be healthy in that the next generation of individuals that work at this company. The old confident proud about where the company is going to go, and we'll invest in a way that we make sure that we have that capability and that kind of a franchise built. And then, of course, we want to continue to maintain our commitments to our bond holders and our dividend, and those are, you know, what I would say the top three. But, as you know, we'll have some optionality to go beyond that.

John Stankey: As we get in the next year and I think we'll, we'll be very delivered about that. The board is being very delivered about it right now. We're spending multiple cycles on it. We're spending a lot of time looking at scenarios. I think we'll continue to invest in growth in this business at some level in some way, but I also believe we have optionality to change our formula around how we return to shareholders. And I think you'll see us employ the right approach to that. In terms of where we are on the internet air run, you should expect that we're going to continue to grow, and you'll see improvements in our rates associated with that.

John Stankey: But I don't want you to take that and say that that's an artifact that would change in strategy.

John Stankey: We are executing the strategy we put out, and again I don't want to sound like a broken record, but I've articulated that our strategy's a bit different than others; we're not broadly offering internet air. Everywhere we do business, we're being selective in how we do that. We're doing it in places where it makes sense to aid our transition from legacy technology to new technology that helps us stay cost out of the business. We're doing it in places where we have a very valid capacity that we can be confident will be long-lived in nature and not something that we end up having to incrementally invest in two years out after we sell into the market.

John Stankey: We're doing it as I said last quarter. Any place right business customer wants to buy it will sell it, and that means whether we've got capacity or not, the business product is a different product. The business product has different usage characteristics, the business product has different our food characteristics, and the business product has different characteristics around how you can bundle and serve multiple products together. And so I feel very comfortable in a nationwide offer on business that when we pick up the right customer there and how we employ that capability, either for primary or backup, that we can profitably add it to other portfolios and into our service offerings and reinvest in it in a way that makes sense for the business.

John Stankey: So you'll continue to see a scale further in the business market where we're still getting the distribution tuned and home to that space, and I would expect you to see improvement in our numbers in the business segment as we move forward in the coming quarters.

David Barden: I rate the next question operator. Our next question will come from the line of David Barden of Bank of America. Please go ahead. Hey guys, thanks so much for taking the questions.

David Barden: John, I wanted to maybe go back to something you just said, which was that there's a race to convergence in the market, and I think that not everyone agrees that that's a true statement; that maybe it's more of a race for AT&T to exploit the opportunity it has and it's in its footprint to converge as much as possible. You mentioned that you've got a 500 basis point market shared vantage in the areas where you've deployed fiber. Could you kind of share more data that would support your argument that there should be a race to convergence that the AT&T is in a unique position to take advantage of these economics beyond simply market share.

David Barden: And then if I could, the second question would be, you know, there's been a series of events over the course of the year: network averages, data breaches, disclosures about previous data breaches. Is there anything that we need to know about how that's impacting either your go to market or the possibility of future financials?

John Stankey: Thank you. Hi, you're morning, Dave. So, look, you will get more and more as we move forward over time.

John Stankey: I think we're giving you just a lot of insight with what we shared today, and I'm not necessarily going to tick off other things that we look at, but you should conclude a couple of things. One, are combined customers are happier customers. They have lower turn, and they have longer lifetime values. Why raise the convergence? Because that's a good way to make money, and it's a good way to keep customers in the fold. And I don't know; I hope not everybody believes that's the right strategy. I think it is. We're going to continue to push the pedal on it because we're uniquely positioned to do it well.

John Stankey: And that's what I think is the exciting thing about this company. We have an opportunity for great organic growth and organic investment that allows us to control our own destiny. And when part of that is constructed around a shared-take dynamic, we don't necessarily have to tire ourselves to the overall growth of the market and whether or not there's growth in fixed broadband connections, we can play into we just want somebody else's connection. And I think we're demonstrating that we can do that effectively. So, maybe that's why it's more important to me than somebody else's. Already a dominant player in the space and wants to think about it in a different lens.

John Stankey: And when I say race, I mean this race is going to take place over years. It's not going to take place in a quarter or a year or two years. It's a reordering of assets. And I think if it's done right, it's going to be really, really effective.

John T. Stankey: I think customers are another driver behind this race. I don't think customers intuitively love to have more relationships in their life with suppliers of critical services to them than they have to. I think they like to have, you know, if you trusted relationships, if it works well. And so whoever figures that out over time, whoever can give the customer great value and ensure for them that wherever they go around the globe at whatever time, either through organic, owned and operated relationships or third-party aggregation, can be the one place somebody goes to get that connectivity. I think that's a winning combination.

John Stankey: And I believe the person that does that the best will ultimately return the best in this industry and gain scale the best. So that's my rationale behind it and where we're going. And I think it's our true north of how we think about orienting this company, how we're thinking about product development, and how we're thinking about how we want to structure pricing plans. We're just keeping that in the back of our mind over the next decade because I think that's where the management team needs to go and what needs to happen. And I understand this will be a race that we fight, you know, year after year after year; it's not quarter after quarter after quarter.

John Stankey: Look, going to your second question, there's nobody more disappointed that we have to actually address your question and work through these issues than I am. And I know that all of my co-workers here share that same disappointment that we've had some instances where we've let down customers. Thomas, when you look at our growth of convert services, you should conclude that we're getting incrementally better, quarter of a quarter, around marketing to our consolidated basis of either wireless, no broadband, or broadband to wireless. So it's all those things come together. That's why we did a bit better, and we'll continue to take that where we can as long as we can take it profitably.

John Stankey: Where we are on kind of costs, look, I just point to the fact that we're continuing to get margin of creation in our business, and you're seeing it. And you're getting margin of creation that outstrips the service revenue growth because we're managing the cost structure more effectively. And I don't go to sleep at night worrying about not having more opportunities to run the business more effectively. I think we have opportunities as we reposition this business to be a 5G and fiber provider. There's a lot of infrastructure and a lot of overheads that have built up to make this business what it was over a century.

John Stankey: And on a base of technology that was great when it was available, and it served its time. But it's not going to be the technology that takes us forward into the next decade. And so we're getting better every year. It mining out those costs.

John Stankey: We continue to make progress on the regulatory front. It's a state-by-state battle. But we're making progress on the regulatory front and getting the flexibility to change those cost structures. I think this management team has done an exceptional job of re-tooling our labor structure around these things. And I feel really good about what we've been able to do.

John Stankey: And I think we're positioning this company for an opportunity for growth and a sustainable franchise moving forward. So we'll give people an opportunity for great careers at dancing. That I feel really good about. It's hard work. We still got a ways to go. But we're getting there. And technologies working in our favor right now when I said earlier that, you know, we put a lot of fiber out there. I've mentioned it to you. We are seeing the benefits on our operating costs as a result of that. And I don't mean to be a dead horse.

John Stankey: But, as I said, I wish I was early in my career right now operating in our network organization. Because what we see in failure rates and reliability and on-time performance. And what we're able to do to avoid missed appointments because the network just works the right way. And we're not dealing with unexpected things. It makes for an operating environment that is far more cost effective than it's ever been. And we're getting help with technology on the software side. And that software is a lot of minutes to do more; that's taking labor out of our labor intensive processes that allow us to serve customers better and have them walk away feeling better about their experience with AT&T.

John Stankey: So we're making good progress. We're going to continue to do that. And I would tell you, I think we can continue to take cost out of this business. Continue to improve our consumer margins. Continue to hold what I think are some of the best competitive margins in the wireless industry and grow the business.

John Stankey: It feels like we're in a little bit of a repeat and rinse-and-repeat cycle here. That's a good thing. We've been pretty consistent in our approach. I don't have a lot of new things to tell you about how we've been executing around things other than we're doing what we did the previous quarter. And I don't mean to belabor it, but I think at the end of the day, that was clearly one of the objectives of this management team, which was to get to something that allows us week in a week out, month in a month out, quarter in a quarter.

John Stankey: To try to manage the same set of issues and get incrementally better. And I think you're seeing that happen in this company right now, and that focus is helpful for us over time. And I think we still have more miles to run and actually improving that place.

John Stankey: So thank you for your time, and thank you for your interest in AT&T.

John Stankey: And I hope everybody enjoys the balance of their summer.