AT&T’s Earnings Call: 5 Big Things You Might Have Missed

The telecom giant had a strong showing when it came to wireless subscriber growth and mobility momentum in Q1, but AT&T’s business segment continued to struggle during the most recent fiscal quarter.

Wireless For The Win

The COVID-19 pandemic weighed on AT&T’s first fiscal quarter of 2020, but the same can’t quite be said for this year as the telecom giant posted subscriber wins and overall revenue growth.

Similar to last year, AT&T sees mobility, fiber and 5G as its path to profitable growth in 2021 as the carrier continues to refocus efforts on its core telecom business, AT&T CEO John Stankey said during the company’s first-quarter 2021 earnings call.

Dallas-based AT&T hit some high notes in its financials in the most recent quarter, with growth in postpaid phone net adds and an increase in HBO Max subscribers. But while the mobility segment, which includes AT&T Communications, saw growth during the quarter, business services continued to struggle and the carrier said it expects a future decline in SMB revenue.

Here are five important highlights from AT&T’s first-quarter 2021 earnings call.

The Results

For the first quarter of the year ended March 31, AT&T reported total revenue of $43.94 billion, an increase of 2.6 percent compared with $42.78 billion in the same quarter one year earlier. Diluted earnings per share during the quarter was 86 cents, up from 84 cents one year ago. Net income during first-quarter 2021 was $7.94 billion, up significantly from $4.96 billion in first-quarter 2020.

AT&T beat analysts’ expectations on adjusted earnings per share and revenue during the first quarter of the year. The carrier also beat on postpaid phone subscriber expectations.

Wireless Growth

Along the lines of fourth-quarter 2020’s subscriber result, AT&T had a very strong quarter in terms of phone subscriber growth, unlike its competitor Verizon, during first-quarter 2021. Postpaid phone subscriptions continue to be a key area of growth for AT&T amid declines in some of its other legacy businesses.

AT&T‘s postpaid phone net additions rang in at 595,000, which was more than double analyst estimates. The carrier had 823,000 postpaid net adds and 207,000 prepaid phone net adds. AT&T called first-quarter 2021’s results the strongest first quarter for net adds in at least five years.

For comparison, rival Verizon this week reported a loss of 178,000 postpaid phone connections over the same time period.

Business Solutions

Business wireline services revenue continued to decline, dropping 3.64 percent during first-quarter 2021 to $6.05 billion compared with $6.27 billion a year ago. The carrier attributed the decline to lower service revenue, primarily due to lower legacy service demand as businesses move to more advanced IP-based offerings. AT&T has seen an increase in interest around strategic and managed services—AT&T‘s most advanced business offerings, which include VPN and security—over the past several quarters.

The carrier said it expects to see a decline in small-business revenue moving forward, which accounts for about 15 percent of the carrier‘s business wireline revenue.

AT&T‘s mobility segment revenue totaled $19.03 billion during first-quarter 2021, an increase of 9.3 percent compared with $17.40 billion in the same quarter a year ago, which the carrier attributed to higher equipment revenue. The overall communications business, which includes high-speed internet, video and legacy voice services, jumped 4.9 percent to $28.18 billion during the quarter from $26.78 billion in the first quarter of 2020.

5G

AT&T sees 5G as one of its main paths to profitable growth this year and continues to compete strongly with T-Mobile and Verizon in terms of 5G footprint in the U.S. AT&T said its 5G network now covers 230 million Americans in 14,000 cities and towns and AT&T 5G+ is now available in parts of 38 cities in the U.S.

Fiber, another important path to growth for the carrier, is going strong. AT&T said that more than 650,000 U.S. business buildings are lit with fiber from AT&T. Nationwide, more than 9.0 million business customer locations are on or within 1,000 feet of AT&T‘s fiber, according to the carrier.

COVID-19 Impact

The COVID-19 pandemic weighed heavily on AT&T's financials last year at this time. In fact, the carrier last April pulled its financial forecast for the year because then-CEO Randall Stephenson said that it was “impossible to overstate the impact of COVID-19” and there was no consensus on how long the resulting financial downturn would last.

AT&T‘s current financials, however, are on the rise as the company is starting to see recovery from the pandemic, the carrier said. AT&T saw an increase in revenue for higher-priced smartphones this quarter compared with the same quarter last year when retail stores were temporarily closed due to the pandemic. International roaming revenue, however, is still down.