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AT&T: 5G, Fiber Focus Will Anchor Carrier In The Wake Of COVID-19 Fallout

The carrier‘s brand-new CEO, John Stankey, says that despite the fiscal impact of COVID-19, which will continue to be felt for the rest of the year, AT&T is prioritizing high-speed fiber and broadband, 5G and the creation of meaningful content to drive growth.

The AT&T that will emerge from COVID-19 and the business transformation that the carrier has been undergoing will look very different than the AT&T that exists today, promised the carrier‘s brand-new CEO, John Stankey, who assumed the role July 1 after previously serving as president and chief operating officer.

The COVID-19 coronavirus pandemic weighed on AT&T‘s second fiscal quarter of the year in nearly every segment of the business, and the carrier isn’t expecting business as usual anytime soon. “We’re planning on operating under the assumption that significant accommodations from COVID will be the business norm well into next year,” Stankey said during the carrier’s second-quarter 2020 earnings call Thursday.

AT&T, however, is charting an investment plan that includes prioritizing high-speed fiber and broadband, 5G and the creation of meaningful content, according to the new CEO.

Dallas-based AT&T also said during its earnings call that its 5G network is now available to consumers and businesses nationwide with the addition of 40 new markets. The carrier said its 5G network is available to more than 205 million users in 395 coverage markets across the U.S.

[Related: AT&T Sees 'Unprecedented Volumes' Of Calls As COVID-19 Leaves Its Mark]

Business wireline services revenue dipped 3.5 percent during second-quarter 2020 to $6.37 billion compared with $6.60 billion a year ago due to a decline in legacy voice services. The carrier estimated that business wireline revenue would have declined about 1.7 percent without the pandemic‘s impact. However, even during these uncertain financial times, demand continues to climb for strategic and managed services—AT&T’s most advanced business offerings, which include VPN and security, according to the carrier.

John Stephens, AT&T‘s senior executive vice president and CFO, called business wireline revenue “solid” as enterprises relied on the reliability and flexibility of the AT&T network during the pandemic, and that the revenue for the segment was consistent with industry trends.

“Our enterprise segment … will be in a better position to sustain what‘s going to be a tough economic environment, but that business does cycle with how the economy moves, so we are going to see some pressure on that as we move into the third quarter,” Stankey said.

AT&T‘s mobility segment revenue totaled $17.15 billion during second-quarter 2020, a slight decline compared with $17.29 billion in the same quarter a year ago. The overall communications business, which includes high-speed internet, video and legacy voice services, dropped to $33.59 billion during the quarter from $35.27 billion in the second quarter of 2019, a 4.7 percent decline that the carrier said was impacted in part by consumers cutting spending during the outbreak.

The carrier now has 4.3 million AT&T fiber customers with more than 2 million of those customers using Gigabit speeds. AT&T also invested an additional $1 billion in new 5G spectrum during the second quarter, Stephens said.

The WarnerMedia unit, which includes Turner and premium TV channel HBO that AT&T acquired as part of its Time Warner purchase in 2018, was hard hit by the pandemic. The segment reported revenue of $6.81 billion in the quarter compared with $8.84 billion last year, a 29.8 percent drop-off due to movie releases being delayed, sporting events being canceled, and the carrier losing premium paid-TV subscribers during the quarter.

On the other hand, AT&T‘s nationwide FirstNet emergency communications network, which is still being built out, has seen demand during the pandemic from those on the front lines fighting the coronavirus, including health-care professionals, police and firefighters, the carrier said.

AT&T during the first quarter and into the second quarter of 2020 began offering flexible payment options, including waiving fees for overages and lifting data caps for its residential and small-business customers who were financially impacted by the pandemic through the Federal Communications Commission‘s Keep America Connected pledge, which ended June 30. The carrier said it had a loss of 151,000 postpaid mobile phone users but that it’s treating customers who haven’t paid for services due to pledge as disconnects for the time being. “We assume we’ll be winning some of those customers back,” Stankey said.

AT&T said the pandemic reduced its first-quarter earnings by 5 cents per share and in the second quarter, the carrier‘s earnings were reduced by 9 cents as a result of incremental costs and revenue-related impacts, including hazard pay for employees related to the pandemic. Adjusted diluted earnings per share during the second quarter, which ended June 30, was 83 cents, down from 89 cents one year ago. Total revenue declined percent to $40.95 billion, an 8.9 percent fall from $44.96 billion in the same quarter one year earlier. AT&T estimated that the pandemic had a $2.8 billion impact to the quarter.

Net income was $1.23 billion, a 66.8 percent decline from $3.71 billion in first-quarter 2019.

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