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AT&T Business Wireless Carries Slumping Wireline Segment As Carrier Courts Midmarket

The telecom giant’s wireless wins in both consumer and business are outpacing its business wireline declines, but AT&T is working to move enterprises through a product shift in favor of fiber, 4G LTE and 5G offerings while also targeting the midmarket.

AT&T’s wireless, fiber and WarnerMedia strengths continued to anchor the carrier in the third fiscal quarter of 2021 as it keeps its eye on simplifying its business and focusing on core telecom services.

Still, the Dallas-based company continues to struggle on the business wireline side. Business wireless and fiber services are buoying the business segment, said AT&T executives during the carrier’s third-quarter 2021 earnings call Thursday.

AT&T is moving enterprise customers through a product mix shift as businesses move off legacy wireline, low-profit services and onto wireless offerings, such as 4G LTE and 5G wireless backhaul. This shift has been especially evident during the pandemic, said Jeff McElfresh, CEO of AT&T’s Communications segment.

“We’re on the cusp of getting business wireline to move … to growth, McElfresh said. “It’s going to take some time because it’s going to require some product mix and development work.”

AT&T also is working on targeting more midmarket customers, he added. “These customers are more inclined to use shared broadband served up by fiber and our business-class services we serve to enterprises are not so attractive to the midmarket. We’ve been making moves to shift … you’ll see us shift shares of our revenue in business wireline more downmarket with the execution we know we can deliver.”

[Related: RootMetrics 5G Report: AT&T Takes Top Honors]

Business wireline services revenue fell 5.1 percent during third-quarter 2021 to $5.94 billion compared with $6.26 billion a year ago, which the carrier attributed to higher demand for pandemic-related connectivity in the prior year. Business wireline services decreased 5.5 percent and equipment sales fell 5.2 percent during the quarter. AT&T CFO Pascal Desroches said the carrier is focusing on its core networking and transport services and expects business wireline revenue to return to growth in 2022.

Business wireless services, however, climbed 9.1 percent to $2.87 billion compared with $2.61 billion a year ago.

AT&T’s mobility segment revenue totaled $19.14 billion during third-quarter 2021, an increase of 6.5 percent compared with $17.89 billion in the same quarter a year ago. The overall communications business, which includes high-speed internet, video and legacy voice services, climbed 3.6 percent to $28.23 billion during the quarter compared with $27.19 billion in the third quarter of 2020. In mobility, AT&T said its service revenue grew 4.6 percent, while equipment revenue climbed 13 percent during the quarter.

“We’re moving into what I would call the golden age of connectivity and ubiquity in connectivity,” said CEO John Stankey. “We’re accelerating our historical rates of customer growth in mobility [and] fiber.”

AT&T saw 928,000 postpaid phone net adds and 1,218,000 postpaid net adds overall in the third quarter of 2021, the highest number of net adds of its highest-value subscribers in more than a decade. The carrier had 289,000 fiber net adds during third-quarter 2021 and 37 percent penetration, up 3.4 percent from a year ago.

AT&T’s WarnerMedia unit, which includes Turner and premium TV channel HBO that AT&T acquired as part of its Time Warner purchase in 2018, continued its upward trajectory. The segment reported revenue of $8.44 billion in the quarter compared with $7.39 billion last year, a 14.2 percent increase, which reflected recovery from prior-year COVID-19 impacts and higher content, subscription and advertising revenue, according to the company.

The carrier in the third quarter closed its sale of satellite television service DirecTV to TPG Capital for $7.1 billion in cash. The monies will help AT&T continue its strategic telecom services investment strategy, Stankey said.

Adjusted earnings per share during AT&T’s second quarter, which ended Sept. 30, was 87 cents, up from 76 cents one year ago. Total revenue was $39.92 billion, a 5.7 percent decrease from $42.34 billion in the same quarter one year earlier. Net income was $5.92 billion.

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