AT&T signed up 813,000 new wireless customers from April to June for its second best three-month cycle in over a decade, despite inflationary pressures forcing some to pay their monthly phone bills more slowly.
The Dallas-based telecommunications company also added 316,000 subscribers to its ultrafast fiber internet service, pushing that total to 6.6 million. It’s on track to close in on 100 million customers with 5G by year-end.
“Having high-quality, wireless service and high-quality home broadband service is kind of indispensable now,” said Jeff McElfresh, AT&T’s chief operating officer.
The company has this market momentum in spite of less aggressive promotions, McElfresh said. Instead, he added, it has focused on customer service, such as getting installs done on time.
“Our industry is a very durable industry when it comes to recessionary pressures or hypergrowth economies,” McElfresh said. “It’s becoming a necessary product in your life.”
Revenue for the quarter totaled about $30 billion, down about 17% from the same period last year when AT&T was completing its spinoff of DirecTV. Excluding the impact of divestitures, revenue was up 2.2% year-over-year.
The company thinks it will continue raking in subscribers, with plans to invest $24 billion in fiber and 5G this year.
McElfresh, who has fiber internet service at his home, said the speed difference is particularly useful for homes with multiple users, allowing one to stream movies, another to play games and someone else to take part in a Zoom call.
“The most pleasing thing to watch is when you convert a home from having a competitor’s broadband service or, frankly, our older copper broadband service and you light up that fiber in the home and the eyes just brighten,” he said.
This quarter also was unique for AT&T as it spun off its WarnerMedia unit in April in a merger with Discovery that formed Warner Bros. Discovery. AT&T used most of $43 billion in cash and debt securities it got in the merger to reduce its debt by about $37 billion, according to its earnings report.
AT&T previously fought regulators to take over Warner Bros. in an $85 billion deal in June 2018 to turn it into a content giant. But last year, it announced plans to unwind the mega deal to focus its capital expenditures on its fiber network and 5G services.
Looking to the second half of the year, the company lowered its full-year free cash flow guidance from the $16 billion range to the $14 billion range. In an interview on CNBC on Thursday morning, AT&T CEO John Stankey said gaining more than 800,000 phone customers “takes a little bit of cash.”
Stankey said the company is investing heavily in fiber and 5G, with the company covering 70 million people with 5G six months ahead of schedule. He also noted that some customers are stretching out their payments more as inflation hits their pockets.
About $1 billion of the free cash flow revision was tied to the “timing of customer collections,” according to the company.
The forecast raises concerns that consumers are pulling back on spending in the face of decades-high inflation. Part of that pressure is that their bills are getting more expensive. AT&T raised prices by $6 a line on older mobile plans in May.
“I’m not surprised to hear consumers are paying bills more slowly; they are already struggling with higher food and energy prices,” said Wolfe Research analyst Peter Supino. “I’m not worried so much for AT&T as I am for the broader consumer economy. You wonder if this is the canary in the coal mine.”
Stankey said he expects slower payments to continue. Customers are eventually paying their bills, but they’re “less timely,” he said. On average, customers are taking an extra two days to pay their bills.
AT&T shares fell 7.6% Thursday to $18.92, despite topping analyst estimates for profit and wireless subscriber growth.
Bloomberg contributed to this story.