Q3 2024 AT&T Inc Earnings Call
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Speaker Change: You for standing by welcome to At&t's third 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.
Operator: Welcome to AT&T's third quarter 2024 earnings call. At this time, all participants are in the listen-only mode. If you should require assistance during the call, please press star, then zero, and an operator will assist you offline.
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'll 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, then zero. And, as a reminder, this conference is being recorded.
Speaker Change: Following the presentation the call will be opened for questions. If you would like to ask a question. Please press one and then zero and you'll be placed in the question queue.
Speaker Change: We're in the question queue and would like to withdraw your question you can do so by pressing one then zero.
Speaker Change: As a reminder, this conference is being recorded.
Brett Feldman: I would like to turn the conference over to our host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.
Speaker Change: I'd like to turn the conference over to our host Brett Feldman Senior Vice President of Finance and Investor Relations. Please go ahead.
Brett Feldman: Thank you and good morning. Welcome to our third quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T.
Thank you and good morning, welcome to our third 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 Deroche, our CFO. Before we begin, I need to call your attention to our Safe Harbor statement. It said 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.
Brett Feldman: Joining me on the call today are John <unk>, our CEO and Pascal the Roche our CFO before we begin I need to call your attention to our safe Harbor statement. It says that some of our comments today may be forward looking as such they're 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 with that I'll turn the call over to John Stankey, John. Thank you Bret I appreciate everyone. Joining this morning, and I hope, you're all doing well today.
Brett Feldman: With that, I'll turn the call over to John Stanky. John?
John Stankey: Thank you, Brett. I appreciate everyone joining this morning. I hope you're all doing well today. The third quarter showed again that our team continues to produce solid results as we efficiently grow high-value wireless and broadband subscribers.
Brett Feldman: The third quarter showed again that our team continues to produce solid results as we efficiently grow our high value wireless and broadband subscribers.
John Stankey: Since Pascal will go through the quarter in detail, I'll share more on how our investment-led strategy is helping us deliver on our full-year consolidated financial guidance, creating runway for future growth, and then I'll provide a few updates on some recent developments. Our strategy remains the same to lead the industry and converge on activity through 5G and fiber. The mobility, the value of the coverage and reliability of the service we provide, and our best deals for everyone approach that puts our customers first, are producing solid, sustainable results. We're growing 5G subscribers in a durable way and delivered 403,000 post-paid phone net ads in the third quarter.
Brett Feldman: Since Pascal will go through the quarter in detail I'll share more on how our investment led strategy.
Brett Feldman: It is helping us deliver on our full year consolidated financial guidance, creating runway for future growth and then I'll provide a few updates on some recent developments.
Brett Feldman: Our strategy remains the same to lead the industry in converged connectivity through <unk> and fiber.
Brett Feldman: And mobility.
Brett Feldman: Are you the coverage and reliability of the service, we provide and our best deals for every one approach that puts our customers first are producing solid sustainable results.
Brett Feldman: We're growing <unk> subscribers in a durable way and delivered 403000 postpaid phone net adds in the third quarter.
John Stankey: We also grew efficiently with lower year-over-year post-paid phone churn and upgrade rates. Three-quarters of the way through the year, our mobility business has grown EBITDA by more than 6%, which is in the high end of the guidance we provided for the full year. This puts us in a solid position heading into the fourth quarter where we expect seasonally higher phone purchasing activity, upgrades, and promotional cycles. Overall, we feel great about our continued momentum and mobility. We're adding customers, increasing profitability, and expect to deliver the best post-paid phone churn in the industry for the 13th time in 15 quarters.
Brett Feldman: We also grew efficiently with lower year over year postpaid phone churn in upgrade rates.
Three quarters of the way through the year, our mobility business has grown EBITDA by more than 6%, which is in the high end of the guidance we provided for the full year.
Brett Feldman: This puts us in a solid position heading into the fourth quarter, where we expect seasonally higher phone purchasing activity upgrades and promotional cycles.
Brett Feldman: Overall, we feel great about our continued momentum in mobility, we're adding customers.
Brett Feldman: Increasing profitability and expect to deliver the best postpaid phone churn in the industry for the 13th time in 15 quarters.
John Stankey: Now, let's switch gears to Consumer Wireline, where we generated positive total broadband subscriber net ads for the fifth consecutive quarter, despite impacts from a one-month work stoppage in the Southeast and from Hurricane Helene. And I think it's important to take a moment, recognize our frontline teams, who continue to show up in a heroic fashion while confronting multiple devastating hurricanes. We were pleased to welcome our committed employees in the Southeast back to work on September 16th. With newly ratified agreements, a five-year contract in the southeast and a similar four-year agreement in the west, we appropriately recognize our employees for the exceptional service and performance they provide our customers on a daily basis, with annual wage increases averaging 3.6%.
Brett Feldman: Now, let's switch gears to consumer wireline, where we generated positive total broadband subscriber net adds for the fifth consecutive quarter. Despite impacts from a one month work stoppage in the southeast and from Hurricane Helene.
Brett Feldman: And I think it's important to take a moment recognize our frontline teams, who continue to show up in our gorilla fashion, while confronting multiple devastating hurricanes.
Brett Feldman: We were pleased to welcome our committed employees and the South East back to work on September 16th.
Brett Feldman: With newly ratified agreements a five year contract in the southeast and a similar for your agreement in the West.
Brett Feldman: We appropriately recognize our employees for the exceptional service and performance they provide our customers on a daily basis with annual wage increases averaging three 6%.
John Stankey: Our employees will maintain their position as some of the best paid professionals in the industry while we cooperatively work with our labor partners to reposition the company around 5G and Fiber. Is the only all-union wireless and broadband provider in the U.S. We serve millions of individuals and businesses in the Southeast region of the country, and our frontline employees on the ground have responded quickly and worked tirelessly to keep our communities, customers, and first responders connected when it matters most. For context, our first net organization provides a meaningfully differentiated product: the public safety during events like these.
Brett Feldman: Our employees will maintain their position as some of the best paid professionals in the industry.
Brett Feldman: While we cooperatively work with our labor partners to reposition the company around <unk> and fiber.
Brett Feldman: The only all union wireless and broadband provider in the U S.
Brett Feldman: We serve millions of individuals and businesses in the southeast region of the country and our frontline employees on the ground have responded quickly.
Brett Feldman: Worked tirelessly to keep our communities customers and first responders connected when it matters most.
Brett Feldman: For context, our first net organization provides a meaningfully differentiated product the public safety during events like these.
John Stankey: Our organization dedicated to supporting our growing public safety base on FirstNet responded to more than 200 requests during the hurricane-holene recovery. This was one of our largest emergency response efforts ever. These efforts are nothing short of remarkable. It's exactly why more than 29,000 public safety agencies and organizations, including the New York City Police Department, the Fire Department of New York City, and the North Carolina Department of Public Safety, choose FirstNet, the only dedicated communications platform for public safety. We applaud the FCC's recent decision to make available 50 megahertz of spectrum to the FirstNet authority to facilitate nationwide deployment of 5G services for first responders.
Brett Feldman: Our organization dedicated to supporting our growing public safety base on first Ned responded to more than 200 requests.
The hurricane holding recovery.
Brett Feldman: This was one of our largest emergency response efforts ever.
These efforts are nothing short of remarkable it's exactly why more than 29000 public safety agencies and organizations, including the New York City Police Department. The Fire Department of New York City in the North Carolina Department of public safety choose first.
Brett Feldman: Net.
Brett Feldman: The only dedicated communications platform for public safety.
We applaud the FCC's recent decision to make available 50 megahertz of spectrum to the first net authority to facilitate nationwide deployment of <unk> services for first responders and we look forward to working together.
John Stankey: We look forward to working together on plans that take these capabilities to the next level. Moving back to broadband, despite a 30-day work stoppage in the southeast portion of our footprint, we've now had more than 200,000 AT&T Fiber net ads for 19 consecutive quarters, which shows the strong underlying customer demand for fiber. In the quarter, consumer wireline delivered more than 8% EBITDA growth, driven by nearly 17% growth in fiber revenue. Is, these consistent results make it clear that our fiber investment is generating attractive returns with improved operating leverage as we transition from legacy networks. Overall, the underlying momentum with 5G and fiber positions us to close the year strong.
Brett Feldman: Lands that take these capabilities to the next level.
Speaker Change: Moving back to broadband despite a 30 day work stoppage in the southeast portion of our footprint.
Speaker Change: We've now had more than 200000, AT&T fiber net adds for 19 consecutive quarters, which shows the strong underlying customer demand for fiber.
In the quarter consumer wireline delivered more than 8% EBIT growth driven by nearly 17% growth in fiber revenues.
Speaker Change: These consistent results make it clear that our fiber investment is generating attractive returns with improved operating leverage as we transition from legacy networks.
Speaker Change: Overall, the underlying momentum momentum with <unk> and fiber positions us to close the year strong.
John Stankey: While our 5G and fiber businesses are performing well on their own, it's increasingly clear that customers prefer to purchase mobility and broadband together as a converged service. Only AT&T can offer this at scale with benefits from owners' economics. This is driving a reinforcing cycle where the success of our fiber business tries growth and mobility, and vice versa. As we shared last quarter, about 4 out of every 10 AT&T Fiber households also choose AT&T as their wireless provider. Additionally, our share of post-paid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average.
Speaker Change: While our five G and fiber businesses are performing well on their own it's increasingly clear that customers prefer to purchase mobility and broadband together is a converged service.
Speaker Change: Only AT&T can offer this at scale with benefits from owners economics.
Speaker Change: This is driving a reinforcing cycle, where the success of our fiber business drives growth in mobility and vice versa.
Speaker Change: As we shared last quarter about four out of every 10 AT&T fiber households, also choose AT&T the wireless provider.
Speaker Change: Additionally, our share of postpaid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average.
John Stankey: This highlights the true benefit of owning and operating both 5G and fiber networks at scale, which is the ability to drive higher share and both 5G and fiber networks at scale. Both mobility and broadband through converged service penetration. Over time, we expect this should drive higher returns on our invested capital in both our mobility and broadband businesses than either could achieve as a standalone operation.
Speaker Change: This highlights the true benefit of owning and operating both five <unk> and fiber networks at scale, which is the ability to drive higher share in both mobility and broadband through converged service penetration over time.
Speaker Change: We expect this should drive higher returns on our invested capital in both our mobility and broadband businesses than either could achieve as a standalone operation.
John Stankey: While our conversion strategy began with a focus on our own fiber footprint, we're also pursuing attractive opportunities to expand AT&T Fiber outside of it. We're already America's largest fiber provider with the fastest and most reliable speeds. The superiority of AT&T Fiber elevates the overall AT&T brand. We want more customers to experience the best wired internet experience available today. That's why we've announced plans to bring AT&T Fiber high-speed internet to even more people and new geographies through Gigapower, a joint venture with BlackRock, as well as through recent agreements with commercial open access fiber providers. These fiber-driven growth initiatives present attractive, capital-efficient ways for us to provide both AT&T fiber and 5G wireless services to more customers.
While our convergence strategy began with a focus on our own fiber footprint. We're also pursuing attractive opportunities to expand AT&T fiber outside of it we're already America's largest fiber provider with the fastest and most reliable speeds.
Speaker Change: The superiority of AT&T fiber elevates the overall AT&T brand, we want more customers to experience the best Wired Internet experience available today.
Speaker Change: That's why we've announced plans to bring AT&T fiber high speed internet to even more people and new geographies through Giga power, our joint venture with Blackrock as well as through recent agreements with commercial open access fiber providers.
Speaker Change: These fiber driven growth initiatives present attractive capital efficient ways for us to provide both the AT&T fiber and <unk> wireless services to more customers.
John Stankey: In addition to being the largest capital investor in the US connectivity infrastructure since 2019, we continue to reduce our net debt and increase operating leverage due to a combination of higher EBITDA and strong free cash flow generation. Our financial flexibility continues to improve, and we 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.
Speaker Change: In addition to being the largest capital investor in the U S connectivity infrastructure. Since 2019, we continue to reduce our net debt and increased operating leverage due to a combination of higher EBITDA and strong free cash flow generation.
Speaker Change: Our financial flexibility continues to improve and we remain on pace to meet our target of net debt to adjusted EBITDA in the two five times range in the first half of next year.
John Stankey: In the quarter, we also announced that we reached an agreement to sell a remaining 70% stake in Direct TV to TPG in a non-contingent transaction subject only to customary closing conditions and separate from the regulatory process associated with the Direct TV dish transaction. This sale and transaction structure allows us to continue our focus on being a leader in 5G in fiber connectivity throughout America while further strengthening the balance sheet. It also presents new optionality as we consider opportunities to leverage our significant distribution to aggregate products and services that simplify and improve our customer's lives. We will close the transaction following necessary regulatory approvals and optimal financing and tax considerations.
Speaker Change: In the quarter, we also announced that we reached an agreement to sell our remaining 70% stake in Directv to TPG in a non contingent transaction subject only to customary closing conditions.
Speaker Change: Separate from the regulatory process associated with the direct TV dish transaction.
Speaker Change: This sale and transaction structure allows us to continue our focus on being a leader in <unk> and fiber connectivity throughout America, while further strengthening the balance sheet.
Speaker Change: It also presents new Optionality as we consider opportunities to leverage our significant distribution to aggregate products and services that simplify and improve our customers lives.
Speaker Change: We will close the transaction following necessary regulatory approvals and optimal financing and tax considerations.
John Stankey: We're confident that the company's transformation over the past 4 years has positioned us well for continued organic growth, while also increasing our financial flexibility and capacity to support sustained investment and enhanced shareholder returns. We're excited to share the details on what this all means for the future of AT&T. When we look at it, we'll see if we can make sure that the company's transformation over the past 4 years has positioned us well for continued organic growth, while also increasing our financial flexibility and capacity to support sustained investment and enhanced shareholder returns. We're excited to share the details on what this all means for the future of AT&T.
Speaker Change: We're confident that the company's transformation over the past four years has positioned us well for continued organic growth, while also increasing our financial flexibility and capacity to support sustained investment and enhance shareholder returns.
Speaker Change: I'm excited to share the details of what this all means for the future of AT&T. When we speak with you again at our upcoming analyst and Investor Day on December 3rd.
John Stankey: We speak with you again at our upcoming Analysts and Investor Day on December 3rd, so mark your calendars for an exciting visit to Big D.
Speaker Change: So mark your calendars for an exciting visit to Big D.
Pascal Desroches: With that, I'll turn it over to Pascal to cover the quarter in greater detail. Pascal. Thank you, John, and good morning, everyone.
Speaker Change: I'll turn it over to Pascal to cover the quarter in greater detail Pascal.
Pascal Roche: Thank you John and good morning, everyone, let's start by reviewing our third quarter financial summary on slide eight.
Pascal Desroches: Let's start by reviewing our 3rd quarter financial summary on slide 8. 3rd quarter consolidated results were in line with our expectations. Repnews were down slightly as it declined. In line in business, wild line service revenues and low margin mobility equipment revenues were mostly offset by growth in higher margin, wireless service revenues and fiber revenues. Year-over-year consolidated revenue trends were also impacted by more than 100 million of FX headwinds and an approximately 100 million dollar impact from transferring our cybersecurity business into the joint venture earlier this year. Adjusted EBITDA was up 3.4% for the quarter, as growth in mobility, consumer wireline, and Mexico, which collectively drove more than 80% of our total revenues in the quarter, were partially offset by a continued decline in business wireline.
Pascal Roche: Third quarter consolidated results were in line with our expectations.
Pascal Roche: Revenues were down slightly as the decline in business wireline service revenues and low margin mobility equipment revenues were mostly offset by growth in higher margin wireless service revenues and fiber revenue year.
Pascal Roche: Year over year consolidated revenue trends were also impacted by more than $100 million of FX headwinds and an approximately $100 million impact from transferring our cyber security business into a joint venture earlier this year.
Adjusted EBITDA was up three 4% for the quarter as growth in mobility, consumer wireline and Mexico, which collectively drove more than 80% of our total revenues in the quarter were partially offset by a continued decline in business wireline.
Pascal Desroches: Year to date, adjusted EBITDA grew 3.4%, and we continued to expect adjusted EBITDA growth in the 3% range for the full year. We expect to achieve this growth even with about 115 million of estimated financial impact related to the effects of Hurricane Helene and Milton, and the work stoppage. Consumer wireline and business wireline are expected to bear most of this impact. Adjusted EBITDA was 60 cents compared to 64 cents in the year-go quarter. Consistent with prior quarters this year, the third quarter included about nine cents of our gave DPS headwinds from the four items we discussed earlier in the year.
Pascal Roche: Year to date adjusted EBITDA grew three 4% and we continue to expect adjusted EBITDA growth in the 3% range for the full year.
Pascal Roche: We expect to achieve this growth EBIT with about $115 million of estimated financial impact related to the effects of hurricane Helene and Milton.
Pascal Roche: And the work stoppage.
Pascal Roche: Consumer wireline business wireline are expected to bear most of this impact.
Pascal Roche: Adjusted EPS was <unk> 60, compared to 64 in the year ago quarter.
Pascal Roche: Consistent with prior quarters. This year the third quarter included about nine of Al gave EPS headwinds from the four items, we discussed earlier in the year adjusted.
Pascal Desroches: Adjusted EBITDA excludes 61 cents impact related to a $4.4 billion non-cash goodwill and payment charge for our business wireline unit, driven by an industry-wide secular decline of legacy service. for the full year. Our expectations remain for adjusted EPS in the range of $2.15 to $2.25. Year-to-date free cash flow is $12.8 billion. This is up $2.4 billion compared to the same time last year and consistent with our goal of driving higher free cash flow that is more radical on a quarterly basis. In the third quarter, we generated free cash flow of $5.1 billion, which included the previously disclosed one-time payment of $480 million related to our wireless network transformation and the continued pay-down of vendor financing obligations.
Pascal Roche: EPS excludes 61 impact related to a $4 4 billion dollar non cash goodwill impairment charge.
Pascal Roche: For our business wireline unit, driven by an industry wide secular decline of legacy services.
Pascal Roche: For the full year.
Pascal Roche: Our expectations remain for adjusted EPS in the range of $2 15 to.
Pascal Roche: To $2 25.
Pascal Roche: Year to date free cash flow was $12 8 billion. This is up $2 4 billion compared to the same time last year and consistent with our goal of driving higher free cash flow that is more ratable on a quarterly basis.
Pascal Roche: In the third quarter, we generated free cash flow of $5 1 billion, which included the previously disclosed onetime payment of $480 million related to our wireless network transformation and the continued pay down of vendor financing obligations.
Pascal Roche: Okay.
Pascal Desroches: Capital investments for the quarter were $5.5 billion, down about $150 million compared to the prior year, primarily due to lower vendor financing payments. Capital expenditures were $5.3 billion, up approximately $650 million compared to the prior year. We expect higher capital investment in the fourth quarter as we ramped our wireless network modernization. We also expect to sustain strong cash conversion in the fourth quarter and anticipate using our improved liquidity to continue reducing our short-term financing, including further pay-down of vendor financing in the fourth quarter. These additional vendor financing payments put us on page for a full-year capital investment at the high end of our guidance range of $21 to $22 billion.
Pascal Roche: Capital investments for the quarter was $5 5 billion down about $150 million compared to the prior year, primarily due to lower vendor financing payments.
Pascal Roche: Capital expenditures were $5 3 billion up approximately 650 million compared to the prior year, we expect higher capital investment in the fourth quarter as we ramp our wireless network modernization.
Pascal Roche: We also expect to sustain strong cash conversion in the fourth quarter and anticipate using our improved liquidity to continue reducing our short term financing, including further pay down of vendor financing in the fourth quarter.
Pascal Roche: Additional vendor financing payments put us on pace for a full year capital investment at the high end of our guidance range of 21 to 22 billion.
Pascal Desroches: Our free cash flow is tracking to the midpoint of our guidance range of $17 to $18 billion.
Pascal Roche: Our free cash flow is tracking to the midpoint of our guidance range of $17 billion to $18 billion now.
Pascal Desroches: Now let's look at our mobility operator results on slide nine. For the quarter, we delivered 403,000 post-paid phone net ads, down from 468,000 a year ago. This is consistent with our wireless market normalization expectation. We also posted another quarter of year-over-year churn improvement, with post-paid phone churn of 0.78% versus 0.79% in the third quarter of 2023. Mobility service revenue grew 4% driven by strong execution in our balance-go-to-market strategy. In the quarter, we also align the timing of certain administrative fees and recorded approximately $90 million of one-time revenues that benefited service revenue. Post-paid phone RPU was $57.7.
Pascal Roche: Now, let's look at our mobility operating results on slide nine.
Pascal Roche: For the quarter, we delivered 403000 postpaid phone net adds down from 468000, a year ago. This.
Pascal Roche: This is consistent with our wireless market normalization expectation.
Pascal Roche: <unk> also posted another quarter of year over year churn improvement with postpaid phone churn of <unk>.
Pascal Roche: Seven 8% versus.
Pascal Roche: Seven 9% in the third quarter of 2023.
Pascal Roche: Yeah.
Pascal Roche: Mobility service revenue grew 4% driven by strong execution and our balanced go to market strategy in.
Pascal Roche: In the quarter, we also align the timing of certain administrative fees and recorded approximately $90 million of one time revenues that benefited service revenue.
Pascal Roche: Postpaid phone <unk> was $57 seven.
Pascal Desroches: Up 1.9% year-over-year, largely driven by higher RPU on legacy plans. As expected, service revenue growth was partially offset by lower equipment revenues, with a post-paid upgrade rate of 3.5%, which was down from 3.9% last year. In prepaid, our cricket brand continues to display remarkable consistency with positive phone net ads for 40 consecutive quarters, or a decade straight. For the year, we continue to expect mobility service revenue growth in 3%. Brains. Mobility EBITDA of 9.5 billion grew 6.7% or by about 600 million year-over-year. On a year-to-date basis, Mobility EBITDA grew 6.3%, reflecting nearly 100% of service revenue growth flowing through to EBITDA.
Pascal Roche: Up one 9% year over year, largely driven by higher ARPA on legacy plants.
Pascal Roche: As expected service revenue growth was partially offset by lower equipment revenues with a postpaid upgrade rate of three 5%, which was down from three 9% last year.
Prepaid our cricket brand continues to display remarkable consistency with positive phone net adds for 40 consecutive quarters or decades straight.
Pascal Roche: For the year, we continue to expect mobility service revenue growth and 3% range.
Pascal Roche: Mobility EBITDA of $9 5 billion grew six 7% or by about $600 million year over year.
Pascal Roche: On a year to date basis mobility, EBITDA grew six 3%, reflecting nearly a 100% of service revenue growth flowing through to EBITDA.
Pascal Desroches: The strong performance puts us on pace to achieve our target of mobility EBITDA growth in the higher end of the mid-single-digit range for the full year. Our mobility outlook also continues to anticipate higher fourth-quarter promotional activity levels consistent with seasonal trends.
Pascal Roche: This strong performance puts us on pace to achieve our target of mobility EBITDA growth in the higher end of the mid single digit range for the full year.
Pascal Roche: Our mobility outlook also continues to anticipate higher fourth quarter promotional activity levels consistent with seasonal trends.
Pascal Desroches: Now, let's move to Consumer Wireline results on slide 10. The sustainable strength of fiber is driving consumer wireline growth and yielding strong returns. In 8,000 total broadband subscribers, which includes 226,000 AT&T fiber net ads. Our fiber subscriber gains also reflect an estimated 50,000 fewer net ads from the work stoppage and storms in the Southeast. It is clear that where we do have AT&T Fiber, we win. We now pass more than 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've stated before, the better-than-expected returns we're seeing on our fiber investment potentially expand our opportunity to go beyond our initial build target by roughly 10 to 15 million additional locations.
Pascal Roche: Now, let's move to consumer wireline results on slide 10.
Pascal Roche: Yeah.
Pascal Roche: The sustainable strength of fiber is driving consumer wireline growth and yielding strong returns.
Pascal Roche: In the quarter, we added 28000 total broadband subscribers, which includes 226000 AT&T fiber net adds.
Pascal Roche: Our fiber subscriber gains also reflect an estimated 50000 fewer net adds from the work stoppage and stores in the southeast.
Pascal Roche: It is clear that where we do have AT&T fiber we win.
Pascal Roche: We now pass more than $28 million consumer business locations with fiber.
Pascal Roche: And remain on track to past 30 million plus fiber locations by the end of 2025.
Pascal Roche: As we've stated before.
Pascal Roche: The better than expected returns, we're seeing on our fiber investments potentially expand our opportunity to go beyond our initial build target by roughly $10 million to $15 million additional locations.
Pascal Desroches: We look forward to providing you with a more detailed update on our plans for expanding the reach of AT&T Fiber during our Analyst and Investor Day on December 3rd. Outside of fiber, we remain encouraged by the early performance of AT&T Internet Air and our success proactively migrating legacy copper-based internet customers to the service. We now have nearly 500,000 total AT&T Internet air consumer subscribers, including 135,000 added during the quarter. Third quarter broadband revenues grew 6.4% due to strong fiber revenue growth of nearly 17%. For the full year, we continue to expect broadband revenue growth of 7% plus.
Pascal Roche: We look forward to providing you with a more detailed update on our plans for expanding the reach of AT&T fiber during our analyst and Investor day on December 3rd.
Pascal Roche: Outside of fiber.
Pascal Roche: We remain encouraged by the early performance of AT&T net air and our success proactively migrating legacy copper based internet customers to this service.
Pascal Roche: We now have nearly 500000 total AT&T in the ear consumer subscribers, including 135.
Pascal Roche: <unk> added during the quarter.
Pascal Roche: Third quarter broadband revenues grew six 4% due to strong fiber revenue growth of nearly 17%.
Pascal Roche: For the full year, we continue to expect broadband revenue growth of 7% plus.
Pascal Desroches: Fiber ARPU of $70.36 was up 3.2% year over year, with intake ARPU approximately $75. We continue to see solid uptake in higher speed fiber tiers and a healthy underlying pricing trends. The third quarter also was the first full quarter in which ARPU was impacted by the rollout of auto pay changes. We view auto pay as a long-term benefit for customers as well as operationally for our broadband business. Consumer wireline EBITI grew 8.6% as growth in broadband revenues and ongoing course transformation continue to improve profitability.
Fiber or <unk> of $70, a 36 was up three 2% year over year with intake RP approximately $75.
Pascal Roche: We continue to see solid uptake and higher speed fiber tiers, and a healthy underlying pricing trends.
Pascal Roche: The third quarter also was the first full quarter in which <unk> was impacted by the rollout of order pay changes, we view <unk> as a long term benefit for customers as well as operationally for our broadband business.
Pascal Roche: Sooner wireline EBITDA grew eight 6% as growth in broadband revenues and ongoing cost transformation continued to improve profitability.
Pascal Desroches: grew the third quarter, consumer wireline EBITDA grew 10% and we continue to expect growth in the mid-to-high single-digit range for the full year, including impacts from the recent work stoppage and storms. Now let's cover business wireline on slide 11. Business wireline EBITDA was down 20% due to continued industry-wide secular decline in legacy voice services. The reported decline in EBITDA also reflects a tough comparison versus the third quarter of last year, which benefited from approximately 100 million of IP sales that did not recur in 3Q this year. Overall, business wireline has performed slightly below the outlook we provided in the first quarter, due to lower revenue expectations, including a shift of IP sales into 2025, as well as the impact of southeast work stoppage and impacts of hurricanes, lean and milk.
Pascal Roche: Through the third quarter consumer wireline EBITDA grew 10% and we continue to expect growth in the mid to high single digit range for the full year, including impacts from the recent work stoppage and storms.
Pascal Roche: Now, let's cover business wireline on slide 11.
Pascal Roche: Business wireline EBITDA was down 20% due to continued industry wide secular declines in legacy voice services.
Pascal Roche: The reported decline in EBITDA also reflects a tough comparison versus the third quarter of last year, which benefited from approximately 100 million of IP sales that did not recur in <unk> this year.
Pascal Roche: Overall business.
Pascal Roche: Wireline is performing slightly below the outlook, we provided in the first quarter due to lower revenue expectations, including a shift of IP sales into 2025 as well as the impact of southeast work stoppage and impacts of Hurricanes Helene and milk.
Pascal Desroches: We now expect business wireline EBITDA declines in the high-teens range for the full year versus our prior outlook for a mid-team decline. 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 wireless products continue to present attractive growth opportunities in business solutions. This includes sustained growth in First-Net, which now has approximately 6.4 million total connections. Similarly, we're excited about the potential of emerging growth products like AT&T Internet AFR business.
Pascal Roche: We now expect business wireline EBITDA declines in the high teens range for the full year versus our prior outlook for a mid teen decline.
Pascal Roche: While near term declines in legacy voice revenues are likely to weigh on business wireline EBITDA trends for the remainder of the year, our five G and wireless products continue to present attractive growth opportunities and business solutions.
Pascal Roche: This includes sustained growth at first net which now has approximately $6 4 million total connections.
Pascal Roche: Really we're excited about the potential of emerging growth products like AT&T Internet after business now.
Pascal Desroches: Now, let's move to slide 12 for an update on our capital allocation strategy. Our approach to capital allocation remains consistent and delivered. We're successfully balancing efficient growth with long-term investment as we deliver, converge network services to more customers, pay down debt, and return value to shareholders. We also remain focused on deleveraging. We reduced net debt by about $1.1 billion in the quarter, despite a $1.3 billion FX headwind related to foreign debt. Also recall, we fully hedge our foreign-denominated debt, so we have an offsetting FX gain recorded in other non-current liabilities on our balance sheet related to the hedges.
Pascal Roche: Now, let's move to slide 12 for an update on our capital allocation strategy.
Our approach to capital allocation remains consistent and deliberate.
Pascal Roche: We're successfully balancing efficient growth with long term investment as we deliver converged network services to more customers.
Pay down debt and return value to shareholders.
Pascal Roche: We also remain focused on deleveraging, we reduced net debt by about $1 1 billion in the quarter. Despite a 1.3 billion FX headwind related to foreign debt.
Pascal Roche: Also recall.
Pascal Roche: We fully hedge our foreign denominated debt. So we have an offsetting FX gain recorded in other non current liabilities on our balance sheet related to the hedges.
Pascal Desroches: Year over year, we've reduced net debt by approximately $2.9 billion and have lower vendor and supplier financing by $2.4 billion. At the end of September, net debt suggested that I was at $2.8 times and were making steady progress on achieving our target in the two-and-a-half times range in the first half of 2025. Looking forward, our debt maturities are very manageable, and we're in a great position with more than 95% of our long-term debt fixed, with an rated average rate of 4.2%. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $1.7 billion versus the second quarter.
Pascal Roche: Year over year, we've reduced net debt by approximately $2 9 billion and have lowered vendor and supplier financing by $2 4 billion.
Pascal Roche: At the end of September net debt to adjusted EBITDA was at two eight times and we're making steady progress on achieving our target in the two five times range in the first half of 2025.
Pascal Roche: Looking forward our debt maturities are very manageable and we're in a great position with more than 95% of our long term debt fixed with a weighted average rate of four 2%.
Pascal Roche: In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $1 $7 billion versus the second quarter.
Pascal Desroches: The third quarter net impact from securitization facilities was a $400 million source of cash, so the net of these items was a $1.3 billion use of cash. In the fourth quarter, we expect a sequential increase in direct supply of financing balances due to typical seasonality. However, we expect to continue reducing our aggregate net balance of direct supply and vendor financing on a year-over-year basis for the remainder of the year, which should lower our interest expense and continue to improve the quality and reliability of our cash flows over time. Direct TV distributions in the quarter were about $600 million on a pre-tax basis.
Pascal Roche: The third quarter net impact from securitization facilities was a $400 million source of cash. So the net of these items was a $1 3 billion use of cash.
Pascal Roche: In the fourth quarter, we expect sequential increase in direct supplier financing balances due to typical seasonality. However, we expect to continue reducing our aggregate net balance of direct supplier and vendor financing on a year over year basis for the remainder of the year, which should lower our interest.
Pascal Roche: Spence and continue to improve the quality and route ability of our cash flows over time.
Pascal Roche: Directv distributions in the quarter were about $600 million on a pre tax basis.
Pascal Desroches: Based on the terms of our agreement to digest our 70% stake in Direct TV, we expect 1.1 billion of pre-tax cash payments in 4Q. Cash taxes were about 600 million in the third quarter, and we expect to pay about 1.6 billion in cash taxes in the fourth quarter. To close, I'm very pleased with our team's performance so far this year, and as John noted, we're on pace to deliver on all of our full year 2024 consolidated financial guidance. Brett, that's our presentation.
Pascal Roche: Based on the terms of our agreement to divest our 70% stake in Directv, We expect $1 1 billion of pre tax cash payments in for cube.
Pascal Roche: Cash taxes were about 600 million in the third quarter, and we expect to pay about $1 6 billion in cash taxes in the fourth quarter.
Speaker Change: To close I'm very pleased with our team's performance so far this year and as John noted we're on pace to deliver on all of our full year 2024 consolidated financial guidance, Brett That's our presentation, we're now ready for the Q&A.
Pascal Desroches: We're now ready for the Q&A. Thank you, Pascal.
Simon Flannery: Operator, we're ready to take the first question. Thank you, and that will come from the line of Simon Flannery with Morgan Stanley.
Pascal Roche: E. Pascal operator, we are ready to take the first question.
Speaker Change: Thank you and that will come from the line of Simon Flannery with Morgan Stanley.
Simon Flannery: Good morning, thank you very much. John, you mentioned in the fourth quarter, we expect to easily hire a phone purchasing activity upgrades and promo cycles. Can you just put some context around that you've continued to see low upgrade activity? There's concerns about a bigger iPhone cycle.
Simon Flannery: Good morning. Thank you very much John you mentioned in the fourth quarter, we expect seasonally higher phone purchasing activity upgrades and promo cycles can you just put some context around that you've continued to see low upgrade activity. There is concerns about a bigger iPhone cycle you know what.
Simon Flannery: What are you expecting in the fourth quarter and longer term as Apple introduces AI, etc. And then just one on the business wireline. Any kind of light at the end of the tunnel there, how much more of these sort of pressures do you think we get before the rate of change starts to stabilize and improve?
Simon Flannery: What are you expecting in the fourth quarter and a longer term as Apple introduces AI et cetera, and then just one on the business wireline.
Simon Flannery: Any any kind of light at the end of the tunnel there how much more of these sort of pressures do you think we can before the rate of change starts to stabilize and improve.
John Stankey: Thanks.
John Stankey: I've signed a good morning. So I don't know that I can give you an answer that's more satisfying than last quarter on projecting what Apple phone sales might be. I, you know, you've seen the numbers. They're down slightly over last year's levels on an introduction. We're still waiting, obviously, for the software release, and whether or not that software release drives interest in the consumer base to accelerate that remains to be seen. I don't know. I've given you my point of view that says I think some of these things are going to be a little bit more graceful ramp up and consumer interest as opposed to big bang software. Oftentimes, tends to be that.
Speaker Change: Simon good morning.
Simon Flannery: Good morning, So I don't know that I can give you an answer that's more satisfying than last quarter on projecting what apple phone sales might be.
Speaker Change:
Speaker Change: You've seen the numbers theyre down slightly over last year's levels on an introduction.
Speaker Change: We're still waiting obviously for the software release, and whether or not that software release.
Speaker Change: <unk> interest in the consumer base to accelerate that remains to be seen I don't know.
Speaker Change: I've given you my point of view that says I think some of these things are going to be a little bit more graceful ramp up and consumer interest as opposed to big Bang software oftentimes tends to be that if you went back and thought about any software innovation that occurs on a handset over the past decades or so.
John Stankey: If you went back and thought about any software innovation that occurs on a hand set over the past decades or so, you tend to see that dynamic occur. They become material and meaningful over time. But oftentimes certain features didn't exactly go to this massive ramp when their first release because software is an iterative technology; sometimes it has to be iterated on to improve it and make it meaningful and address the particular need. So I don't know that I would expect when the software release comes out that all of a sudden we see this massive uptick.
Speaker Change: You tend to see that dynamic occur they become material and meaningful over time, but oftentimes certain features didn't exactly go to this massive ramp when their first release because software is an iterative technology that sometimes has to be iterate it on to improve it and make it meaningful and address that.
Speaker Change: Need so I don't know that I would expect when the software release comes out but all of a sudden we see this massive uptick.
John Stankey: But the consumer will ultimately decide that. The consumer will be the one that decides what to do, and I think to my remarks. We're in a position in what we've done through the first three-quarters of this year that we've got a lot of flexibility. We can adjust to whatever takes place. I think I mentioned last quarter when we were on the call, expected the fourth quarter might be active, combinational holiday season, device capabilities. And so we've tried to make sure that we're in a position to address that no matter how it occurs. And I feel like, based on what you've seen in the industry over the course of the last couple of weeks, things have been very realistic and very pragmatic about how folks have approached the market.
The consumer alternately decide that the consumer will be the one that decides what to do and I think to my remarks.
Speaker Change: We're in a position and what we've done through the first three quarters of this year that we've got a lot of flexibility.
Speaker Change: Can adjust to whatever.
Speaker Change: <unk> place.
Speaker Change: I think I had mentioned last quarter, when we were on the call.
Speaker Change: <unk> the fourth quarter might be active combination of a holiday season device capabilities and so we've tried to make sure that we're in a position to address that no matter how it occurs.
Speaker Change: Feel like based on what you've seen it in the industry over the course of the last couple of weeks.
Speaker Change: Things have been.
Speaker Change: Very realistic and very pragmatic about how folks have approached the market and I don't expect things to be dramatically different as we move through the fourth quarter.
John Stankey: And I don't expect things to be dramatically different as we move through the fourth quarter.
John Stankey: Related to business wireline, there are green shoots.
Speaker Change: Relative to the business wireline.
Speaker Change: Look there's a lot there are green shoots.
John Stankey: As you know, we're trying to reposition the business to a connectivity-based business. And when I look at what we're doing in our connectivity-based product and service portfolio, as we reposition the focus of the organization, we move from spending most of our time in the Fortune 1000 to a broader exposure to the business market. I do see those volumes starting to take off. And I see our distributions starting to ramp. They're just not doing at the rate and pace of some of the decline in the legacy revenue base. And some of those are products or fairly mature products that have very attractive margin constructs around it.
Speaker Change: As you know, we're trying to reposition the business to a connectivity based business and when I look at what we're doing and our connectivity based product and service portfolio as we reposition.
Speaker Change: The focus of the organization and we move from spending most of our time in the fortune 1000 to a broader exposure to the business market I do see those volumes starting to take off.
Speaker Change: I see our distributions starting to ramp.
Speaker Change: We're just not doing that at the rate and pace of some of the decline in the legacy revenue base and some of those are products are fairly mature products that have.
Speaker Change: Very attractive margin cost structure around it and there's a little bit of a shift going on and it's it's not a whole lot different than what we were kind of going through on the consumer side, you know a few years back.
John Stankey: And there's a little bit of a shift going on. And it's not a whole lot different than what we were kind of going through on the consumer side, you know, a few years back. We will catch it exactly the date that we will catch it. We'll spend some time on that December, giving you a little bit of an outlook of how we see that playing through. But, as you've been seeing, we've been doing a nice job as a business finding other places to grow to kind of offset that as we move through it.
Speaker Change: We will catch it exactly.
Speaker Change: Exactly the date, we will catch it will spend some time on that in December, giving you a little bit of an outlook.
Speaker Change: Of how we see that playing through but as you've been seeing we've been doing a nice job as a business finding other places to grow to kind of offset that as we move through it.
John Stankey: I drive home at night thinking about a lot of things. You know, we have a tough challenge in front of us on our things that I wonder whether we're headed the right direction on. One thing I do not wonder about is whether we should be putting our time and effort in repositioning in the business. I feel very, very comfortable that this is a place that AT&T should be. This is an important market to us. All of our data, all of our research, everything we're doing suggests that we can create long-term value, just like we're doing in consumer as a converged provider.
Speaker Change: Drive home at night.
Speaker Change: Thinking about a lot of things that we have a tough challenge in front of us on are things that I wonder whether we're headed the right direction. One thing I do not wonder about is whether we should be putting our time and effort in repositioning the business.
Speaker Change: I feel very very comfortable.
Speaker Change: This is the place at AT&T you should be.
Speaker Change: This is an important market to us all of our data all of our research everything we're doing suggests that we can create long term value just like we're doing in consumer as a converged provider and we will be successful in that transition and I don't want to lose the fact that because we report.
John Stankey: And that we will be successful in that transition, and I don't want to lose the fact that because we report business wireline separately, it doesn't really reflect how we're doing in the business market overall. When you add in what we're experiencing in the wireless space and the solid growth that we're putting up on the board, a lot of that's coming from business. And it's just it's a technology shift in some cases of business that have traditionally purchased wireline services that are now migrating certain products and services to wireless. And I think our product portfolio is now starting to evolve.
Speaker Change: Wireline separately it doesn't really reflect how we're doing in the business market overall.
Speaker Change: When you add in what we're experiencing in the wireless space and the solid growth that we're putting up on the board a lot of that is coming from business and it's just it's a technology shift in some cases a business that have traditionally purchased wireline services that are now migrating certain products and services to wireless and.
Speaker Change: And I think our product portfolio is now starting to evolve where on a combined basis, we can be even more effective.
John Stankey: We're on a combined basis. We can be even more effective. And I'm pretty confident we're going to make that pivot. We're going to be in a good place after we get everything lined up on that.
Speaker Change: I'm pretty confident we're going to make that pivot and we're gonna be in a good place after we get everything lined up on that.
John Stankey: Great. Thanks, John.
Speaker Change: Great. Thanks, John.
Operator: We'll take our next question, please.
Speaker Change: We'll take our next question please.
John Hodulik: And we'll go to the line of John Huddlick with you. B.S.
Speaker Change: And we'll go to the line of John Hodulik with UBS.
John Hodulik: Great, thanks.
John Hodulik: Good morning, guys. I don't want to jump the gun too much on the December event, but can we talk a little bit about the outer region opportunity with fiber? I guess first, how did you guys, or what was the criteria for selecting the partners that you have, and are there more partners likely to be added? Second, how big could that opportunity be, I guess, including gig-a-power? Third, are you guys seeing the churn benefits? I guess you sort of laid out the customers that have bundled service, but are you guys seeing churn benefits in the wireless business for customers that have, that take both services?
Great. Thanks, and good morning, guys.
John Hodulik: I don't want to jumping on too much on the December agenda, but can we talk a little bit about the outer region opportunity with with fiber.
John Hodulik: I guess first how did you guys or what was the criteria for selecting the partners that you have and are there more partners likely to be added.
John Hodulik: Second how big could that opportunity be I guess, including Giga power.
Are you guys seeing the churn benefits.
John Hodulik: Yes.
Speaker Change: You sort of laid out that the customers that have had.
Speaker Change: Bundled service, but are you guys seeing churn benefits in the wireless business for customers that have that take both services. Thanks.
John Stankey: Thanks.
John Stankey: Hi, John. So, I have a talk about some of those, and of course, to your point, we'll spend even more time and give you a little bit more texture when you come and visit us here in December. Hope you do come. So, look, the partner dynamic is, it's a good question and it's really important in our point of view, and I think I alluded to this at the Comunicopia conference that we try to put a portfolio of capabilities together that make us the attractive partner, and it's not just that we can go in and move product for somebody. We're doing all the things where, because we have a gig-a-power offer and because we're actually, in some cases, operating, you know, what could ultimately be an open access network in some parts of the country, we've been very mindful of how you should construct the product offer, how you need to work with partners, et cetera, and we've walked in with the model, it's a model that we're executing in our own partner footprint, where we can walk in and offer them, even though we're not funding the build, in this case, the same construct of what we're executing in gig-a-power, same product offer, the same ability to bring our distribution strength that comes in play, the same ability to do things like offer OSS and BSS back offices that can facilitate people and how they operate things, even going as far as what we can do to give them opportunities to ride on our scale and our capabilities with their party suppliers and providers as they go about the work that they're doing.
Speaker Change: Hi, John.
Speaker Change: So happy to talk about some of those and of course to your point, we will spend even more time and give you a little bit more texture.
Speaker Change: You come and visit US here in December Hope you do come.
Speaker Change: So look the partner dynamic is it's a good question and it's really important and our point of view and I think I alluded to this.
Speaker Change: We communicated to you.
Speaker Change: Conferences.
Speaker Change: We've tried to put our portfolio of capabilities together that make us the attractive partner.
Speaker Change: And it's not just that we can go in and move product for somebody we're doing all the things were.
Speaker Change: Because we havent Giga power offer because we're actually in some cases operating.
Speaker Change: What could ultimately be an open access network in some parts of the country.
Speaker Change: We've been very mindful of how you should construct the product offer how you need to work with partners et cetera, and we walk in with a model that is <unk>.
Speaker Change: Model that were executing and our own partner footprint, where we can walk in and offer them, even though we're not funding the build in this case the <unk>.
Speaker Change: Same construct of what we're executing and Giga power same product offer the same ability to bring our distribution strength that comes in play.
Speaker Change: <unk> ability to do things like offer Oss and BSS back offices that can facilitate people and how they operate things even going as far as what we can do to give them opportunities to write on our scale and our capabilities with third party suppliers and providers as they go about the work that they're doing.
John Stankey: And we're very open, for example, of offering the technologies we put together in home technologies, how that product capability evolves over time, and to build a world-class product; that kind of scale is essential. So when we walk in, we approach a partner, and when we approach a partner and we're not necessarily interested in selling fixed wireless access over the top of them, that looks like a really good place for somebody to maybe invest in a relationship over time that's mutually productive moving forward. And is there more out there that can be done? Sure. And I think one of the things that maybe we all need to understand structurally of what's occurring in this industry over time is these partnerships and some of the open access arrangements will in fact change the percentage of the population that certain brands and converge capabilities can serve over time.
Speaker Change: And we're very open for example of operating the technology that we put together for in home technologies, how that product capability evolves over time.
Speaker Change: And to build a world class product that kind of scale is essentially so when we walk in and we approach a partner and when we approach a partner and we're not necessarily interested in selling fixed wireless access over the top of them that that looks like a really good place for somebody to maybe invest in a relationship over time.
Speaker Change: <unk>.
Speaker Change: Mutually productive moving forward and is there more out there that can be done sure.
Speaker Change: And I think one of the things that maybe we all need to understand structurally of what's occurring in this industry over time as these partnerships and some of the open access arrangements will in fact.
Speaker Change: Change the percentage of the population that certain brands and converged capabilities conserve overtime.
John Stankey: And I think that will be a meaningful, not the most significant part, but it will be a meaningful part of the total addressable market that companies like AT&T can ultimately attack moving forward. So I do think you can get bigger. I think you're seeing just the front end of it right now. As I've said before, I don't believe this is a two- or three-year dynamic. I think this is what will the industry structure emerge to over the next decade dynamic?
Speaker Change: And I think that will be a meaningful not these most significant part of it will be a meaningful part of the total addressable market that companies like AT&T can ultimately attack moving forward.
Speaker Change: So I do think it can get bigger I think youre seeing just the front end of it right now as I've said before I don't believe this is a two or three year dynamic I think this is what will the industry structure emerged to over the next decade dynamic.
John Stankey: And that's the play that I'm kind of focusing the business on, and I'm trying to think about as we allocate capital to ensure that over the next decade, AT&T is positioned in the right way as this industry restructures in a very different way than what we've seen in the previous decade. So where we are in performance, I gave a fair amount of insight to the front end of what we're seeing with some of our partnership sales when I was out at Communicopia. I think what we can safely say is everything at the front end, customer acquisition, our foods, our rate of penetration, all those things, as I shared, are looking very, very similar to what's happening in region.
Speaker Change: That's the play that I'm kind of focusing the business on what I am trying to think about as we allocate capital to ensure that over the next decade AT&T is positioned in the right way as this industry restructures in a very different way than what we've seen in the previous decade.
So where we are in performance I gave a fair amount of insight to the front end of what we're seeing with some of our partnership sales when I was out at community Copia.
I think what we can safely say is everything at the front end customer acquisition are boos or rate of penetration all those things.
Speaker Change: As I shared.
Speaker Change: Are looking very very similar to what's happening in that region, that's how I would kind of sum it up.
John Stankey: That's how I would kind of sum it up. I think I also share with you, and we went and we established those partnerships. We didn't expect that. We key rated our business cases. We expected we'd be somewhat slower to penetration given that the brand hadn't necessarily been in those markets. We expected that maybe we would have our poo dynamics and we'd have to price differently to in order to penetrate blah, blah, blah, blah. That's not happening. It's looking more like the in-region business case, and that only makes it more compelling. Now, what we don't know yet, John, is we haven't been in that business for two years or 18 months.
Speaker Change: I think I also shared with you when we went and we establish those partnerships we didn't expect that.
Speaker Change: We de rated our business cases, we expected we'd be.
Speaker Change: Somewhat slower to penetration given that the brand hasn't necessarily been in those markets.
We expected that maybe we would have <unk> dynamics that we'd have to price differently.
Speaker Change: In order to penetrate blah blah blah blah, that's not happening it's looking more like the in region business case and that only makes it more compelling now what we don't know yet John is we haven't been in that business for two years or 18 months. So I cant conclusively tell you that we're going to see the same.
John Stankey: I can't conclusively tell you that we're going to see the same dynamic play into our wireless share perspective and our turn dynamic. But if I'm seeing the early stuff looking like what it does in region, I guess I step back and say, why should the back end look a lot different over time? I'm assuming we offer the same quality product and the same execution of what we're achieving on our more established footprint, and all the operational dynamics would be that we are in fact executing in that way. Yeah, that makes sense.
Speaker Change: <unk> play into our wireless share perspective, and our churn dynamic, but if I'm seeing the early stuff looking like what it does in region I guess I'd step back and say why should the backend look a lot different over time.
Speaker Change: We offer the same quality product in the same execution, what we're achieving on our more established footprint in all of the operational dynamics would be that we are in fact executing in that way.
Speaker Change: Got it makes sense thanks for the color.
John Hodulik: Thank you for calling.
Operator: We'll take the next question, please.
Speaker Change: We'll take the next question please.
Peter Sapino: That will come from the line of Peter Sapino with Wolf research. Hi, good morning.
Speaker Change: Comes from the line of Peter Zaffino with Wolfe Research.
Peter Zaffino: Hi, Good morning. Thank you a question on consumer broadband and one on capital allocation and consumer broadband.
Peter Sapino: Thank you.
Peter Sapino: A question on consumer broadband and one on capital allocation in consumer broadband. And your internet error and growth stabilized despite your announcement that you've launched about 204 partial regions last quarter. And so I wonder if you'd comment on the relationship between that open for sale change and the growth path of internet error, just bigger picture and then on capital allocation.
Peter Zaffino: Your Internet are net add growth stabilized despite your announcements.
We launched about 204 partial region last quarter.
Peter Zaffino: And so I wonder if you'd comment on the relationship between that opened for sale change.
Peter Zaffino: And the growth path of Internet are just bigger picture and then on capital allocation.
Peter Sapino: On the M&A front, I wonder if you have a point of view on HFC assets on cable assets where they could possibly be complimentary to your fiber strategy, depending on the region and the assets you have in place. Thanks.
Peter Zaffino: Yeah.
On the M&A front I Wonder if you have a point of view on HFC assets on cable asset where.
Peter Zaffino: Where they could possibly be complementary to your fiber strategy depending on the.
Peter Zaffino: The region and the assets we have in place.
Peter Sapino: Hi, Peter. I'm very comfortable where we're at on Internet error. I don't. I don't think you should be, as I said, many, many, many times. You shouldn't expect that AT&T is going to look like some of our competitors in the industry on volume and where we're going. But we're using it as I've said before, very strategically. I'll sell to any business customer that is well suited to the product. That's an attractive market to us, an attractive market because of what we can bring in growth and other products and services, including the enhancements in the account.
Speaker Change: Hi, Peter.
I am very comfortable with where we're at on the Internet are.
Speaker Change: I don't.
Speaker Change: I don't think you should be look as I've said, many many many times you Shouldnt expect that AT&T is going to look like some of our competitors in the industry on volume and where we're going but we're using it as I've said before very strategically I'll sell to any business customer.
Speaker Change: That is well suited to the product.
Speaker Change: Attractive market to us.
Attractive market because of what we can brand growth.
Speaker Change: Other products and services, including handsets in the account.
John Stankey: We can justify the usage characteristics around it. You should expect, as we continue to scale some of our distribution in the mid-business market, that you'll see those numbers grow as a result of that. And then use it very strategically in consumer. We're using it as a footprint hold; excuse me, capability is we know we've got some copper customers we can improve service levels waiting for fiber. In some cases, we're using it to migrate people off of copper so that we can ultimately turn down costly service areas and not have to support the legacy infrastructure that's in place.
We can justify the usage characteristics around it.
Speaker Change: You should expect as we continue to scale some of our distribution in the MS business market that Youll see those numbers grow as a result of that and then use it very strategically and consumer we're using it as a footprint whole.
Speaker Change: Excuse me capability as we know we've got some copper customers, we can improve service levels waiting for fiber in some cases, we're using it to migrate people off of copper so that we can ultimately turned down.
Speaker Change: Costly service areas and not have to support the legacy infrastructure, that's in place and occasionally.
John Stankey: And occasionally in markets where we have surplus spectrum that we know will be in place for many, many years. And it's really kind of a follow-up dynamic, and we can get the right kind of returns on it. But that rate and pace is never going to rival what you're seeing with anybody else. And you should just assume that's the case. I would tell you, relative to our internal projections of the product, we're very much online with what our expectations would have been. And I don't think you're going to see what I would call a demonstrative shift in the quarters moving forward.
Speaker Change: Markets, where we have surplus spectrum that we know will be in place for many many years.
Speaker Change: And it's really kind of a fallow dynamic and we can get the right kind of returns on it.
Speaker Change: But that rate and pace is never going to rival what youre seeing with anybody else and you should just assume that's the case I would tell you relative to our internal projections of the product.
Speaker Change: Pretty much on line with what our expectations would have been and I don't think youre going to see what I would call a demonstrative shift in the quarters moving forward.
John Stankey: There was a time in my career where I thought it was I was I had hair at that time where I believe the pivot to HFC was the right capital allocation decision. And I think cable has demonstrated that it has been a pretty resilient and capable infrastructure that they've managed to get very attractive returns on. But every decision, you know, it has its time and place. And my belief is, even if you kind of look at the dynamics of what's necessary to service taxes for, we're on this steady march. The eventually fiber is moving its way to a customer.
Speaker Change: There was a time in my career, where I thought it was I was I had hair at that time, where I believe the pivot to HFC was the right capital allocation decision.
Speaker Change: I think cable has demonstrated that it has been a pretty resilient and capable infrastructure that they've managed to get very attractive returns on but every decision. It has its time and place.
Speaker Change: My belief is even if you kind of look at the dynamics of what's necessary to service DOCSIS four were on this steady March that eventually fiber is moving its way to a customer.
John Stankey: We've been on that march since the early 1980s when fiber introduced itself, and it's just been on a slow march to getting closer to the customer. And I think we're now starting to get into the final innings of that game. And so in the in what I would consider to be a more mature technology cycle of HFC jumping into something that ultimately ends with fiber having to show up at the customer's home doesn't seem like a. A timed well-timed decision at this juncture; more importantly, I look at our business model and our organic opportunities are in front of us.
Speaker Change: <unk> been on that margin in the early 19 eighties.
Speaker Change: Fiber introduced itself and it's done on a slow march to getting closer to the customer and I think we're now starting to get into the final innings of that game.
So in the in what I would consider to be a more mature technology cycle of HFC jumping into something that ultimately ends with fiber having to show up at the customer's home doesn't seem like.
Speaker Change: Timed well time decision at this juncture more importantly, I look at our business model and our organic opportunities are in front of us and I look at how we're executing around this and I look at the future returns that are available.
John Stankey: And I look at how we're executing around this, and I look at the future returns that are available, and I'm more interested in allocating capital to use the business model we have that I think is incredibly powerful and has. Fantastic runway, a fantastic annuity stream, a durable annuity stream for invest. And so that's where my energy is at, which is simplifying operations, having continuity, and working with partners that can expand our footprint. I think that's the play that has longevity. And I don't subscribe to this point of view that, over the long haul, the next wave of growth in the space is somehow sub-optimal return characteristics.
Speaker Change: I'm more interested in allocating capital to use the business model that we have that I think is incredibly powerful and it has fantastic runway a fantastic annuity stream of durable annuity stream for investors and so.
Speaker Change: That's where my energy is at which is simplifying operations, having continuity working with partners that can expand our footprint I think thats. The play that has longevity and I don't subscribe to this point of view that over the long haul that the next wave of growth in this space is somehow suboptimal.
Speaker Change: Return characteristics I, just don't believe that I don't see that I don't see that in any of the operations of our business and I don't see it in the way the market is structured.
John Stankey: I just don't believe that. I don't see that. I don't see that in any of the operations of our business. And I don't see it in the way the market is structured.
Peter Sapino: Thanks, Peter.
Speaker Change: Thank you. Thanks, Peter will take next question. Please.
Operator: We'll take the next question, please. And that will come to the line of David Barden of Bank of America.
Speaker Change: Yes.
Speaker Change: And that will come from the line of David Barden of Bank of America.
David Barden: Hey guys, good morning. Thanks for taking the questions.
David Barden: Hey, guys. Good morning, Thanks for taking the questions John I do remember when <unk> had here so it would be look great.
David Barden: John, I do remember when you had hair. So you look great.
David Barden: So John, I wanted to ask this question, which is maybe the inverses, the Gigapower question, which is as you think about how you're building fiber out in your territory and as you make these new decisions about what's coming next, is the fiber build in your territory a walled garden that's only for AT&T's benefit and however much share you're able to get is the share you get. Or is there a thought that maybe AT&T wants to be an open access provider and the parts of the market that it doesn't access directly, it can at least participate in on a wholesale basis the way you historically were talking about maybe the wireless business and the cable relationship.
David Barden: So John I wanted to ask this question, which is maybe the in versus the Giga power question, which is as you think about how you're building fiber out in your territory and as you make these new decisions about what's coming next is the fiber build in your territory, a walled garden thats only for At&t's benefit and however, much share here.
David Barden: To get is the share you get.
Or is there a thought that maybe AT&T wants to be an open access provider in the parts of the market that it doesn't access directly it can at least participate in.
David Barden: On a wholesale basis the way you historically were talking about maybe.
David Barden: <unk>.
Speaker Change: The wireless business and the cable relationship and then the second question if I could Pascal.
David Barden: And then the second question I could Pascal, I think you've reiterated the guidance. I think I missed the line that said that 2025 earnings growth would be positive. Obviously, there's lots of moving parts, but could you just step us through kind of the thought process on taking that out. Thank you.
Speaker Change: I. Thank you for reiterating the guidance the I think I missed the line that said that 2025 earnings growth will be positive obviously, there's lots of moving parts, but could you just step us through kind of.
Speaker Change: The thought process on taking that out thank you.
John Stankey: Hi Dave, that must mean you're getting old if you remember when I had hair. But I am. But you look good for being old days. Right back at you, John.
Pascal Roche: Hi, Dave.
Speaker Change: That must be getting old if you remember what I had here but.
Pascal Roche: I am.
Pascal Roche: But you look good for being old data.
Dave: Right back to you John.
John Stankey: Look, as I said, I think the structure of this industry is going to evolve differently over the next decade. And the way I think about it is there's going to be far more differentiation that comes in over time on what the converged offering looks like, and that differentiation will be both on product and service.
Pascal Roche: The.
Look as I said I think the structure of this industry is going to evolve differently over the next decade.
Pascal Roche: The way I think about it is.
Pascal Roche: There's going to be far more differentiation that comes in over time on what a converged offering looks like and that differentiation will be both on product and service.
John Stankey: And I think if you're I don't want to use the term world garden, but if you think about owned and operated assets, our motivation would be to get the best customers that we can sell the most product to and provide the most vertical revenue capability on new products and services where our brand is the owned and operated servicing brand of that customer. And I think that's the play that we want to be putting our time and energy on for the next year or two. And I think we're going to be very successful in that regard, and we're going to find very attractive customers that are interested in the very simple value proposition of working with one company. And we're going to make sure that we get the most share that we possibly can in the market in that way, shape, or form. That will probably be the most profitable oil and best customers we have.
Pascal Roche: And I think if you're I don't want to use the term walled garden, but if you think about owned and operated assets our motivation would be to get the best customers that we can sell the most product to provide the most vertical revenue capability on new products and services, where our brand is the owned and operated.
Servicing brand of that customer and I think thats. The play that we want to be putting our time and energy on for the next year or two and I think we're going to be very successful in that regard and we're going to find very attractive customers that are interested in a very simple value proposition are working with one company and we're going to make sure that.
Pascal Roche: We get the most share that we possibly can in the market in that way shape or form that will probably be the most profitable loyal and best customers we have.
John Stankey: I've been in this industry long enough to know that you know it is a high fixed cost industry, and there's been an element of wholesale that is played in over time in virtually every piece of infrastructure that's been built. There will come a time where you step back and say there's another point or two of growth or capacity that can be allocated in a way that's different than the way it is today, and it could be done on a wholesale structure. And it may be a creative to the overall returns of the business. I think it's entirely possible that that day could arrive.
Pascal Roche: But I've been in this industry long enough to know that it is a high fixed cost industry than there has been an element of wholesale that has played in over time.
Pascal Roche: And virtually every piece of infrastructure, that's been built and will come a time, where you step back and say there is another point or two of growth through capacity that can be allocated in a way that's different than the way. It is today and it could be done on a wholesale structure and it may be accretive to the overall returns of the business.
Pascal Roche: I think it's entirely possible that that could arrive.
John Stankey: And I think it's really important that we think about an industry structure in that regard because, as people start talking about the ability to federate product and service across an industry and what footprint looks like over the course of the next decade. If you're not thinking about the likelihood that that could become an element of how the industry is structured, you're missing the fact that the dynamic of how cable, for example, has federated on nationwide constructs of cooperation that you could have a much broader footprint of how you think about marketing and selling your products and services that have unique capabilities in your brand position in a way over time that could make a very strong difference in terms of profitability and return.
Pascal Roche: And I think it's really important that we think about an industry structure in that regard because as people start talking about the ability to federate product and service across the industry and what footprint looks like over the course of the next decade, if youre not thinking about the likelihood that that could become an element of how the industry is structured you're missing.
Pascal Roche: The fact that the dynamic of how cable for example, as Federated on nationwide construct some cooperation that you could have a much broader footprint of how you think about marketing and selling your products and services that have unique capabilities in your brand position in a way over time that could make a.
Pascal Roche: Very strong difference in terms of profitability and returns so I won't rule. It out I, absolutely believe that overtime, there may be an accretive and economic construct around it I don't know that that time is right now, but it's something that we should be paying attention to when you have plenty of capacity in the ground that you can continue to sell in different ways and <unk>.
John Stankey: So I won't rule it out. I absolutely believe that over time there may be an accretive and economic construct around it.
John Stankey: I don't know that that time is right now, but it's something that we should be paying attention to when you have plenty of capacity in the ground that you can continue to sell in different ways and pass call if you want to talk about the earnings dynamic for 25.
Speaker Change: Last call if you want to talk about the earnings dynamic for 25% sure. Thanks David.
Pascal Desroches: Sure thing. Hey, Dave, I wouldn't read too much into it except for the fact that look, you know, we announced our Direct TV transaction and we're not quite sure when in 2025 that's going to close. So, depending upon when it closes, we may not grow EPS on a reported basis, but rest assured, on an organic basis, there is nothing to see here in that.
Speaker Change: Wouldn't read too much into it except for the fact that look as you know we announced our Directv transaction.
Speaker Change: And we're not quite sure when in 2025, that's going to close so depending upon when it closes.
Speaker Change: We may not grow EPS on a reported basis, but rest assured on an organic basis. There is nothing to see here that we continue to expect our EBITDA.
Pascal Desroches: We continue to expect our EBITDA and operating income to grow next year. So I feel really good about the overall performance, and so that it's really all about Direct TV in the time and close.
Speaker Change: And operating income to grow next year, so I feel really good about the overall performance and so it's really all about Directv it the timing close.
David Barden: All right, thank you both.
Speaker Change: Alright, Thank you both.
Michael Rollins: We'll take the next question, please. That will come from the line of Michael Rollins of City.
Speaker Change: We'll take the next question please.
Speaker Change: That will come from the line of Michael Rollins of Citi.
Michael Rollins: Thanks and good morning. Teri said you could provide an update on the wireless competitive landscape broadly across the consumer and business verticals. And if you can unpack in a little bit more detail what's driving the growth in post-page phone ARPU on a year-over-year basis and how you view the sustainability of post-page phone ARPU growth over the next couple of years?
Michael Rollins: Thanks, and good morning, I'm curious if you can provide an update on the wireless competitive landscape broadly across the consumer and business verticals and U K.
Michael Rollins: Unpack a little bit more detail, what's driving the growth in postpaid phone <unk> on a year over year basis, and how you view the sustainability of postpaid phone <unk> growth over the next couple of years.
Michael Rollins: I'm Michael.
Speaker Change: Hi, Michael.
Michael Rollins: Look, the industry is great. I'm very comfortable with where things said it's competitive. We're having to work really hard, but I don't look at it and say I can't figure it out.
Speaker Change: Look I think the industry is great.
Speaker Change: I'm very comfortable with where things sit it's competitive.
Speaker Change: We're having to work really hard, but I don't look at it and say I can't figure it out I can rationalize what people are doing I mean, I look at all the moves that competitors are making in what's going on in the.
John Stankey: I can't rationalize what people are doing. I mean, I look at all the moves that competitors are making and what's going on. And I think I can understand them. I think I understand what they're trying to achieve. I understand what we have in terms of our long-term ability to compete against it in an effective fashion.
Speaker Change: I think I can understand them I think I understand what they're trying to achieve I understand what we have in terms of our long term ability to compete against it and effective fashion.
John Stankey: I don't mean to sound like a broken record.
Speaker Change: I don't mean to sound like a broken record there is some growth that's going on in the industry that I'm not as interested in participating in as others might be.
John Stankey: There's some growth that's going on in the industry that I'm not as interested in participating in as others might be. And I've tried to be disciplined about that. I feel good about kind of the balance of our growth to the quality of our growth. And I think over the long haul, that's the best way to ensure that we're returning for our shareholders. And I feel good about where we stand in that regard. And I don't expect that is going to change dramatically. And I see consumers using more of our product every month. I see it working their ways into their lives and even more important fashions.
Speaker Change: And I've tried to be disciplined about that I feel good about.
Speaker Change: Kind of the balance of our growth to the quality of our growth and I think over the long haul that's the best way to ensure that we're returning for our shareholders and I feel good about where we stand in that regard.
Speaker Change: And I don't expect that is going to change dramatically and I see.
Speaker Change: Consumers using more of our product every month.
Speaker Change: C are working their ways into their lives and even more important fashions and.
John Stankey: And I think that goes well over the long haul for what's occurring.
Speaker Change: That bodes well over the long haul for what's occurring.
John Stankey: Business, as I mentioned earlier, is a place that I think we could do better as our distribution gets fine tuned a bit. That's there's a lot of activity going on in the business market. I believe that we're not, we're doing well, but we're not as good as we can be. I think there's still some segments in the business market that we can be more present in and more effective, especially given what we're able to do on a combined basis. The introduction of internet air in addition to selling voice products as well as our fiber footprint.
Speaker Change: Business as I mentioned earlier is a place that I think we could do better as our distribution gets fine tuned a bit.
Speaker Change: That's there's a lot of activity going on in the business market.
Speaker Change: I believe that we're not we're doing well, but we're not as good as we can be I think there is still some segments in the business market that we can be more present in a more effective, especially given what we're able to do on a combined basis introduction of Internet are in addition to selling voice products as well.
Speaker Change: As our fiber footprint.
John Stankey: And I don't know that that's any different in how the markets perform.
Speaker Change: I don't know that thats any different than how the market's performing its just an opportunity of where I think we can get incrementally better as we move through the year as I think about <unk>.
John Stankey: And it's just an opportunity of where I think we can get incrementally better as we move through the year as I think about our poo. You know, it's always a combination of things. I actually would say is I move into next year. I wouldn't I wouldn't dismiss if I was able to be a little bit more effective in the value segment of the market. And that came at a plateauing of our poo because I was getting a little bit better growth in that segment because of the mix that was occurring. That wouldn't bother me, frankly, but I would say on the embedded base of customers we have, our poo growth is because we're able to get customers to say they want to buy up and get more from us and buy other products and services that add value to that relationship, whether it be insurance or what they're needing to do to upgrade plans in order to get higher performance off the wireless network and more features and services that we bring it on the higher rated plan.
Speaker Change: It's always a combination of things I actually would say as I move into next year.
Speaker Change: I wouldn't dismiss.
Speaker Change: If I was able to be a little bit more effective in the value segment of the market and that came at a plateauing of our pud because I was getting a little bit better growth in that segment because of the mix that was occurring that wouldn't bother me.
Speaker Change: Frankly, but I would say on the embedded base of customers we have.
Speaker Change: Our <unk> growth is because we're able to get customers to say they want to buy up and get more from us and by other products and services.
Speaker Change: That add value to that relationship whether it be insurance or what theyre needing to do to upgrade plans in order to get higher performance of wireless network and more features and services that we bring in on the higher rated plans.
John Stankey: We'll continue to do that. We still have room to grow on that. We certainly have been very diligent as we have been the last couple of years to look for pockets in our base of where we think there's a value mismatch and we can possibly realize some pricing to the market. That's helped us this year. It helped us last year. I would expect it might help us a little bit next year. So I feel like we can continue to do the right things and managing the returns and yields of our customers. But I would actually like to see us maybe do a little bit better down at the low end of the market overall, and that wouldn't actually come in a little bit of a play on our poo from a company that has leading our poo in the industry.
Speaker Change: We will continue to do that we still have room to grow on that we certainly have been.
Speaker Change: Very diligent as we have been the last couple of years to look for pockets in our base of where we think there is a value mismatch and we can.
Possibly realign some pricing into the market that has helped US. This year helped us last year I would expect that might help us a little bit next year. So I feel like we can continue to do the right things and managing the returns and yields of our customers.
Speaker Change: But.
I would actually like to see us maybe do a little bit better down at the low end of the market overall and that would naturally come at a little bit of a play on <unk> from a company that is leading <unk> in the industry.
Speaker Change: Yeah.
Operator: We'll go ahead and take our next question. Thank you.
Speaker Change: We will go ahead and take our next question.
Jim Schneider: That will come from the line of Jim Schneider with Goldman Sachs. Good morning. Thanks for taking my question. If we consider the pace of your fiber net additions in broadband heading into next year, if you're passing the same or more locations with better penetration, is there any reason to believe why those fiber net additions shouldn't accelerate next year? And then, relative to CapEx, I believe we heard from one of your competitors yesterday that CapEx is moving higher in 2025, mainly due to accelerated fiber investment. And that obviously this is an area where you've been the most vocal in your industry in terms of fiber expansion, is expect you would see the same trend in your CapEx next year.
Speaker Change: Thank you that will come from the line of Jim Schneider with Goldman Sachs.
Jim Schneider: Good morning, Thanks for taking my question.
Jim Schneider: If we consider the pace of your fiber net additions in broadband heading into next year, if you're passing the same or more locations with better penetration is there any reason to believe why those fiber additions shouldnt accelerate next year and then relative to Capex I believe we heard from one of your competitors yesterday that Kathy.
Jim Schneider: <unk> is moving higher in 2025, mainly due to accelerated fiber investment and that will be heard this is an area where you've been the multiple industry in terms of fiber expansion as I expect you would see the same trend in your Capex next year.
Jim Schneider: Hi, Jim.
Speaker Change: Hi, Jim.
Jim Schneider: I guess I would say our rate and pace of build has been more level loaded over the last, you know, several years, and as we've introduced new footprint, it's been very radical and kind of what we bring in. There's still seasonality that occurs in our net ad dynamics that are more market based around buying cycles of the consumer. I wouldn't expect it to dramatically change as you move in the next year. I don't see anything where there's a footprint that's going to come in that will dramatically change that dynamic because we've been at a pretty steady pace of new footprint as how we brought it in.
Speaker Change: I guess I would say a rate and pace of build has been more level loaded over the last.
Speaker Change: All yours.
Speaker Change: As we've introduced new footprint, it's been very ratable and kind of what we bring and there is still seasonality that occurs in our net add dynamics that are more market based around buying cycles of the consumer.
Speaker Change: Wouldn't expect it to dramatically change as you move into next year I don't see anything where there is footprint that's going to come in that will dramatically change that dynamic because we've been at a pretty steady pace of new footprint is how we brought it in so I don't think you should see any dramatic change in the rate and pace of what we've been able to do and how we are.
Jim Schneider: And so I don't think you should see any dramatic change in the rate and pace of what we've been able to do and how we're doing it.
Speaker Change: Doing it.
John Stankey: And, you know, I can't speak to my competitors. I can tell you, I'm well aware that we've been investing at the top of the industry over the last four years. And that's been necessary for us to reposition the company to where we are today and see some of the opportunities that are in front of us, and I feel very comfortable that that investment has driven the right kind of growth. But we've been on that trajectory. We've already been doing the things that I think I'm seeing other people starting to maybe look at and consider investing capital into.
Speaker Change: I can't speak to my competitors I can tell you I'm well aware that we've been investing at the top of the industry over the last four years and that's been necessary for us to reposition the company to where we are today and see some of the opportunities that are in front of us and I feel very comfortable that that investment is.
Speaker Change: Driven the right kind of growth, but we've been on that trajectory. We've already been doing the things that I think I've seen other people starting to maybe look at and consider investing capital into so it's not like I've got to start investing in fiber I've been doing it for over four years now and we.
John Stankey: So it's not like I've got to start investing in fiber. I've been doing it for over four years now. And we have great success at it. We have a great footprint; we're the leading provider of fiber on the market. And I think a lot of that's in our run rate. And you know, as we're getting better and better and driving costs down, there are things that we can do to start to moderate our capital intensity as we get some of these things behind us over time. And we'll talk a little bit about that as we move into our Investor Day and how we see that playing out over the next couple of years.
Speaker Change: <unk> had great success at it and we have a great footprint, leading provider of fiber in the market and I think a lot of that is in our run rate and as.
Speaker Change: As we're getting better and better and driving costs down Theres things that we can do to.
Speaker Change: Start to moderate our capital intensity as we get some of these things behind us over time, and we'll talk a little bit about that as we move into our Investor day, and how we see that playing out over the next couple of years.
Jim Schneider: Thank you.
Speaker Change: Thank you.
Sebastiano Petti: We'll take the next question, please. That will come from the line of Sebastian O'Petti with JP Morgan.
Speaker Change: We will take next question please.
Speaker Change: That will come from the line of Sebastiano Petti with J P. Morgan.
Sebastiano Petti: How's keeping question? I think last quarter, you pointed out that the post date phone R push and probably you see more of an impact and more of a benefit in the fourth quarter than third quarter related to the price increase that kind of went into effect mid three cubes. Is that still the right way to kind of think about it, and relatedly, of the 90 million one time benefit?
Sebastiano Petti: Housekeeping question I think last quarter, you pointed out that the.
Sebastiano Petti: Postpaid phone <unk>, probably seen more of an impact from more of a benefit in the fourth quarter than third quarter related to the price increase that went into effect in mid <unk>.
It's still the right way to kind of think about it and relatedly.
Sebastiano Petti: Of the $90 million, one time benefit in that and within postpaid phone or two or is that perhaps captured somewhere else within service revenue.
Sebastiano Petti: Is that within post paid phone R purer that, you know, perhaps captured somewhere else within service revenue. And then maybe I guess broader kind of question. I mean, John, you did talk about the 4.9 gigahertz award to FirstNet for AT&T. Obviously, I think that that community copie did kind of talk about. The Supply Spectrum, likely influencing pricing across the industry over the next several years, an election upcoming in a few weeks here. Probably not going to materially change the availability of spectrum for a few years, so just thinking about AT&T's appetite, given your peer did some more transactions in the secondary market just last week.
Speaker Change: And then maybe.
Speaker Change: I guess broader kind of question I mean, John you did talk about the port at 90 gigahertz on warranty first net for AT&T, obviously I think in that.
Speaker Change: Okay.
Speaker Change: The company did kind of talk about.
Speaker Change: The supply of spectrum likely influencing pricing across the industry over the next several years.
<unk> upcoming in a few weeks here.
Speaker Change: Probably not going to materially change the availability of spectrum for a few years, so just thinking about <unk> appetite.
Given your peer kind of did some.
Speaker Change: <unk> in the secondary market just last week. Thank you.
Sebastiano Petti: Thank you.
Speaker Change: Yeah.
Pascal Desroches: Hey, hey, Luciano, how are you? So, in terms of the pricing actions that we announced, those will impact the fourth quarter, but it's all baked into the guidance that we provided to the updated guys we provided you. So we feel really good about the overall trajectory of the business, and the $90 million adjustment related to our simplification. Of our building up administrative piece, really, is it is impacting post paid our proof. So my comment on kind of where we are, I think about Spectrum and the portfolio spectrum of the 4.9, not much differently than any other spectrum that needs to be developed.
Speaker Change: Okay.
Hey, Sebastiano how are you so in terms of our product.
Speaker Change: The pricing actions that we announced those will impact the fourth quarter, but it's all baked into the guidance that we provided to you.
Speaker Change: The updated guidance, we provided you so we feel really good about the overall trajectory.
Speaker Change: Of the business and the.
The $90 million adjustment relate.
Speaker Change: Related to our simplification of our.
Speaker Change: Building up administrative piece really is it is.
Speaker Change: It's impacting postpaid ARPA.
Speaker Change: Yeah.
Speaker Change: So my comment on kind of where we are.
Speaker Change: Think about spectrum and the portfolio of spectrum in the Florida nine not much differently than.
Speaker Change: Any other spectrum that needs to be developed it takes time.
Pascal Desroches: It takes time. If the first net authority decides they want to deploy that in a way that is similar to how they deployed Spectrum previously, it will certainly take time to have infrastructure put in place and figure out where they wish to do that and how they want to deploy. So I don't think this is anything where you've got the same dynamic that you might have in the secondary spectrum market right now, where you can acquire something, flip a switch, and ultimately get capacity into your network and an opportunity to continue to grow on things.
Speaker Change: If the first net authority decides they want to deploy that in a way that is similar to how they deploy spectrum previously it will certainly take time to have infrastructure put in place in the figure out where they wish to do that and how they want to deploy it. So I don't think this is anything where you've got the same dynamic that.
Speaker Change: You might have in the secondary spectrum market right now where you can acquire something flip a switch and.
Speaker Change: Ultimately get capacity into your network and an opportunity to continue to grow on things.
Pascal Desroches: And for that very reason, of course, I'd be interested in the secondary market, and it's something that we pay attention to. And if I can go in and pick up a track spectrum that is harmonized with our existing holdings, that we can go and get additional capacity without putting more capital into the network to do things. That's a good move for our shareholders. It's a good move for our customers. It's a good way to sustain growth and where there's opportunistic opportunities to do that. I always pay attention to those things. I'll never not examine those and understand whether or not there's an opportunity to do that.
And for that very reason of course, I would be interested in the secondary market and it's something that we pay attention to and if I can go in and pick up attractive spectrum that is harmonized with our existing holdings that.
Speaker Change: We can go and get additional capacity without putting more capital into the network to do things that is a good move for our shareholders. It's a good move for our customers. It's a good way to sustained growth.
Speaker Change: Where there is opportunistic opportunities to do that I always pay attention to those things I'll never not.
Speaker Change: Examine those and understand whether or not there is an opportunity to do that and I think what's important to understand as we will certainly talk about in December we've worked really hard over the last four years I think the team has done a remarkable job of improving the quality of our cash flow you know what our capital position as Pascal talked about in his comments.
Pascal Desroches: And I think what's important to understand, and as we'll certainly talk about in December, we've worked really hard over the last four years. I think the team’s done a remarkable job of improving the qualities of our cash flow. You know what our capital position is, as Pascal talked about in his comments about where we are on the balance sheet, and we have latitude and flexibility to do those kinds of things and do them strategically and carefully. And so, to the extent that they present themselves, I do that. And similarly, as we worked with the FirstNet Authority, there's win-wins and a lot of these things.
Speaker Change: About where we are in the balance sheet, and we have latitude and flexibility to do those kinds of things.
Speaker Change: And do them strategically and carefully and so to the extent that they present themselves I would do that.
Speaker Change: Similarly, as we work with the first net authority Theres win wins and a lot of these things and just like there was a win win and how we introduce their initial into spectrum that allowed them to get some of the product and service capability that is truly differentiated using our embedded portfolio of spectrum and services that are in place while we ultimately.
Pascal Desroches: And just like there was a win-win and how we introduced their initial holdings to Spectrum and allowed them to get some of the product and service capability that is truly differentiated using our embedded portfolio Spectrum and services that are in place while we ultimately deployed the dedicated bands to them. I see the same opportunity presenting itself as we work through four to nine, where we can continue to give them advanced 5G services as we're harmonizing that spectrum and putting it out the network and allowing the next generation of unique and differentiated public safety services for FirstNet to be developed that we can both benefit from that if they choose to do that as the band manager for that spectrum.
Speaker Change: Deployed the dedicated bands to them I see the same opportunity presenting itself as we work through <unk>, where we can continue to give them advanced <unk> services as we're harmonizing that spectrum reporting about the network and allowing the next generation of unique and differentiated public.
Speaker Change: Safety services for <unk> to be developed that we can both benefit from that if the if they choose to do that as the band manager for that spectrum.
Kannan Venkateshwar: Operator, we have time for one more question, please. Thank you. That will come from the line of Kanan Venkateshwar with Barclays.
Speaker Change: Operator, we have time for one more question. Please.
Speaker Change: Thank you that will come from the line of Canon Bank, Natasha <unk> with Barclays.
Kannan Venkateshwar: Thank you. Maybe a couple on 25, I know it's a little early for you, they're just talking about it, but maybe if we could just understand the levers, I mean operating leverage this year has been very high, especially on the mobility side because of upgrade rate and also John being low, of course. So, if you could just talk through maybe some of the levers next year, maybe on the cost front or maybe the price was a value dynamic, that would be helpful. Then the same question on cashflow, just in terms of levers. You obviously taxes will be ahead when, but when the financing in theory should be an easier comp.
Speaker Change: Thank you.
Speaker Change: Maybe a couple of them.
Speaker Change: On 25 minutes and then let me just talking about it but maybe if we could just understand the numbers I mean operating leverage this year.
Speaker Change: Has been very high.
Especially on the mobility side.
Speaker Change: Great.
And also John being of course, so if you would.
Speaker Change: Just talk through maybe some of the numbers next year, maybe on the cost per environment price value dynamic.
Speaker Change: That would be helpful. And then same question on cash flow just in terms of leverage.
Obviously taxes wouldn't be a headwind.
Speaker Change: The financing in theory should be an easier comp.
Kannan Venkateshwar: And directly, we of course would be depending on them, the being closes, that wouldn't be another variable.
Speaker Change: PBF group's wood.
Depending on the deal.
Speaker Change: And that would be another medium groups and if you could just help us think through.
Pascal Desroches: So, if you could just help us think through, you know, the operating leverage side on the cashflow, that would be helpful. Thank you.
Speaker Change: The operating leverage side and the cash flow.
Speaker Change: Thank you.
Pascal Desroches: Short thing, I'll start. John the probably chime in. Here's the way I think about it. We've been investing because we expect to continue to grow our business over time. So, you should expect a continuation of our e-blog growth over time. And we will, you know, our mobility business will really please without me performing. And, you know, I believe that it's one that we can sustain. Similarly, we'll really please with our consumer broadband business, and we continue to believe that there is opportunity to drive more operating leverage there. As we continue to scale fiber, what you should see is over time profit margins that are much closer to some of our scale broadband competitors.
Speaker Change: Sure thing all Spartan.
Speaker Change: John will probably chime in here is the way I think about it.
Speaker Change: We've been investing because we expect to continue to grow our business over time. So you should expect a continuation of our EBITDA growth over time.
Speaker Change: Our mobility business, we're really pleased with how we've been performing.
Speaker Change: I believe it's one that we can sustain that similarly, we're really pleased with that.
Speaker Change: <unk> business.
Speaker Change: That there is opportunity to drive more operating leverage there as we continue to scale fiber what you should see is over time profit margins.
Speaker Change: Much closer to some of our scale broadband competitors.
Pascal Desroches: And I wouldn't we still have an opportunity across the board to continue to work on costs, whether it is costs associated with serving our customers through the use of AI machine learning. There are plenty of opportunities there, as well as we have opportunities to continue rationalize our real state footprint. And over time, the other benefit to think about the 2025 is the fact that, you know, the last 2023 and 2024 will be a year that we spent paying down vendor financing balances fairly significantly. And as we exit this year, I would expect us to be at a level that we will manage the company at over time.
Speaker Change: We still have an opportunity across the board to continue to work on cost whether it is.
Speaker Change: Costs associated with serving our customers through the use of AI and machine learning there are plenty of opportunities there as well as we have opportunities to continue to rationalize our real estate footprint.
Speaker Change: <unk>.
Speaker Change: And over time, the other benefit to think about for 2025 is the fact that the 2023 2024 will be a year that we spent paying down vendor financing balances fairly.
Speaker Change: And as we exit this year I would expect us to be at a level that we will manage the company at over time so while.
Pascal Desroches: So, while those investments have depressed free cash flow the last two years, we're going to be in a position where they are not going to depress free cash flow going the other way. We would expect higher cash taxes and the absence of direct TV to offset some of those tailwinds. But by and large, we are investing because we believe long-term business of business that we can grow both top line and bottom line.
Speaker Change: Those investments have depressed free cash flow of the last two years, we're going to be in a position where.
Speaker Change: They are not going to depress free cash flow going the other way, we would expect higher cash taxes.
Speaker Change: And the absence of Directv to help offset some of those tailwind, but by and large.
Speaker Change: We are testing.
Because we believe long term business a business that we can grow both topline and bottom line.
Operator: All right, that is the end of the call. Thank you so much, everyone, for joining us this morning.
Speaker Change: Alright that is the end of the call. Thank you so much everyone for joining us this morning.
Operator: Thank you.
Operator: And ladies and gentlemen, that does include our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now.
Speaker Change: Thank you and ladies and gentlemen that does conclude our conference for today. Thank you for your participation and for using AT&T conferencing you may now disconnect.
Operator: Disconnect. .
Speaker Change: We're sorry your conferences ending now please hang up.
Speaker Change: [music].
Operator: John, welcome to AT&T's third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. If you should require a system stirring the call, please press star, then zero, and an operator will assist you offline.
Speaker Change: Welcome to At&t's third quarter 2024 earnings call at this time, all participants are in a listen only mode.
Speaker Change: You should require assistance during the call. Please press Star then zero and an operator will assist you offline.
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'll 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, then zero.
Speaker Change: Following the presentation the call will be opened for questions.
Speaker Change: You would like to ask a question. Please press, one and then zero and you'll be placed in the question queue.
Speaker Change: If you are in the question queue and would like to withdraw. Your question you can do so by pressing one than zero and as a reminder, this conference is being recorded I would like to turn the conference over to our host Brett Feldman Senior Vice President of Finance and Investor Relations. Please go ahead.
Operator: And, as a reminder, this conference is being recorded.
Brett Feldman: I would like to turn the conference over to our host, Brett Feldman, Senior Vice President of Finance and Investor Relations. Please go ahead.
Brett Feldman: Thank you, and good morning.
Brett Feldman: Welcome to our third quarter call. I'm Brett Feldman, head of Investor Relations for AT&T.
Speaker Change: You and good morning, welcome to our third quarter call I'm, Brett Feldman head of Investor Relations for AT&T joining.
Brett Feldman: Joining me on the call today are John Stanky, our CEO, and Pascal Desroches, our CFO.
Brett Feldman: Joining me on the call today are John <unk>, our CEO and Pascal the Roche our CFO before we begin I need to call your attention to our safe Harbor statement. It says that some of our comments today may be forward looking as such they're subject to risks and uncertainties described in At&t's SEC filings results may differ materially.
Brett Feldman: Before we begin, I need to call your attention to our Safe Harbor statement. It said that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties. These describe 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.
Additional information as well as our earnings materials are available on the Investor Relations website with that I'll turn the call over to John Stankey John.
John Stankey: With that, I'll turn the call over to John Stanky, Sean. Thank you, Brett. I appreciate everyone joining this morning. I hope you're all doing well today. The third quarter showed again that our team continues to produce solid results as we efficiently grow high-value wireless and broadband subscribers.
John Stankey: Brett I appreciate everyone. Joining this morning, and I hope, you're all doing well today.
John Stankey: The third quarter showed again that our team continues to produce solid results as we efficiently grow our high value wireless and broadband subscribers.
John Stankey: Since Pascal will go through the quarter in detail, I'll share more on how our investment-led strategy is helping us deliver on our full-year consolidated financial guidance, creating runway for future growth, and then I'll provide a few updates on some recent developments. Our strategy remains the same to lead the industry and converge on activity through 5G and fiber. Immobility, the value of the coverage and reliability of the service we provide, and our best deals for everyone approach that puts our customers first, are producing solid, sustainable results. We're growing 5G subscribers in a durable way and delivered 403,000 post-paid phone net ads in the third quarter.
John Stankey: Since Pascal will go through the quarter in detail I'll share more on how our investment led strategy is helping us deliver on our full year consolidated financial guidance, creating runway for future growth and then I'll provide a few updates on some recent developments.
John Stankey: Our strategy remains the same to lead the industry in converged connectivity through <unk> and fiber.
John Stankey: And mobility the VAT.
John Stankey: You have the coverage and reliability of the service, we provide and our best deals for every one approach that puts our customers first.
John Stankey: Producing solid sustainable results.
John Stankey: We're growing <unk> subscribers in a durable way and delivered 403000 postpaid phone net adds in the third quarter.
John Stankey: We also grew efficiently with lower year-over-year post-paid phone churn and upgrade rates. Three quarters of the way through the year, our mobility business has grown EBITDA by more than 6%, which is in the high end of the guidance we provided for the full year. This puts us in a solid position heading into the fourth quarter where we expect seasonally higher phone purchasing activity, upgrades, and promotional cycles. Overall, we feel great about our continued momentum in mobility. We're adding customers, increasing profitability, and expect to deliver the best post-paid phone churn in the industry for the 13th time in 15 quarters.
John Stankey: We also grew efficiently with lower year over year postpaid phone churn in upgrade rates.
John Stankey: Three quarters of the way through the year, our mobility business has grown EBITDA by more than 6%, which is in the high end of the guidance we provided for the full year.
John Stankey: This puts us in a solid position heading into the fourth quarter, where we expect seasonally higher falling purchasing activity upgrades and promotional cycles.
John Stankey: Overall, we feel great about our continued momentum in mobility, we're adding customers.
John Stankey: Creasing profitability and expect to deliver the best postpaid phone churn in the industry for the 13th time in 15 quarters.
John Stankey: Now, let's switch gears to consumer wireline, where we generated positive total broadband subscriber net ads for the 5th consecutive quarter, despite impacts from a one-month work stoppage in the Southeast and from Hurricane Helene. And I think it's important to take a moment, recognize our frontline teams, who continue to show up in a heroic fashion while confronting multiple devastating hurricanes. We were pleased to welcome our committed employees in the southeast back to work on September 16th, with newly ratified agreements, a five-year contract in the southeast, and a similar four-year agreement in the west. We appropriately recognize our employees for the exceptional service and performance they provide our customers on a daily basis, with annual wage increases averaging 3.6%.
Now, let's switch gears to consumer wireline, where we generated positive total broadband subscriber net adds for the fifth consecutive quarter. Despite impacts from a one month work stoppage in the southeast and from Hurricane Helene.
John Stankey: And I think it's important to take a moment recognize our frontline teams, who continue to show up in a heroic fashion, while confronting multiple devastating hurricanes.
John Stankey: We were pleased to welcome our committed employees and the South East back to work on September 16th.
John Stankey: With newly ratified agreements a five year contract in the southeast and a similar four year agreement in the West we appropriately recognize our employees for the exceptional service and performance they provide our customers on a daily basis with annual wage increases averaging three 6%.
John Stankey: Our employees will maintain their position as some of the best-paid professionals in the industry, while we cooperatively work with our labor partners to reposition the company around 5G and fiber as the only all-union wireless and broadband provider in the U.S. We serve millions of individuals and businesses in the Southeast region of the country, and our frontline employees on the ground have responded quickly and worked tirelessly to keep our communities, customers, and first responders connected when it matters most. For context, our first-net organization provides a meaningfully differentiated product, the public safety, during events like these. Our organization dedicated to supporting our growing public safety base on FirstNet, responded to more than 200 requests during the Hurricane Helene recovery.
John Stankey: <unk>.
John Stankey: Our employees will maintain their position in some of the best paid professionals in the industry, while we cooperatively work with our labor partners to reposition the company around <unk> and fiber.
John Stankey: The only all union wireless and broadband provider in the U S.
John Stankey: We serve millions of individuals and businesses in the southeast region of the country and our frontline employees on the ground have responded quickly and worked tirelessly to keep our communities customers and first responders connected when it matters most.
John Stankey: For context, our first net organization provides a meaningfully differentiated product the public safety during events like these.
John Stankey: Our organization dedicated to supporting our growing public safety base on first Ned responded to more than 200 requests.
John Stankey: The hurricane wholly in recovery.
John Stankey: This was one of our largest emergency response efforts ever. These efforts are nothing short of remarkable. It's exactly why more than 29,000 public safety agencies and organizations, including the New York City Police Department, the Fire Department of New York City, and the North Carolina Department of Public Safety, choose FirstNet. The only dedicated communications platform for public safety.
John Stankey: This was one of our largest emergency response efforts ever.
John Stankey: These efforts are nothing short of remarkable it's exactly why more than 29000 public safety agencies and organizations, including the New York City Police Department. The Fire Department of New York City in the North Carolina Department of public safety choose first.
John Stankey: Net.
John Stankey: The only dedicated communications platform for public safety.
John Stankey: We applaud the FCC's recent decision to make available 50 megahertz of spectrum to the FirstNet authority to facilitate nationwide deployment of 5G services for first responders, and we look forward to working together on plans that take these capabilities to the next level. Moving back to broadband, despite a 30-day work stoppage in the southeast portion of our footprint, we've now had more than 200,000 AT&T Fiber net ads for 19 consecutive quarters, which shows the strong underlying customer demand for fiber. In the quarter, consumer wireline delivered more than 8% EBITDA growth, driven by nearly 17% growth in fiber revenues.
John Stankey: We applaud the FCC's recent decision to make available 50 megahertz of spectrum to the first net authority to facilitate nationwide deployment of <unk> services for first responders and we look forward to working together.
John Stankey: Lands that take these capabilities to the next level.
Speaker Change: Moving back to broadband despite a 30 day work stoppage in the southeast portion of our footprint.
Speaker Change: We've now had more than 200000, AT&T fiber net adds for 19 consecutive quarters, which shows the strong underlying customer demand for fiber.
Speaker Change: In the quarter consumer wireline delivered more than 8% EBIT growth driven by nearly 17% growth in fiber revenues.
John Stankey: These consistent results make it clear that our fiber investment is generating attractive returns with improved operating leverage as we transition from legacy networks.
Speaker Change: These consistent results make it clear that our fiber investment is generating attractive returns with improved operating leverage as we transition from legacy networks.
John Stankey: Overall, the underlying momentum with 5G and fiber positions us to close the year strong. While our 5G and fiber businesses are performing well on their own, it's increasingly clear that customers prefer to purchase mobility and broadband together as a converged service. Only AT&T can offer this at scale with benefits from owners' economics. This is driving a reinforcing cycle where the success of our fiber business drives growth and mobility, and vice versa. As we shared last quarter, about four out of every 10 AT&T Fiber households also choose AT&T as their wireless provider. Additionally, our share of postpaid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average.
Speaker Change: Overall, the underlying momentum momentum with <unk> and fiber positions us to close the year strong.
Speaker Change: While our <unk> and fiber businesses are performing well on their own it's increasingly clear that customers prefer to purchase mobility and broadband together is a converged service.
Speaker Change: Only AT&T can offer this at scale with benefits from owners economics.
Speaker Change: This is driving a reinforcing cycle, where the success of our fiber business drives growth in mobility and vice versa.
Speaker Change: As we shared last quarter about four out of every 10 AT&T fiber households, also choose AT&T the wireless provider.
Speaker Change: Additionally, our share of postpaid phone subscribers within the AT&T fiber footprint is about 500 basis points higher than our national average.
John Stankey: This highlights the true benefit of owning and operating both 5G and fiber networks at scale, which is the ability to drive higher share in both mobility and broadband through converged service penetration. Over time, we expect this should drive higher returns on our invested capital in both our mobility and broadband businesses than either could achieve as a standalone operation.
Speaker Change: This highlights the true benefit of owning and operating both five <unk> and fiber networks at scale, which is the ability to drive higher share in both mobility and broadband through converged service penetration over time.
Speaker Change: We expect this should drive higher returns on our invested capital in both our mobility and broadband businesses than either could achieve as a standalone operation.
John Stankey: While our conversion strategy began with a focus on our own fiber footprint, we're also pursuing attractive opportunities to expand AT&T Fiber outside of it. We're already America's largest fiber provider with the fastest and most reliable speeds. The superiority of AT&T Fiber elevates the overall AT&T brand. We want more customers to experience the best wired Internet experience available today.
Speaker Change: While our convergence strategy began with a focus on our own fiber footprint. We're also pursuing attractive opportunities to expand AT&T fiber outside of it.
Speaker Change: We're already America's largest fiber provider with the fastest and most reliable speeds.
Speaker Change: The superiority of AT&T fiber elevates the overall AT&T brand, we want more customers to experience the best Wired Internet experience available today.
John Stankey: That's why we've announced plans to bring AT&T Fiber high-speed internet to even more people and new geographies through Gigapower, our joint venture with BlackRock, as well as through recent agreements with commercial open access fiber providers. These fiber-driven growth initiatives present attractive, capital-efficient ways for us to provide both AT&T Fiber and 5G wireless services to more customers.
Speaker Change: That's why we've announced plans to bring AT&T fiber high speed internet to even more people and new geographies through Giga power, our joint venture with Blackrock as well as through recent agreements with commercial open access fiber providers.
Speaker Change: These fiber driven growth initiatives present attractive capital efficient ways for us to provide both the AT&T fiber and <unk> wireless services to more customers.
John Stankey: In addition to being the largest capital investor in the U.S. Conactivity Infrastructure since 2019, we continue to reduce our net debt and increase operating leverage due to a combination of higher EBITDA and strong free cash flow generation. Our financial flexibility continues to improve, and we 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.
Speaker Change: In addition to being the largest capital investor in the U S connectivity infrastructure. Since 2019, we continue to reduce our net debt and increased operating leverage due to a combination of higher EBITDA and strong free cash flow generation.
Speaker Change: Our financial flexibility continues to improve and we remain on pace to meet our target of net debt to adjusted EBITDA in the two five times range in the first half of next year.
John Stankey: In the quarter, we also announce that we reached an agreement to sell our remaining 70% stake in Direct TV to TPG in a non-contentious transaction subject only to customary closing conditions and separate from the regulatory process associated with the Direct TV dish transaction. This sale and transaction structure allows us to continue our focus on being a leader in 5G and fiber connectivity throughout America while further strengthening the balance sheet. It also presents new optionality as we consider opportunities to leverage our significant distribution to aggregate products and services that simplify and improve our customer's lives. We will close the transaction following necessary regulatory approvals and optimal financing and tax considerations.
Speaker Change: In the quarter. We also announce that we reached an agreement to sell our remaining 70% stake in Directv to TPG in a non contingent transaction subject only to customary closing conditions.
Speaker Change: Separate from the regulatory process associated with the direct TV dish transaction.
Speaker Change: This sale and transaction structure allows us to continue our focus on being a leader in <unk> and fiber connectivity throughout America, while further strengthening the balance sheet.
Speaker Change: It also presents new Optionality as we consider opportunities to leverage our significant distribution to aggregate products and services that simplify and improve our customers lives.
Speaker Change: We will close the transaction following necessary regulatory approvals and optimal financing and tax considerations.
John Stankey: We're confident that the company's transformation over the past four years has positioned us well for continued organic growth while also increasing our financial flexibility and capacity to support sustained investment and enhance shareholder returns. We're excited to share the details on what this all means for the future of AT&T.
Speaker Change: We're confident that the company's transformation over the past four years has positioned us well for continued organic growth, while also increasing our financial flexibility and capacity to support sustained investment and enhance shareholder returns.
Excited to share the details of what this all means for the future of AT&T. When we speak with you again at our upcoming analyst and Investor Day on December 3rd.
John Stankey: When we speak with you again at our upcoming Analyst and Investor Day on December 3rd, so mark your calendars for an exciting visit to Big D.
Speaker Change: So mark your calendars for an exciting visit to big D with that I'll turn it over to Pascal to cover the quarter in greater detail Pascal.
Pascal Desroches: With that, I'll turn it over to Pascal to cover the quarter in greater detail. Pascal. Thank you, John, and good morning, everyone.
Pascal Roche: Thank you John and good morning, everyone, let's start by reviewing our third quarter financial summary on slide eight.
Pascal Desroches: Let's start by reviewing our 3rd quarter financial summary on slide 8. 3rd quarter consolidated results were in line with our expectations. Revenues were down slightly as a decline in business wireline service revenues and low margin mobility equipment revenues were mostly offset by growth in higher margin wireless service revenues and fiber revenues.
Pascal Roche: Third quarter consolidated results were in line with our expectations.
Pascal Roche: Revenues were down slightly as the decline in business wireline service revenues and low margin mobility equipment revenues were mostly offset by growth in higher margin wireless service revenues and fiber revenues.
Pascal Desroches: Year-over-year consolidated revenue trends were also impacted by more than 100 million of FX headwinds and an approximately $100 million impact from transferring our cybersecurity business into a joint venture earlier this year. Adjusted EBITDA was up 3.4% for the quarter, as growth in mobility, consumer wireline, and Mexico, which collectively drove more than 80% of our total revenues in the quarter, were partially offset by a continued decline in business wireline. Year-to-date, adjusted EBITDA grew 3.4%, and we continued to expect adjusted EBITDA growth into 3% range for the full year. We expect to achieve this growth even with about 115 million of estimated financial impact related to the effects of Hurricane Helene and Milton and the work stoppage.
Pascal Roche: Year over year consolidated revenue trends were also impacted by more than $100 million of FX headwinds and approximately $100 million impact from transferring our cyber security business into a joint venture earlier this year.
Adjusted EBITDA was up three 4% for the quarter as growth in mobility, consumer wireline and Mexico, which collectively drove more than 80% of our total revenues in the quarter were partially offset by a continued decline in business wireline.
Pascal Roche: Year to date adjusted EBITDA grew three 4% and we continue to expect adjusted EBITDA growth in the 3% range for the full year.
Pascal Roche: We expect to achieve this growth EBIT with about $115 million of estimated financial impact related to the effects of hurricane Halloween and Milton and the work stoppage.
Consumer wireline in business wireline are expected to bear most of this impact.
Pascal Roche: Adjusted EPS was <unk> 60, compared to <unk> 64 in the year ago quarter.
Pascal Roche: Consistent with prior quarters. This year the third quarter included about nine of our gave EPS headwinds from the four items, we discussed earlier in the year.
Pascal Desroches: It included about nine cents of our gave VPS headwind from the four items we discussed earlier in the year.
Pascal Desroches: Adjusted EPS excludes 61 cent impact related to a $4.4 billion non-cash goodwill and payment charge for our business war line unit driven by an industry-wide secular decline of legacy services. For the full year, our expectations remain for adjusted EPS in the range of $2.15 to $2.25. Year-to-date free cash flow is $12.8 billion. This is up $2.4 billion compared to the same time last year and consistent with our goal of driving higher free cash flow that is more radical on a quarterly basis. In the third quarter, we generated a free cash flow of $5.1 billion, which included the previously disclosed one-time payment of $480 million related to our wireless network transformation and to continue pay down vendor financing obligations.
Pascal Roche: Adjusted EPS excludes 61 impact related to a $4 4 billion dollar non cash goodwill impairment charge for our business wireline units driven by an industry wide secular decline of legacy services.
Pascal Roche: For the full year.
Our expectations remain for adjusted EPS in the range of $2 15.
To $2 25.
Pascal Roche: Year to date free cash flow was $12 8 billion.
Pascal Roche: This is up $2 4 billion compared to the same time last year and consistent with our goal of driving <unk>.
Pascal Roche: Higher free cash flow that is more ratable on a quarterly basis.
Pascal Roche: In the third quarter, we generated free cash flow of $5 1 billion, which included the previously disclosed onetime payment of $480 million related to our wireless network transformation and the continued pay down of vendor financing obligations.
Pascal Desroches: Capital investments for the quarter was $5.5 billion, down about $150 million compared to the prior year, primarily due to lower vendor financing payments. Capital expenditures were $5.3 billion, up approximately $650 million compared to the prior year. We expect higher capital investment in the fourth quarter as we ramp our wireless network modernization. We also expect to sustain strong cash conversion in the fourth quarter and anticipate using our improved liquidity to continue reducing our short-term financing, including further pay down a vendor financing in the fourth quarter. These additional vendor financing payments put us on page for a full-year capital investment at the high end of our guidance range of $21 to $22 billion.
Pascal Roche: Okay.
Pascal Roche: Capital investments for the quarter was $5 5 billion down about $150 million compared to the prior year, primarily due to lower vendor financing payments.
Pascal Roche: Capital expenditures were $5 3 billion up approximately $650 million compared to the prior year, we expect higher capital investment in the fourth quarter as we ramp our wireless network modernization.
Pascal Roche: We also expect to sustain strong cash conversion in the fourth quarter and anticipate using our improved liquidity to continue reducing our short term financing, including further pay down of vendor financing in the fourth quarter.
Pascal Roche: These additional vendor financing payments put us on pace for a full year capital investment at the high end of our guidance range of $21 billion to $22 billion or.
Pascal Desroches: Our free cash flow is tracking to the midpoint of our guidance range of $17 to $18 billion.
Pascal Roche: Our free cash flow is tracking to the midpoint of our guidance range of $17 billion to $18 billion now.
Pascal Desroches: Now let's look at our mobility operator results on slide 9. For the quarter, we delivered 403,000 post-paid phone net ads, down from 468,000 a year ago. This is consistent with our wireless market normalization expectation. We also posted another quarter of year-over-year churn improvement, with post-paid phone churn of 0.78% versus 0.79% in the third quarter of 2023. Mobility service revenue grew 4% driven by strong execution in our balanced go-to-market strategy.
Pascal Roche: Let's look at our mobility operating results on slide nine.
Pascal Roche: For the quarter, we delivered 403000 postpaid phone net adds down from 468000, a year ago. This is consistent with our wireless market normalization expectation.
We also posted another quarter of year over year churn improvement with postpaid phone churn.
Pascal Roche: Seven 8% versus seven 9% in the third quarter of 2023.
Pascal Roche: Mobility service revenue grew 4% driven by strong execution and our balanced go to market strategy in the quarter. We also align the timing of certain administrative fees and recorded approximately $90 million of one time revenues that benefited service revenue.
Pascal Desroches: In the quarter, we also align the timing of certain administrative fees and recorded approximately $90 million of one-time revenues that benefited service revenue. Postpaid phone ARPRU was $57.07, up 1.9% year over year, largely driven by higher ARPRU on legacy plans. As expected, service revenue growth was partially offset by lower equipment revenues, with a postpaid upgrade rate of 3.5%, which was down from 3.9% last year.
Pascal Roche: Yes.
Pascal Roche: Postpaid phone <unk> was $57 seven.
Pascal Roche: Up one 9% year over year, largely driven by higher ARPA on legacy plants.
Pascal Roche: As expected service revenue growth was partially offset by lower equipment revenues with a postpaid upgrade rate of three 5%, which was down from three 9% last year.
Pascal Desroches: In prepaid, our cricket brand continues to display remarkable consistency with positive phone that adds for 40 consecutive quarters or a decade straight. For the year, we continue to expect mobility service revenue growth in the 3% range. Mobility EBITAB 9.5 billion grew 6.7% or by about 600 million year over year. On a year-to-date basis, mobility EBITAB grew 6.3%, reflecting nearly 100% of service revenue growth flowing through to EBITAB. The strong performance puts us on pace to achieve our target of mobility EBITAB growth in the higher end of the mid-single digit range for the full year. Our mobility outlook also continues to anticipate higher fourth quarter promotional activity levels, consistent with seasonal trends.
Pascal Roche: Prepaid our cricket brand continues to display remarkable consistency with positive phone net adds for 40 consecutive quarters or decades straight.
Pascal Roche: For the year, we continue to expect mobility service revenue growth and 3% range.
Pascal Roche: Mobility EBITDA of $9 5 billion grew six 7% or by about $600 million year over year.
Pascal Roche: On a year to date basis mobility, EBITDA grew six 3%, reflecting nearly a 100% of service revenue growth flowing through to EBITDA.
This strong performance puts us on pace to achieve our target of mobility EBITDA growth in the higher end of the mid single digit range for the full year.
Pascal Roche: Our mobility outlook also continues to anticipate higher fourth quarter promotional activity levels consistent with seasonal trends.
Pascal Desroches: Now, let's move to Consumer Wireline results on slide 10. The sustainable strength of fiber is driving consumer wireline growth and yielding strong returns. In the quarter, we added 28,000 total broadband subscribers, which includes 226,000 AT&T Fiber net ads.
Pascal Roche: Now, let's move to consumer wireline results on slide 10.
Pascal Roche: Yeah.
Pascal Roche: The sustainable strength of fiber is driving consumer wireline growth and yielding strong returns.
Pascal Roche: In the quarter, we added 28000 total broadband subscribers, which includes 226000 AT&T fiber net adds.
Pascal Desroches: Our fiber subscriber gains also reflect an estimated 50,000 fewer net ads from the work stoppage and storms in the Southeast. It is clear that where we do have AT&T Fiber, we win. We now pass more than 28 million consumer and business locations with fiber and remain on track to pass 30 million plus fiber locations by the end of 2025.
Pascal Roche: Our fiber subscriber gains also reflect an estimated 50000 fewer net adds from the work stoppage and stores in the southeast.
Pascal Roche: It is clear that where we do have AT&T fiber we win.
Pascal Roche: We now pass more than $28 million consumer business locations with fiber and remain on track to past 30 million plus fiber locations by the end of 2025.
Pascal Desroches: As we stated before, the better-than-expected returns we're seeing on our fiber investment potentially expand our opportunity to go beyond our initial build target by roughly 10 to 15 million additional locations.
Pascal Roche: As we've stated before that.
Pascal Roche: Better than expected returns, we're seeing on our fiber investments potentially expand our opportunity to go beyond our initial build target by roughly $10 million to $15 million additional locations.
Pascal Desroches: We look forward to providing you with a more detailed update on our plans for expanding the reach of AT&T Fiber during our Analyst and Investor Day on December 3rd.
Pascal Roche: We look forward to providing you with a more detailed update on our plans for expanding the reach of AT&T fiber during our analyst and Investor day on December 3rd.
Pascal Desroches: Outside of fiber, we remain encouraged by the early performance of AT&T Internet Air and our success proactively migrating legacy copper base Internet customers to this service. We now have nearly 500,000 total AT&T Internet air consumer subscribers, including 135,000 added during the quarter. Third quarter broadband revenues grew 6.4% to the strong fiber revenue growth of nearly 17%. For the full year, we continue to expect broadband revenue growth of 7% plus. Fiber Arprue of $70.36 was up 3.2% year over year, with intake Arprue of approximately $75. We continue to see solid uptake in higher speed fiber tiers and a healthy underlying pricing trends.
Pascal Roche: Outside of fiber.
We remain encouraged by the early performance of AT&T Ethernet Air and our success proactively migrating legacy copper based internet customers to this service.
Pascal Roche: We now have nearly 500000 total AT&T in the ear consumer subscribers, including 135000.
<unk> added during the quarter.
Third quarter broadband revenues grew six 4% due to strong fiber revenue growth of nearly 17%.
Pascal Roche: For the full year, we continue to expect broadband revenue growth of 7% plus.
Pascal Roche: Fiber or <unk> of $70 36.
Pascal Roche: It was up three 2% year over year with intake RP approximately $75.
Pascal Roche: We continue to see solid uptake and higher speed fiber tiers, and a healthy underlying pricing trends.
Pascal Desroches: The third quarter also was the first full quarter in which Arprue was impacted by the rollout of auto pay changes. We view auto pay as a long-term benefit for customers as well as operationally for our broadband business. Consumer wireline EBITI grew 8.6% as growth in broadband revenues and ongoing cost transformation continues to improve profitability.
Pascal Roche: The third quarter also was the first full quarter in which <unk> was impacted by the rollout of order pay changes, we view <unk> as a long term benefit for customers as well as operationally for our broadband business.
Pascal Roche: Sooner wireline EBITDA grew eight 6% as growth in broadband revenues and ongoing cost transformation continued to improve profitability.
Pascal Desroches: Through the third quarter, consumer wireline EBITI grew 10%, and we continue to expect growth in the mid to high single-digit range for the full year, including impacts from the recent work stoppage and storms. Now let's cover business wireline on slide 11. Business wireline EBITI was down 20% due to continued industry-wide secular decline in legacy voice services. The reported decline in EBITI also reflects a tough comparison versus the third quarter of last year, which benefited from approximately 100 million of IP sales that did not recur in 3Q this year. Overall business wireline is performed slightly below the outlook we provided in the first quarter due to lower revenue expectations, including a shift of IP sales into 2025, as well as the impact of southeast work stoppage and impacts of hurricanes, lean and melting.
Pascal Roche: Through the third quarter consumer wireline EBITDA grew 10% and we continue to expect growth in the mid to high single digit range for the full year, including impacts from the recent work stoppage and storms.
Pascal Roche: Now, let's cover business wireline on slide 11.
Pascal Roche: Business wireline EBITDA was down 20% due to continued industry wide secular declines in legacy voice services.
Pascal Roche: The reported decline in EBITDA also reflects a tough comparison versus the third quarter of last year, which benefited from approximately $100 million of IP sales that did not recur in <unk> this year.
Pascal Roche: Overall business wireline is performing slightly below the outlook, we provided in the first quarter due to lower revenue expectations, including a shift of IP sales into 2025 as well as the impact of southeast work stoppage and impacts of Hurricanes Helene and Milton.
Pascal Desroches: We now expect business wireline EBITI declines in the high-teens range for the full year versus our prior outlook for a mid-team decline. While near-term declines in legacy voice revenues are likely to weigh on business wireline EBITI transfer the remainder of the year, our 5G and wireless products continue to present attractive growth opportunities in business solutions. This includes sustained growth at first that which now has approximately 6.4 million total connections.
Pascal Roche: We now expect business wireline EBITDA declines in the high teens range for the full year versus our prior outlook for a mid teen decline.
Pascal Roche: While near term declines in legacy voice revenues are likely to weigh on business wireline EBITDA trends for the remainder of the year, our five G and wireless products continue to present attractive growth opportunities and business solutions.
Pascal Roche: This includes sustained growth at <unk>, which now has approximately $6 4 million total connections.
Pascal Desroches: Similarly, we're excited about the potential of emerging growth products like AT&T Internet AFR business.
Really we're excited about the potential of emerging growth products like AT&T Internet business now.
Pascal Desroches: Now let's move to slide 12 for an update on our capital allocation strategy. Our approach to capital allocation remains consistent and deliberate. We're successfully balancing the fishing growth with long-term investment as we deliver, converge network services to more customers, pay down debt, and return value to shareholders.
Pascal Roche: Now, let's move to slide 12 for an update on our capital allocation strategy.
Pascal Roche: Our approach to capital allocation remains consistent and deliberate.
Pascal Roche: We're successfully balancing efficient growth with long term investment as we deliver converged network services to more customers.
Pascal Roche: Pay down debt and return value to shareholders.
Pascal Desroches: We also remain focused on leveraging. We reduced net debt by about $1.1 billion in the quarter, despite a $1.3 billion FX headwind related to foreign debt. Also recall we fully hedge our foreign denominated debt, so we have an offsetting FX gain recorded in other non-current liabilities on our balance sheet related to the head.
Pascal Roche: We also remain focused on deleveraging, we reduced net debt by about $1 1 billion in the quarter. Despite a $1 3 billion FX headwind related to foreign debt.
Also recall.
Pascal Roche: We fully hedge our foreign denominated debt. So we have an offsetting FX gain recorded in other non current liabilities on our balance sheet related to the hedges.
Pascal Desroches: News. Year over year, we've reduced net debt by approximately $2.9 billion and have lower vendor and supplier financing by $2.4 billion. At the end of September, net debt to Adjustee, but I was at $2.8 times and were making steady progress on achieving our target in the two and a half maturities are very manageable and we're in a great position with more than 95% of our long-term debt fix with a rated average rate of 4.2%. In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $1.7 billion versus the second quarter.
Pascal Roche: Year over year, we've reduced net debt by approximately $2 9 billion and have lowered vendor and supplier financing by $2 4 billion.
Pascal Roche: At the end of September net debt to adjusted EBITDA was at two eight times and we're making steady progress on achieving our target in the two five times range in the first half of 2025.
Pascal Roche: Looking forward our debt maturities are very manageable and we're in a great position with more than 95% of our long term debt fixed with a weighted average rate of four 2%.
Pascal Roche: In addition to paying down debt, we reduced direct supplier and vendor financing obligations by about $1 $7 billion versus the second quarter.
Pascal Desroches: The third quarter net impact from securitization facilities was a $400 million source of cash, so the net of these items was a $1.3 billion use of cash. In the fourth quarter, we expect a sequential increase in direct supplier financing balances due to typical seasonality. However, we expect to continue reducing our aggregate net balance of direct supply and vendor financing on a year-over-year basis for the remainder of the year, which should lower our interest expense and continue to improve the quality and readability of our cash flows over time. Direct TV distributions in the quarter were about $600 million on a pre-tax basis.
Pascal Roche: The third quarter net impact from securitization facilities was a $400 million source of cash. So the net of these items was a $1 3 billion use of cash.
Pascal Roche: In the fourth quarter, we expect sequential increase in direct supplier financing balances due to typical seasonality. However, we expect to continue reducing our aggregate net balance of direct supplier and vendor financing on a year over year basis for the remainder of the year, which should lower our interest.
Pascal Roche: Spence and continue to improve the quality and rate ability of our cash flows over time.
Pascal Roche: Directv distributions in the quarter were about $600 million on a pre tax basis.
Pascal Desroches: Based on the terms of our agreement to digest our 70% stake in Direct TV, we expect $1.1 billion of pre-tax cash payments in 4Q. Cash taxes were about $600 million in the third quarter, and we expect to pay about $1.6 billion in cash taxes in the fourth quarter.
Pascal Roche: Based on the terms of our agreement to divest our 70% stake in Directv, We expect $1 1 billion of pre tax cash payments and for cube.
Pascal Roche: Cash taxes were about $600 million into third quarter, and we expect to pay about $1 6 billion in cash taxes in the fourth quarter.
Pascal Desroches: To close, I'm very pleased with our team's performance so far this year, and as John noted, we're on pace and deliver on all of our full year 2024 consolidated financial guidance.
Pascal Roche: To close I'm very pleased with our team's performance so far this year and as John noted we're on pace to deliver on all of our full year 2024 consolidated financial guidance, Brett That's our presentation, we're now ready for the Q&A.
Pascal Desroches: Brett, that's our presentation. We're now ready for the Q&A.
Operator: Thank you, Pascal. Operator, we're ready to take the first question.
Pascal Roche: E Pascal operator, we're ready to take the first question.
Simon Flannery: Thank you, and that will come from the line of Simon Flannery with Morgan Stanley.
Speaker Change: Thank you and that will come from the line of Simon Flannery with Morgan Stanley.
Simon Flannery: Good morning. Thank you very much. John, you mentioned in the fourth quarter, we expect seasonally higher phone purchasing activity, upgrades, and promo cycles. Can you just put some context around that you've continued to see low-upgrade activity? There's concerns about a bigger iPhone cycle.
Simon Flannery: Good morning. Thank you very much John you mentioned in the fourth quarter, we expect seasonally higher phone purchasing activity upgrades and promo cycles can you just put some context around that you've continued to see low upgrade activity. There is concerns about a bigger iPhone cycle. What are you expecting in the fourth quarter and a longer term.
Simon Flannery: What are you expecting in the fourth quarter and longer term as Apple introduces AI, et cetera? And then just one on the business wire line.
Simon Flannery: <unk> introduces AI et cetera, and then just one on the business wireline.
Simon Flannery: Any kind of light at the end of the tunnel there, how much more of these pressures do you think we get before the rate of change starts to stabilize and improve? Thanks.
Simon Flannery: And any kind of light at the end of the tunnel there how much more of these sort of pressures do you think we kept before the rate of change starts to stabilize and improve.
John Stankey: I'm Simon. Good morning. So I don't know that I can give you an answer that's more satisfying than last quarter on projecting what Apple phone sales might be. You've seen the numbers. They're down slightly over last year's levels on an introduction. We're still waiting, obviously, for the software release and whether or not that software release. Thrive's interest in the consumer base to accelerate that remains to be seen. I don't know. I've given you my point of view that says I think some of these things are going to be a little bit more graceful ramp up in consumer interest as opposed to big bang software.
Simon Flannery: Simon good morning.
Speaker Change: So I don't know that I can give you an answer that's more satisfying than last quarter on projecting what apple phone sales might be.
Simon Flannery:
Simon Flannery: You've seen the numbers theyre down slightly over last year's levels on an introduction.
Simon Flannery: We're still waiting obviously for the software release, and whether or not that software release.
Simon Flannery: <unk> interest in the consumer base to accelerate that remains to be seen I don't know.
Simon Flannery: Giving you my point of view that says I think some of these things are going to be a little bit more graceful ramp up and consumer interest as opposed to big Bang software oftentimes tends to be that if you went back and thought about any software innovation that occurs on a handset over the past decades or so.
John Stankey: Oftentimes, tends to be that. If you went back and thought about any software innovation that occurs on a hand set over the past decades or so, you tend to see that dynamic occur. They become material and meaningful over time, but oftentimes certain features didn't exactly go to this massive ramp when their first release because software is an iterative technology. Sometimes has to be iterated on to improve it and make it meaningful and address the particular need.
Simon Flannery: You tend to see that dynamic occur they become material and meaningful overtime, but oftentimes certain features didn't exactly go to this massive ramp when their first release because software is an innovative technology that sometimes has to be reiterated on to improve it and make it meaningful and address the particular.
John Stankey: So I don't know that I would expect when the software release comes out that all of a sudden we see this massive uptick, but the consumer role, ultimately, decide that the consumer will be the one that decides what to do. And I think to my remarks, we're in a position in what we've done through the first three quarters of this year that we've got a lot of flexibility. We can adjust whatever takes place. I think I mentioned last quarter when we were on the call, expected the fourth quarter might be active, combinational holiday season, device capabilities.
Simon Flannery: Need so I don't know that I would expect when the software release comes out but all of a sudden we see this massive uptick.
Simon Flannery: But the consumer will ultimately decide that the consumer will be the one that decides what to do and I think to my remarks.
We're in a position and what we've done through the first three quarters of this year that we've got a lot of flexibility.
Simon Flannery: Can adjust to whatever it takes place.
Simon Flannery: I think I had mentioned last quarter, we were on the call.
Simon Flannery: Expected the fourth quarter might be active combination of a holiday season device capabilities and so we've tried to make sure that we're in a position to address that no matter how it occurs.
John Stankey: And so we've tried to make sure that we're in a position to address that no matter how it occurs. And I feel like, based on what you've seen in the industry over the course of the last couple of weeks, things have been very realistic and very pragmatic about how folks have approached the market. And I don't expect things to be dramatically different as we move through the fourth quarter relative to business wire line.
Simon Flannery: You like based on what you've seen it in the industry over the course of the last couple of weeks.
Simon Flannery: Things have been.
Very realistic and very pragmatic about how folks have approached the market and I don't expect things to be dramatically different as we move through the fourth quarter.
Simon Flannery: Relative to the business wireline.
John Stankey: Look, there's a lot; there are green shoots. As you know, we're trying to reposition the business to a connectivity-based business. And when I look at what we're doing in our connectivity-based product and service portfolio, as we reposition. The focus of the organization we move from spending most of our time in the Fortune 1000 to a broader exposure to the business market, I do see those volumes starting to take off. And I see our distribution starting to ramp. They're just not doing that the rate and pace of some of the decline in the legacy revenue base.
Simon Flannery: Look there's a lot there are green shoots.
Simon Flannery: As you know, we're trying to reposition the business to connectivity base business and when I look at what we're doing and our connectivity based product and service portfolio as we reposition.
Simon Flannery: The focus of the organization that we move from spending most of our time in the fortune 1000 to a broader exposure to the business market I do see those volumes starting to take off.
Simon Flannery: I see our distributions starting to ramp.
Theyre, just not doing that at the rate and pace of some of the decline in the legacy revenue base and some of those are products are fairly mature products that have.
John Stankey: And some of those products are fairly mature products that have very attractive margin constructs around it. And there's a little bit of a shift going on, and it's. It's not a whole lot different than what we were kind of going through on the consumer side, you know, a few years back.
Simon Flannery: Very attractive margin construct around it and there is a little bit of a shift going on and it's it's not a whole lot different than what we were kind of going through on the consumer side a few years back.
John Stankey: We will catch it exactly the date that we will catch it will spend some time on that December, giving you a little bit of an outlook of how we see that playing through. But as you've been seeing, we've been doing a nice job as a business finding other places to grow to kind of offset that as we move through it.
Speaker Change: We will catch exactly.
Speaker Change: Exactly the date, we will catch it will spend some time on that in December giving you a little bit of an outlook of how we see that playing through but as <unk> been saying, we've been doing a nice job as a business.
Speaker Change: Finding other places to grow to kind of offset that as we move through it.
John Stankey: I drive home at night thinking about a lot of things. You know, we have a tough challenge in front of us on our things that I wonder whether we're headed the right direction on. One thing I do not wonder about is whether we should be putting our time and effort in repositioning into business. I feel very, very comfortable that this is a place that AT&T should be. This is an important market to us. All of our data, all of our research, everything we're doing suggests that we can create long term value, just like we're doing in consumer as a converge provider.
Speaker Change: Drive home at night.
Speaker Change: Thinking about a lot of things that we have a tough challenge in front of us on are things that I wonder whether we're headed the right direction. One thing I do not wonder about is whether we should be putting our time and effort in repositioning the business.
Speaker Change: I feel very very comfortable.
Speaker Change: This is the place at AT&T you should be.
Speaker Change: This is an important market to us all of our data all of our research everything we're doing suggests that we can create long term value just like we're doing in consumer is a converged provider and we will be successful in that transition and I don't want to lose the fact that because we report.
John Stankey: And that we will be successful in that transition, and I don't want to lose the fact that because we report business wireline separately, it doesn't really reflect how we're doing in the business market overall. When you add in what we're experiencing in the wireless space and the solid growth that we're putting up on the board, a lot of that's coming from business. And it's just it's a technology shift in some cases of business that have traditionally purchased wireline services that are now migrating certain products and services to wireless. And I think our product portfolio is now starting to evolve.
Speaker Change: <unk> wireline separately it doesn't really reflect how we're doing in the business market overall.
Speaker Change: When you add in what we're experiencing in the wireless space and the solid growth that we're putting up on the board a lot of that is coming from business and it's just it's a technology shift in some cases a business that have traditionally purchased wireline services that are now migrating certain products and services to wireless and I think our product portfolio.
John Stankey: We're on a combined basis. We can be even more effective. And I'm pretty confident we're going to make that pivot.
Speaker Change: It is now starting to evolve where on a combined basis, we can be even more effective and I'm pretty confident we're going to make that pivot we're going to be in a good place. After we get everything lined up on that.
John Stankey: We're going to be in a good place after we get everything lined up on that.
John Stankey: Great. Thanks, John.
Speaker Change: Great. Thanks, John.
John Hodulik: We'll take our next question, please. And we'll go to the line of John Hodulik with UBS.
Speaker Change: We'll take our next question please.
And we will go to the line of John Hodulik with UBS.
John Hodulik: Great, thanks.
John Hodulik: Good morning, guys. I don't want to jump again too much on the December event, but can we talk a little bit about the outer region opportunity with fiber? I guess first, how did you guys, or what was the criteria for selecting the partners that you have? And are there more partners likely to be added? Second, how big could that opportunity be, I guess, including gig of power? And third, are you guys seeing the churn benefits? I guess you sort of laid out the customers that have bundled service. But are you guys seeing churn benefits in the wireless business for customers that have that take both services?
John Hodulik: Great. Thanks, Good morning, guys.
John Hodulik: I don't want to jumping on too much on the December event, but can we talk a little bit about the outer region opportunity with with fiber.
I guess first how did you guys or what was the criteria for selecting the partners that you have and are there more partners likely to be added.
John Hodulik: Second how big could that opportunity be I guess, including Gagan power.
John Hodulik: Are you guys seeing the churn benefits.
John Hodulik: Yes.
John Hodulik: Okay.
Speaker Change: You sort of laid out the customers that have had.
Speaker Change: Bundled service, but are you guys seeing churn benefits in the wireless business for customers that have that take both services. Thanks.
John Stankey: Thanks.
John Stankey: Hi, John. So I have a talk about some of those.
Speaker Change: Hi, John.
John: So happy to talk about some of those and of course to your point will spend even more time and give you more texture.
John Stankey: And of course, to your point, we'll spend even more time and give you a little bit more texture when you come and visit us here in December. Hope you do come. So look, the partner dynamic is, it's a good question, and it's really important in our point of view. And I think I alluded to this at the Comunicopia conference that we try to put a portfolio of capabilities together that make us the attractive partner. And it's not just that we can go in and move product for somebody. We're doing all the things where, because we have a gig of power offer and because we're actually in some cases operating, you know, what could ultimately be an open access network in some parts of the country.
Speaker Change: You come and visit US here in December Hope you do come.
Speaker Change: So look the partner dynamic is it's a good question and it's really important and our point of view and I think I alluded to this.
Speaker Change: Communicate to your car.
Speaker Change: Conferences.
Speaker Change: We've tried to put a portfolio of capabilities together that make us the attractive partner.
Speaker Change: And it's not just that we can go in and move product for somebody we're doing all the things were.
Speaker Change: Because we havent giga power offer them, because we're actually in some cases operating.
Speaker Change: What could ultimately be an open access network in some parts of the country.
John Stankey: We've been very mindful of how you should construct the product offer, how you need to work with partners, et cetera, and we walk in with the model. It's a model that we're executing in our own partner footprint where we can walk in and offer them, even though we're not funding the build in this case. The same construct of what we're executing in gig of power, same product offer, the same ability to bring our distribution strength that comes into play. The same ability to do things like offer OSS and BSS back offices that can facilitate people and how they operate things, even going as far as what we can do to give them opportunities to ride on our scale and our capabilities with their party.
Speaker Change: We've been very mindful of how you should constructive product offer how you need to work with partners et cetera, and we walk in with a model that is <unk>.
Speaker Change: Model that were executing and our own partner footprint, where we can walk in and offer them, even though we're not funding the build in this case the <unk>.
Speaker Change: Same construct of what we're executing and Giga power say.
Speaker Change: Product offer the same ability to bring our distribution strength that comes and play the same ability to do things like offer Oss and BSS back offices that can facilitate people and how they operate things even going as far as what we can do to give them opportunities to ride on our scale.
And our capabilities with third party suppliers and providers as they go about the work that they're doing.
John Stankey: The suppliers and providers, as they go about the work that they're doing. And we're very open, for example, of offering the technologies we put together in home technologies, how that product capability evolves over time. And to build a world-class product, that kind of scale is essential.
Speaker Change: And we are very open for example of operating the technology that we've put together for in home technologies.
Speaker Change: That product capability evolves over time.
Speaker Change: And to build a world class product that kind of scale is essentially so when we walk in and we approach a partner and when we approach a partner and we're not necessarily interested in selling fixed wireless access over the top of them that that looks like a really good place for somebody to maybe invest in a relationship over.
John Stankey: So when we walk in and we approach a partner, and when we approach a partner and we're not necessarily interested in selling fixed wireless access over the top of them, that looks like a really good place for somebody to maybe invest in a relationship over time that's mutually productive moving forward. And is there more out there that can be done? Sure.
Speaker Change: That's mutually productive moving forward and is there more out there that can be darn sure.
John Stankey: And I think one of the things that maybe we all need to understand structurally of what's occurring in this industry over time is these partnerships and some of the open access arrangements will in fact. changed the percentage of the population that certain brands in converged capabilities can serve over time. And I think that will be a meaningful, not these most significant part, but will be a meaningful part of the total addressable market that companies like AT&T can ultimately attack moving forward. So I do think you can get bigger. I think you're seeing just the front end of it right now.
Speaker Change: And I think one of the things that maybe we all need to understand structurally of what's occurring in this industry over time as these partnerships in some of your open access arrangements will in fact change.
Speaker Change: Change the percentage of the population that certain brands and converged capabilities conserve overtime.
Speaker Change: And I think that will be a meaningful not these most significant part of it will be a meaningful part of the total addressable market that companies like AT&T can ultimately attacked moving forward.
Speaker Change: So I do think you can get bigger I think youre seeing just the front end of it right now as I've said before I don't believe this is a two or three year dynamic I think this is what will the industry structure emerged to over the next decade dynamic.
John Stankey: As I've said before, I don't believe this is a two- or three-year dynamic. I think this is what will the industry structure emerge to over the next decade dynamic.
John Stankey: And that's the play that I'm kind of focusing the business on. And I'm trying to think about as we allocate capital to ensure that over the next decade, AT&T is positioned in the right way as this industry restructures in a very different way than what we've seen in the previous decade.
Speaker Change: That's the play that I'm kind of focusing the business on what I am trying to think about as we allocate capital to ensure that over the next decade AT&T is positioned in the right way as this industry restructures in a very different way than what we've seen in the previous decade.
John Stankey: So where we are in performance, I gave a fair amount of insight to the front end of what we're seeing with some of our partnership sales when I was out at Communicopia. I think what we can safely say is everything at the front end, customer acquisition, our booze, our rate of penetration, all those things, as I shared, are looking very, very similar to what's happening in region. That's how I would kind of sum it up. I think I also shared with you, and we went and we established those partnerships. We didn't expect that. We key rated our business cases.
So where we are in performance I gave a fair amount of insight to the front end of what we're seeing with some of our partnership sales when I was out at community Copia.
Speaker Change: I think what we can safely say is everything at the front end customer acquisition, our crews our rate of penetration all those things.
Speaker Change: I shared.
Speaker Change: Are looking very very similar to what's happening in region, that's how I would kind of sum it up.
Speaker Change: I think I also shared with you when we went and we establish those partnerships we didn't expect that.
Speaker Change: We generated our business cases, we expected we'd be.
John Stankey: We expected we'd be somewhat slower to penetration given that the brand hadn't necessarily been on those markets. We expected that maybe we would have our poo dynamics and we'd have to price differently to in order to penetrate blah, blah, blah, blah. That's not happening. It's looking more like the in-region business case. And that only makes it more compelling.
Speaker Change: Somewhat slower to penetration given that the brand hasn't necessarily been in those markets.
Speaker Change: We expected that maybe we would have <unk> dynamics that we'd have to price differently.
Speaker Change: In order to penetrate blah blah blah blah, that's not happening it's looking more like the in region business case and that only makes it more compelling now what we don't know yet John is we haven't been in that business for two years or 18 months. So I cant conclusively tell you that we're going to see the same dynamic.
John Stankey: Now what we don't know yet, John, is we haven't been in that business for two years or 18 months. So I can't conclusively tell you that we're going to see the same dynamic play into our wireless share perspective and our turn dynamic. But if I'm seeing the early stuff, looking like what it does in region, I guess I step back and say, why should the backend look a lot different over time? Again, assuming we offer the same quality product and the same execution, what we're achieving on our more established footprint and all the operational dynamics would be that we are, in fact, executing in that way.
Speaker Change: Into our wireless share perspective, and our churn dynamic, but if I'm seeing the early stuff looking like what it does in region I guess I'd step back and say why should the backend look a lot different over time, assuming we offer the same quality product in the same execution, what we're achieving on our more established.
Speaker Change: Print and all of the operational dynamics would be that we are in fact executing in that way.
John Hodulik: Yeah, that makes sense. Thank you.
Speaker Change: Got it makes sense thanks for the color.
Peter Sapino: We'll take the next question, please. That will come from the line of Peter Sapino with Wolf research.
Speaker Change: We'll take the next question please.
Speaker Change: It comes from the line of Peter Zaffino with Wolfe Research.
Peter Sapino: Hi, good morning. Thank you.
Peter Zaffino: Hi, good morning, Thank you.
Peter Sapino: A question on consumer broadband and one on capital allocation in consumer broadband. And your internet error. Now I growth stable as despite your announcement that you've launched about 204 partial regions last quarter. And so I wonder if you'd comment on the relationship between that open for sale change and the growth path of internet error, just bigger picture and then on capital allocation.
Peter Zaffino: <unk> on consumer broadband and one on capital allocation.
Speaker Change: Consumer broadband.
Speaker Change: Your Internet are net add growth stabilized despite your announcements.
Speaker Change: We launched about 204 partial region last quarter.
Speaker Change: And so I wonder if you'd comment on the relationship between that opened for sale change.
Speaker Change: And the growth path of Internet are just bigger picture and then on capital allocation.
Peter Sapino: And on the M&A front, I wonder if you have a point of view on HFC assets on cable assets where they could possibly be complimentary to your fiber strategy, depending on the region and the assets you have in place. Thank you.
Speaker Change: Yeah.
Speaker Change: On the M&A front I Wonder if you have a point of view on HFC assets on cable asset where.
Speaker Change: Where they could possibly be complementary to your fiber strategy depending on the.
Speaker Change: The region and the assets you have in place.
Peter Sapino: Hi Peter. I'm very comfortable with where we're at on Internet air. I don't I don't think you should be as I've said many, many, many times you shouldn't expect that AT&T is going to look like some of our competitors in the industry on volume and where we're going. But we're using it, as I've said before, very strategically. I'll sell to any business customer that is well suited to the product. That's an attractive market to us to attractive market because of what we can bring in growth and other products and services, including handsets in the account.
Speaker Change: Hi, Peter.
Speaker Change: I'm very comfortable with where we're at on the Internet are.
Speaker Change: I don't.
Speaker Change: I don't think you should be as I've said, many many many times you Shouldnt expect that AT&T is going to look like some of our competitors in the industry on volume and where we're going but we're using it as I've said before very strategically also that any business customer.
Speaker Change: That is well suited to the product.
Speaker Change: Attractive market to us.
Speaker Change: Attractive market because of what we can brand growth.
Speaker Change: Other products and services, including enhancements in the account.
John Stankey: We we can justify the usage characteristics around it. You should expect, as we continue to scale some of our distribution in the mid business market, that you'll see those numbers grow as a result of that and then use it very strategically and in consumer. We're using it as a footprint hold. Excuse me, capability is we we know we've got some copper customers we can improve service levels waiting for fiber. In some cases, we're using it to migrate people off of copper so that we can ultimately turn down costly service areas and not have to support the legacy infrastructure that's in place, and occasionally in markets where we have surplus spectrum that we know will be in place for many, many years.
We can justify the usage characteristics around it.
Speaker Change: You should expect as we continue to scale some of our distribution in the MS business market that Youll see those numbers grow as a result of that and then use it very strategically and consumer we're using it as a footprint whole.
Speaker Change: Excuse me capability as we know we've got some copper customers, we can improve service levels waiting for fiber in some cases, we're using it to migrate people off of copper so that we can ultimately turned down.
Costly service areas and not have to support the legacy infrastructure, that's in place and occasionally.
Speaker Change: Markets, where we have surplus spectrum that we know will be in place for many many years.
John Stankey: And it's really kind of a follow dynamic, and we can get the right kind of returns on it, but that rate and pace is never going to rival what you're seeing with anybody else, and you should just assume that's the case. I would tell you, relative to our internal projections of the product, we're very much online with whatever expectations would have been, and I don't think you're going to see what I would call a demonstrative shift in the quarters moving forward.
Speaker Change: And it's really kind of a fallow dynamic and we can get the right kind of returns on it but.
Speaker Change: But that rate and pace is never going to rival what youre seeing with anybody else and you should just assume that's the case I would tell you relative to our internal projections of the product. We're very much on line with what our expectations would have been and I don't think youre going to see what I would call a demonstrative shift in the quarters moving forward.
John Stankey: There was a time in my career where I thought it was I was I had hair at that time where I believe the pivot to HFC was the right capital allocation decision, and I think cable has demonstrated that has been a pretty resilient and capable infrastructure that they've managed to get very attractive returns on. But every decision has its time in place. And my belief is even if you kind of look at the dynamics of what's necessary to service taxes for we're on this steady march that eventually fiber is moving its way to a customer.
Speaker Change: There was a time in my career, where I thought it was.
Speaker Change: I was I had hair at that time, where I believe the pivot to HFC was the right capital allocation decision.
Speaker Change: And.
Speaker Change: Think cable has demonstrated that it has been a pretty resilient and capable infrastructure that they've managed to.
Speaker Change: Get very attractive returns on but every decision it has its time and place.
Speaker Change: And my belief is even if you kind of look at the dynamics of what's necessary to service DOCSIS four were on this steady March did eventually fiber is moving its way to a customer.
John Stankey: We've been on that march since the early 1980s when fiber introduced itself, and it's just done on a slow march to getting closer to the customer. I think we're now starting to get into the final innings of that game. And so in the in what I would consider to be a more mature technology cycle of HFC jumping into something that ultimately ends with fiber having to show up at the customer's home doesn't seem like a timed well time decision at this juncture. More importantly, I look at our business model and our organic opportunities are in front of us, and I look at how we're executing around this and I look at the future returns that are available.
Speaker Change: We've been on that margin in the early 19 eighties when fiber introduced itself and it's just been on a slow march to getting closer to the customer and I think we're now starting to get into the final innings of that game.
Speaker Change: And so in the in what I would consider to be a more mature technology cycle of HFC.
Jumping into something that ultimately ends with fiber having to show up at the customer's home doesn't seem like.
Speaker Change: Timed well time decision at this juncture more importantly, I look at our business model and our organic opportunities are in front of us and I look at how we're executing around this and I look at the future returns that are available.
John Stankey: And I'm more interested in allocating capital to use the business model we have that I think is incredibly powerful and has fantastic runway, a fantastic annuity stream, a durable annuity stream for investors. And so that's where my energy is at, which is simplifying operations, having continuity, and working with partners that can expand our footprint. I think that's the play that has longevity. And I don't subscribe to this point of view that over the long haul. That the next wave of growth in the space is somehow sub-optimal return characteristics. I just don't believe that. I don't see that.
Speaker Change: Im more interested in allocating capital to use the business model that we have that I think is incredibly powerful and it has fantastic runway a fantastic annuity stream of durable annuity stream for investors.
Speaker Change: So that's.
Speaker Change: Thats, where my energy is that which is simplifying operations, having continuity working with partners that can expand our footprint I think thats. The play that has longevity and I don't subscribe to this point of view that over the long haul.
Speaker Change: Next wave of growth in this space is somehow suboptimal return characteristics.
Speaker Change: Just don't believe that I don't see that I don't see that in any of the operations of our business and I don't see it in the way the market is structured.
John Stankey: I don't see that in any of the operations of our business. And I don't see it in the way the market is structured.
Peter Sapino: Thanks, Peter. We'll take the next question, please.
Speaker Change: Thank you.
Speaker Change: Thanks, Peter will take next question. Please.
David Barden: And that will come to the line of David Barden of Bank of America. Hey guys, good morning.
Speaker Change: And that will come from the line of David Barden of Bank of America.
David Barden: Thanks for taking the questions.
David Barden: Hey, guys. Good morning, Thanks for taking the questions John I do remember when you had here so it would be look great.
David Barden: John, I do remember when you had hair. So you look great.
David Barden: So John, I wanted to ask this question, which is maybe the inverses, the Gigapower question, which is, as you think about how you're building fiber out in your territory and as you make these new decisions about what's coming next, is the fiber build in your territory a walled garden that's only for AT&T's benefit and however much share you're able to get is the share you get. Or is there a thought that maybe AT&T wants to be an open access provider and the parts of the market that it doesn't access directly it can at least participate in on a wholesale basis the way you historically were talking about maybe the wireless business and the cable relationship.
David Barden: So John I wanted to ask this question, which is maybe the in versus the Giga power question, which is as you think about how you're building fiber out in your territory and as you make these new decisions about what's coming next.
David Barden: Is the fiber build in your territory a walled garden, that's only for At&t's benefited however, much share you were able to get is the share you get or is there a thought that maybe AT&T wants to be an open access provider in the parts of the market that it doesn't access directly it can at least participate in.
Speaker Change: On a wholesale basis the way you historically were talking about maybe.
Speaker Change: The wireless business and the cable relationship and then the second question if I could Pascal.
Pascal Desroches: And then the second question I could Pascal, I think you were generating the guidance. I think I missed the line that said that 2025 earnings growth would be positive. Obviously, there's lots of moving parts, but could you just step us through kind of the thought process on taking that out. Thank you.
Speaker Change: Thank you for reiterating the guidance the I think I missed the line that said that 2025 earnings growth will be positive obviously, there's lots of moving parts, but could you just step us through kind of.
Speaker Change: The thought process on taking that out thank you.
Pascal Desroches: Hi Dave, that must be you get mold to remember when I had hair, but. The, but you look good for being old days. Right back at you, John.
Speaker Change: Hi, Dave.
Speaker Change: That must be new signals, if you remember when I had here but.
Speaker Change: Yes.
Speaker Change: Okay.
But you look good for being old data.
Speaker Change: Got it right back to you John.
Pascal Desroches: The look I, as I said, I think the structure of this industry is going to evolve differently over the next decade, and the way I think about it is there's going to be far more differentiation that comes in over time on what I converged offering looks like, and that differentiation will be both on product and service. And I think if you're, I don't want to use the term wall garden, but if you think about owned and operated assets, our motivation would be to get the best customers that we can sell the most product to and provide the most vertical revenue capability on new products and services where our brand is the owned and operated servicing brand of that customer.
Speaker Change: The.
John: Look as I said I think the structure of this industry is going to evolve differently over the next decade.
John: The way I think about it is.
John: There's going to be far more differentiation that comes in over time on what a converged offering looks like and that differentiation will be both on product and service.
John: I think if you are I don't want to use the term walled garden, but if you think about owned and operated assets our motivation would be to get the best customers that we can sell the most product too and provide the most vertical revenue capability on new products and services, where our brand is the owned and operated search.
Pascal Desroches: And I think that's the play that we want to be putting our time and energy on for the next year or two, and I think we're going to be very successful in that regard, and we're going to find very attractive customers that are interested in a very simple value proposition of working with one company. And we're going to make sure that we get the most share that we possibly can in the market in that way, shape or form. That will probably be the most profitable oil and best customers we have.
John: <unk> brand of that customer and I think thats. The play that we want to be putting our time and energy on for the next year or two.
John: Think we're going to be very successful in that regard and we're going to find very attractive customers that are interested in a very simple value proposition.
John: Working with one company and we're going to make sure that we get the.
John: Most here that we possibly can in the market in that way shape or form that will probably be the most profitable loyal and best customers, we have but I've been in this industry long enough to know that it is a high fixed cost industry than there has been an element of wholesale that has played in overtime and.
Pascal Desroches: I've been in this industry long enough to know that you know it is a high fixed cost industry, and there's been an element of wholesale that is played in over time in virtually every piece of infrastructure that's been built. There will come a time where you step back and say there's another point or two of growth or capacity that can be allocated in a way that's different than the way it is today, and it could be done on a wholesale structure, and it may be accretive to the overall returns of the business. I think it's entirely possible that that day could arrive, and I think it's really important that we think about an industry structure in that regard because, as people start talking about the ability to federate product and service across an industry and what footprint looks like over the course of the next decade, if you're not thinking about the likelihood that that could become an element of how the industry is structured.
John: And virtually every piece of infrastructure. That's been built in will come a time, where you step back and say there is another point or two of growth through capacity that can be allocated in a way that's different than the way. It is today and it could be done on a wholesale structure and it may be accretive to the overall returns of the business.
John: I think it's entirely possible that that could arrive.
John: And I think it's really important that we think about an industry structure in that regard because as people start talking about the ability to federate product and service across in the industry and what footprint looks like over the course of the next decade, if youre not thinking about the likelihood that that could become an element of how the industry is structured you're missing the.
Pascal Desroches: You're missing the fact that the dynamic of how cable, for example, has federated on nationwide constructs of cooperation that you could have a much broader footprint of how you think about marketing and selling your products and services that have unique capabilities in your brand position in a way over time that could make a very strong difference in terms of profitability and return. So I won't rule it out. I absolutely believe that over time there may be an accretive and economic construct around it.
John: <unk> that the dynamic of how cable for example, as Federated on nationwide construct a cooperation.
John: Could have a much broader footprint of how you think about marketing and selling your products and services that have unique capabilities in your brand position in a way over time that could make a.
John: Very strong difference in terms of profitability and returns so I won't rule. It out I, absolutely believe that overtime, there may be an accretive and economic construct around it I don't know that that time is right now, but it's something that we should be paying attention to when you have plenty of capacity in the ground that you can continue to sell in different ways and <unk>.
Pascal Desroches: I don't know that that time is right now, but it's something that we should be paying attention to when you have plenty of capacity in the ground that you can continue to sell in different ways and pass call if you want to talk about the earnings dynamic for 25.
This call if you want to talk about the earnings dynamic for 25 short thanks, Dave.
Pascal Desroches: Sure, thanks. Hey, Dave, I wouldn't read too much into it except for the fact that look, you know, we announced our Direct TV transaction and we're not quite sure when in 2025 that's going to close. So, depending upon when it closes, we may not grow EPS on a reported basis, but rest assured, on an organic basis.
John: Wouldn't read too much intuit, except for the fact that look as you know.
John: We announced our Directv transaction.
John: And we're not quite sure when in 2025, thats going to close so depending upon when it closes.
John: We may not grow EPS on a reported basis, but rest assured on an organic basis. There is nothing to see here that we've continued to expect our EBITDA.
Pascal Desroches: There is nothing to see here; that we continue to expect our EBITDA and operating income to grow next year. So I feel really good about the overall performance. And so that it's really all about Direct TV at the time in close.
John: And operating income to grow next year, so I feel really good about the overall performance.
John: So it's really all about Directv it the timing close.
David Barden: All right, thank you both. We'll take the next question, please.
Speaker Change: Right. Thank you both.
We'll take the next question please.
Michael Rollins: That will come from the line of Michael Rollins of City.
Speaker Change: That will come from the line of Michael Rollins of Citi.
Michael Rollins: Thanks, and good morning. I'm curious if you could provide an update on the wireless competitive landscape broadly across the consumer and business verticals.
Michael Rollins: Thanks, and good morning, I'm curious if you could provide an update on the wireless competitive landscape broadly across the consumer and business verticals and if.
Michael Rollins: And if you can unpack in a little bit more detail what's driving the growth in post-page phone ARPU on a year-over-year basis and how you view the sustainability of post-page phone ARPU growth over the next couple of years.
Michael Rollins: Can you unpack a little bit more detail, what's driving the growth in postpaid phone <unk> on a year over year basis, and how you view the sustainability of postpaid phone <unk> growth over the next couple of years.
Michael Rollins: Hi, Michael.
Speaker Change: Hi, Michael.
Michael Rollins: Look, I'm very comfortable with where things set. It's competitive. We're having to work really hard, but I don't look at it and say I can't figure it out. I can't rationalize what people are doing. I mean, I mean, I look at all the moves that competitors are making and what's going on. I think I can understand them. I think I understand what they're trying to achieve. I understand what we have in terms of our long-term ability to compete against it in an effective fashion. I don't mean to sound like a broken record.
Speaker Change: Look I think the industry is great.
I'm very comfortable with where things sit it's competitive.
Speaker Change: We're having to work really hard, but I don't look at it and say I can't figure it out I can rationalize what people are doing.
Speaker Change: Look at all the moves that competitors are making in what's going on in the.
Speaker Change: I think I can understand them I think I understand what they're trying to achieve I understand what we have in terms of our long term ability to compete against it and effective fashion.
Speaker Change: I don't mean to sound like a broken record there is some growth that's going on in the industry that I'm not as interested in participating in as others might be.
John Stankey: There's some growth that's going on in the industry that I'm not as interested in participating in as others might be. And I've tried to be disciplined about that. I feel good about the balance of our growth to the quality of our growth. And I think over the long haul, that's the best way to ensure that we're returning for our shareholders. And I feel good about where we stand in that regard. And I don't expect that is going to change dramatically. And I see consumers using more of our product every month. I see it working their ways into their lives and even more important fashions.
Speaker Change: And I've tried to be disciplined about that I feel good about.
Speaker Change: Kind of the balance of our growth to the quality of our growth and I think over the long haul that's the best way to ensure that we're returning for our shareholders and I feel good about where we stand in that regard.
Speaker Change: And I don't expect that is going to change dramatically.
Speaker Change: I see.
Speaker Change: Consumers using more of our product every month.
Speaker Change: We are working their ways into their lives and even more important fashions and.
John Stankey: And I think that goes well over the long haul for what's occurring.
Speaker Change: I think that bodes well over the long haul for what's occurring.
John Stankey: Business, as I mentioned earlier, is a place that I think we could do better as our distribution gets fine-tuned a bit. There's a lot of activity going on in the business market. I believe that we're doing well, but we're not as good as we can be. I think there's still some segments in the business market that we can be more present in and more effective, especially given what we're able to do on a combined basis. The introduction of Internet Air in addition to selling voice products, as well as our fiber footprint. And I don't know that that's any different in how the markets perform.
Speaker Change: Business as I mentioned earlier is a place that I think we could do better as our distribution gets fine tuned a bit.
Speaker Change: That's there's a lot of activity going on in the business market.
Speaker Change: Believe that we're not we're doing well, but we're not as good as we can be I think there is still some segments in the business market that we can be more present in a more effective, especially given what we're able to do on a combined basis introduction of Internet are in addition to selling voice products as well as our <unk>.
Speaker Change: Or footprint.
Speaker Change: I don't know that thats any different than how the market's performing its just an opportunity of where I think we can get incrementally better as we move through the year as I think about <unk>.
John Stankey: And it's just an opportunity of where I think we can get incrementally better as we move through the year.
John Stankey: As I think about our food, you know, it's always a combination of things. I actually would say, as I move into next year, I wouldn't I wouldn't dismiss. If I was able to be a little bit more effective in the value segment of the market, and that came at a plateauing of our food because I was getting a little bit better growth in that segment. Because of the mix that was occurring, that wouldn't bother me. Frankly, I would say on the embedded base of customers we have, our output growth is because we're able to get customers to say they want to buy up and get more from us and buy other products and services that add value to that relationship, whether it be insurance or what they're needing to do to upgrade plans.
Speaker Change: It's always a combination of things I actually would say as I move into next year.
Speaker Change: I wouldn't I wouldn't dismiss.
Speaker Change: If I was able to be a little bit more effective in the value segment of the market and that came at a plateauing of our pud because I was getting a little bit better growth in that segment because of the mix that was occurring that wouldn't bother me.
Speaker Change: Frankly, but.
Speaker Change: I would say on the embedded base of customers we have.
Speaker Change: <unk> growth is because we're able to get customers to say they want to buy up and get more from us and by other products and services.
Speaker Change: That add value to that relationship whether it be insurance or what they are needing to do to upgrade plans in order to get higher performance of wireless network and more features and services that we bring in on the higher rated plans.
John Stankey: In order to get higher performance off the wireless network and more features and services that we bring in on the higher rated plans, we'll continue to do that. We still have room to grow on that. We certainly have been very diligent, as we have been the last couple of years, to look for pockets in our base of where we think there's a value mismatch and we can possibly realize some pricing to the market. That's helped us this year. It helped us last year. I would expect it might help us a little bit next year. So I feel like we can continue to do the right things and managing the returns and yields of our customers.
Speaker Change: We will continue to do that we still have room to grow on that we certainly have been.
Speaker Change: Very diligent as we have been in the last couple of years to look for pockets in our base of where we think there is a value mismatch and we can possibly realign some pricing into the market that has helped us. This year helped us last year I would expect that might help us a little bit next year. So.
Speaker Change: I feel like we can continue to do the right things and managing the returns and yields of our customers.
John Stankey: But I would actually like to see us maybe do a little bit better down at the low end of the market overall. And that wouldn't actually come in a little bit of a play on our food from a company that has leading our food in the industry.
Speaker Change: But.
Speaker Change: I would actually like to see us maybe do a little bit better down at the low end of the market overall and that would naturally come at a little bit of a play on <unk> from a company that is leading <unk> in the industry.
Jim Schneider: We'll go ahead and take our next question. Thank you. That will come from the line of Jim Schneider with Goldman Sachs.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: We will go ahead and take our next question.
Speaker Change: Thank you that will come from the line of Jim Schneider with Goldman Sachs.
Jim Schneider: Good morning, thanks for taking my question. If we consider the pace of your fiber net additions in broadband heading into next year, if you're passing the same or more locations with better penetration, is there any reason to believe why those fiber net additions shouldn't accelerate next year? And then, relative to CapEx, I believe we heard from one of your competitors yesterday that CapEx is moving higher in 2025, mainly due to accelerated fiber investment.
Good morning, Thanks for taking my question, if we consider the pace of your fiber net additions in broadband heading into next year, if you're passing the same or more locations with better penetration is there any reason to believe why those fiber additions shouldnt accelerate next year and then relative to Capex.
Speaker Change: We heard from one of your competitors yesterday that Capex is moving higher in 2025, mainly due to accelerated fiber investment and that will be heard this is an area where you've been the multiple industry in terms of fiber expansion is expect you would see the same trend in your Capex next year.
Jim Schneider: And that obviously this is an area where you've been the most vocal in your industry in terms of fiber expansion. Is expect you would see the same trend in your CapEx next year. Hi Jim, I guess I would say our rate and pace of build has been more level loaded over the last, you know, several years, and as we've introduced new footprint, it's been very radical and kind of what we bring in. There's still seasonality that occurs in our net add dynamics that are more market based around buying cycles of the consumer. I wouldn't expect it to dramatically change as you move in the next year.
Jim Schneider: Hi, Jim.
I guess I would say a rate and pace of build has been more level loaded over the last several years and as.
Jim Schneider: We've introduced new footprint, it's been very ratable and kind of what we bring and there is still seasonality that occurs in our net add dynamics that are more market based around buying cycles of the consumer.
Jim Schneider: Expect it to dramatically change as you move into next year I don't see anything where there is footprint that's going to come in that will dramatically change that dynamic because we've been at a pretty steady pace of new footprint is how we brought it in so I don't think you should see any dramatic change in the rate and pace of what we've been able to do and how we are.
Jim Schneider: I don't see anything where there's a footprint that's going to come in that will dramatically change that dynamic because we've been at a pretty steady pace of new footprint is how we brought it in. So I don't think you should see any dramatic change in the rate and pace of what we've been able to do and how we're doing it.
John Stankey: And, you know, I can't speak to my competitors. I can tell you I'm well aware that we've been investing at the top of the industry over the last four years. And that's been necessary for us to reposition the company to where we are today and see some of the opportunities that are in front of us. And I feel very comfortable that that investment is driven the right kind of growth. But we've been on that trajectory. We've already been doing the things that I think I've seen other people starting to maybe look at and consider investing capital into.
Jim Schneider: Doing it.
Jim Schneider: I can't speak to my competitors I can tell you I'm well aware that we've been investing at the top of the industry over the last four years and that's been necessary for us to reposition the company to where we are today and see some of the opportunities that are in front of us and I feel very comfortable that that investment is.
Jim Schneider: Driven the right kind of growth, but we've been on that trajectory, we've already been doing the things that I was.
I think I've seen other people starting to maybe look at and consider investing capital into so it's not like I've got to start investing in fiber I've been doing it for over four years now and we've had great success at it and we have a great footprint, leading provider of fiber in the market and I think a lot of thats in our run.
John Stankey: So it's not like I've got to start investing in fiber. I've been doing it for over four years now. And we have great success at it. We have a great footprint; we're the leading provider of fiber on the market. And I think a lot of that's in our run rate. And, you know, as we're getting better and better and driving costs down, there are things that we can do to start to moderate our capital intensity as we get some of these things behind us over time.
Speaker Change: Right and as.
Speaker Change: As we're getting better and better and driving costs down Theres things that we can do.
Speaker Change: Start to moderate our capital intensity as we get some of these things behind us over time, and we'll talk a little bit about that as we move into our Investor day, and how we see that playing out over the next couple of years.
John Stankey: And we'll talk a little bit about that as we move into our Investor Day and how we see that playing out over the next couple of years.
Operator: Thank you. We'll take the next question, please.
Speaker Change: Thank you.
Speaker Change: We will take next question please.
Sebastiano Petti: That will come from the line of Sebastian O'Petti with J.P. Morgan.
Speaker Change: That will come from the line of Sebastiano Petti with Jpmorgan.
Sebastiano Petti: Housekeeping question. I think last quarter, you pointed out that the post-paste phone R push should probably see more impact and more of a benefit in the fourth quarter than third quarter related to the price increase that kind of went into effect mid-3Q. Is that still the right way to kind of think about it?
Sebastiano Petti: Housekeeping question I think last quarter, you pointed out that the.
Postpaid phone <unk>, probably seen more of an impact from more of a benefit in the fourth quarter than third quarter related to the price increase that went into effect in mid <unk>.
Sebastiano Petti: And, relatedly, of the 90 million one-time benefit, is that within post-paid phone R push that, you know, perhaps captured somewhere else within service revenue.
Speaker Change #100: It's still the right way to kind of think about it and relatedly.
Of the $90 million, one time benefit is that within postpaid phone or two or is that perhaps captured somewhere else within service revenue.
Sebastiano Petti: And then maybe, I guess broader kind of question. I mean, John, you did talk about the 4.9 gigahertz award to FirstNet for AT&T. Obviously, I think that community co-p you did kind of talk about. The Supply Spectrum, likely influencing, you know, pricing across the industry over the next several years, you know, an election upcoming in a few weeks here. Probably not going to materially change the availability of Spectrum for a few years, so just thinking about AT&T Dapetite, you know, given your peer kind of did some, did a transaction in the secondary market just last week.
Speaker Change #101: And then maybe.
Speaker Change #102: I guess broader kind of question I mean, John you did talk about the $4 nine gigahertz on warranty first net for AT&T, obviously I think in that.
Speaker Change #101: Okay.
Speaker Change #101: The company did kind of talk about.
Speaker Change #101: The supply of spectrum likely influencing pricing across the industry over the next several years.
Speaker Change #101: <unk> upcoming in a few weeks here.
Speaker Change #101: Probably not going to materially change the availability of spectrum for a few years, so just thinking about <unk> appetite.
Speaker Change #103: Given your peer kind of did some.
Pascal Desroches: Thank you.
Speaker Change #103: <unk> in the secondary market just last week. Thank you.
Pascal Desroches: Hey, hey, Bossiano, how are you? So, in terms of our pricing actions that we announce, those will impact the fourth quarter, but it's all baked into the guidance that we provided to the updated guys we provided. So we feel really good about the overall trajectory of the business, and the $90 million adjustment related to our simplification of our building of administrative fees really is, it is impacting post paid our proof. So my comment on kind of where we are, I think about Spectrum and the portfolio spectrum of the 4.9, not much differently than any other spectrum that needs to be developed.
Speaker Change #103: Yeah.
Speaker Change #103: Okay.
Hey, Sebastiano how are you so in terms of our product.
Speaker Change #104: The pricing actions that we announced those will impact the fourth quarter, but it's all baked into the guidance that we provided to the updated guidance. We provided you. So we feel really good about the overall trajectory.
Speaker Change #103: Of the business and the.
Speaker Change #103: The $90 million adjustment relate.
Speaker Change #103: Related to our simplification of our.
Speaker Change #103: Building up administrative piece really is.
Speaker Change #103: It's impacting postpaid ARPA.
Speaker Change #103: Yeah.
Speaker Change #103: So my comment on kind of where we are.
Speaker Change #103: I think about spectrum and the portfolio of spectrum of afford nine not much differently than.
Pascal Desroches: It takes time. If the first net authority decides they want to deploy that in a way that is similar to how they deployed Spectrum previously, it will certainly take time to, you know, have infrastructure put in place and the figure out where they wish to do that and how they want to deploy. So I don't think this is anything where you've got the same dynamic that you might have in the secondary spectrum market right now, where you can acquire something, flip a switch, and ultimately get capacity into your network.
Speaker Change #103: Any other spectrum that needs to be developed it takes time.
Speaker Change #103: If the first net authority decides they want to deploy that in a way that is similar to how they deploy spectrum previously it will certainly take time to have infrastructure put in place and to figure out where they wish to do that and how they want to deploy it. So I don't think this is anything where you've got the same dynamic that.
Speaker Change #103: You might have in the secondary spectrum market right now where you can acquire something flip a switch and ultimately get capacity into your network and an opportunity to continue to grow on things.
Speaker Change #103: And for that very reason of course, I would be interested in the secondary market and it's something that we pay attention to and if I can go in and pick up attractive spectrum is harmonized with our existing holdings.
Pascal Desroches: That's a good move for our shareholders; it's a good move for our customers. It's a good way to sustain growth. And where there's opportunistic opportunities to do that, I always pay attention to those things. I'll never not examine those and understand whether or not there's an opportunity to do that.
Speaker Change #103: We can go and get additional capacity without putting more capital into the network to do things that is a good move for our shareholders. It's a good move for our customers. It's a good way to sustained growth.
Speaker Change #103: Where there is opportunistic opportunities to do that I always pay attention to those things I'll never know.
Speaker Change #103: Examine those and understand whether or not there is an opportunity to do that and I think what's important to understand and as we will certainly talk about in December we've worked really hard over the last four years I think the team has done a remarkable job of improving the quality of our cash flow you know what our capital position as Pascal talked about it in there.
Pascal Desroches: And I think what's important to understand, and as we'll certainly talk about in December, we've worked really hard over the last four years. I think the team’s done a remarkable job of improving the qualities of our cash flow. You know what our capital position is. As Pascal talked about in his comments about where we are on the balance sheet, and we have latitude and flexibility to do those kinds of things and do them strategically and carefully. And so, to the extent that they present themselves, I do that. And similarly, as we work with the first net authority, there's win-wins and a lot of these things.
Speaker Change #103: Comments about where we are on the balance sheet, and we have latitude and flexibility to do those kinds of things.
Speaker Change #103: And do them strategically and carefully and so to the extent that they present themselves I would do that and similarly, as we work with the first net authority theres win wins and a lot of these things and just like there was a win win and how we introduced their initial holdings of spectrum. It allowed them to get some of the product and service capability that is truly differentiated.
Pascal Desroches: And just like there was a win-win and how we introduced their initial whole into spectrum and allowed them to get some of the product and service capability that is truly differentiated using our embedded portfolio, spectrum and services that are in place while we ultimately deployed the dedicated bands to them. I see the same opportunity presenting itself as we work before that night where we can continue to give them advanced 5G services as we're harmonizing that spectrum and putting it out the network and allowing the next generation of unique and differentiated public safety services for FirstNet to be developed that we can both benefit from that if they if they choose to do that as the band manager for that spectrum.
Speaker Change #103: <unk> using our embedded portfolio of spectrum and services that are in place while we ultimately deployed the dedicated bands to them I see the same opportunity presenting itself as we work through $4 nine where we can continue to give them advanced <unk> services as we're harmonizing that spectrum reporting it.
Speaker Change #103: The network and allowing the next generation of unique and differentiated public safety services for <unk> to be developed that we can both benefit from that if the if they choose to do that as the band manager for that spectrum.
Kannan Venkateshwar: Operator, leave time for one more question, please. Thank you. That will come from the line of Kannan Venkateshwar, with Barclays.
Speaker Change #105: Operator, we have time for one more question. Please.
Speaker Change #106: Thank you and that will come from the line of Canon Banca <unk> with Barclays.
Kannan Venkateshwar: Thank you. Maybe a couple on on on 25. I know it's a little early. They're just talking about it, but maybe if we could just understand the levers. I mean, operating leverage this year has been very high, especially on the mobility side because of upgrade rate and also John being low, of course. So if you would just talk through maybe some of the levers next year, maybe on the cost front or maybe the price versus value dynamic, that would be helpful. Then the same question on cash flow, just in terms of levers. You obviously taxes will be ahead when, but when the financing in theory should be an easier comp and directly be, of course, would you know, depending on the deal closes, that wouldn't be another variable.
Speaker Change #106: Thank you.
Speaker Change #108: Maybe a couple of them.
Speaker Change #109: 25, and then <unk> talking about it but maybe if we could just understand the numbers I mean operating leverage this year has been very high.
Speaker Change #110: Especially on the mobility side because of upgrades.
Speaker Change #110: And also John being North of course, so if you could.
Speaker Change #110: Just talk through maybe some of the numbers next year, maybe on the cost cutting environment price value dynamic.
Speaker Change #111: That would be helpful. And then same question on cash flow just in terms of leverage.
Speaker Change #110: Obviously taxes wouldn't be a headwind.
Speaker Change #111: Financing in theory should be an easier comp.
Speaker Change #112: PBF group's wood.
Speaker Change #112: Depending on when the deal closes.
Kannan Venkateshwar: So if you could just help us think through, you know, the operating leverage side on the cash flow, that would be helpful.
Speaker Change #112: And that would be another medium groups and if you could just help us think through.
Speaker Change #112: The operating leverage side on the cash flow.
Pascal Desroches: Short thing, I'll start John the probably time and here's the way I think about it. We've been investing because we expect to continue to grow our business over time. So you should expect a continuation of our e-blog growth over time. And we will, you know, our mobility business will really please without we've been performing. And, you know, I believe that it's one that we can sustain. Similarly, we're really pleased with our consumer broadband business, and we continue to believe that there is opportunity to drive more operating leverage there. As we continue to scale fiber, what you should see is, over time, profit margins that are much closer to some of our scale broadband competitors.
Speaker Change #113: Thank you.
Sure thing all Spartan.
Speaker Change #114: John will probably chime in here is the way I speak about it.
Speaker Change #114: We've been investing because we expect to continue to grow our business over time. So you should expect a continuation of our EBITDA growth over time.
Speaker Change #114: Our mobility business, we're really pleased with how we've been performing.
Speaker Change #114: I believe it's one that we could sustain that similarly, we're really pleased with our consumer broadband business.
Speaker Change #115: Do you believe that there is opportunity to drive.
Speaker Change #115: More operating metrics there as we continue to scale fiber what you should see is over time profit margins.
Speaker Change #115: Much closer to some of our scale broadband competitors.
Pascal Desroches: And I wouldn't we still have an opportunity across the board to continue to work on costs, whether it is costs associated with serving our customers through the use of AI machine learning. There are plenty of opportunities there, as well as we have opportunities to continue to rationalize our real state footprint. And over time, the other benefit to think about the 2025 is the fact that, you know, the last 2023 and 2024 will be a year that we spend paying down vendor financing balances fairly significantly. And as we exit this year, I would expect us to be at a level that we will manage the company at overtime.
Speaker Change #115: <unk>.
Speaker Change #115: We still have an opportunity across the board to continue to work on cost whether it is.
Speaker Change #115: Costs associated with serving our customers through the use of AI machine learning there are plenty of opportunities there as well as we have opportunities to continue to rationalize our real estate footprint.
Speaker Change #115: <unk>.
Speaker Change #115: And over time, the other benefit to think about for 2025 is the fact that the 2023 2024 will be a year that we spent paying down vendor financing balances fairly significantly.
Speaker Change #115: As we exit this year I would expect us to be at a level that we will manage the company at over time so while.
Pascal Desroches: So while those investments have to press free cash flow of the last two years, we're going to be in a position where they are not going to the press free cash flow going the other way. We would expect higher cash taxes. And the absence of direct TV to offset some of those tailwinds, but by and large, so we are investing in because we believe long term business of business that we can grow both top line and bottom line.
Speaker Change #115: Those investments have depressed free cash flow of the last two years, we're going to be in a position where.
Speaker Change #115: They are not going to depress free cash flow going the other way, we would expect higher cash taxes.
Speaker Change #115: And the absence of Directv to offset some of those tailwind, but by and large growth.
Speaker Change #115: We are testing.
Speaker Change #115: Because we believe long term business a business that we can grow both topline and bottom line.
Operator: All right, that is the end of the call. Thank you so much, everyone, for joining us this morning.
Speaker Change #116: Alright that is the end of the call. Thank you so much everyone for joining us this morning.
Operator: Thank you, and ladies and gentlemen, that does include our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now.
Thank you and ladies and gentlemen that does conclude our conference for today. Thank you for your participation and for using AT&T conferencing you may now disconnect.