AT&T Will ‘Reposition’ Struggling Business Wireline Segment

“We know this transformation won’t happen overnight. Similar to our turnaround in mobility and consumer wireline, we are confident we have the right strategy in place and in our ability to execute it successfully,” said the carrier’s CEO John Stankey during AT&T’s Q2 2022 earnings call.

AT&T is pushing its core fiber internet and 5G services as it begins a reposition of its slumping business wireline segment during the “increasingly pressured” economic backdrop, according to CEO John Stankey (pictured).

“While we’re hopeful that some spending will return and the enterprise infrastructure solutions contract volumes and share gains will offset pricing reductions over time, we consider it prudent to reset expectations,” the carrier’s CEO said during its Q2 2022 earnings call Thursday morning.

Business wireline services revenue fell 7.4 percent during second quarter ended June 30 to $5.42 billion compared with $5.86 billion one year ago. The carrier attributed the decline to due to lower demand for legacy voice and data services, which are being replaced with mobility and collaboration solutions, and lower revenues from the government sector. Business wireline equipment sales decreased 6.8 percent to $179 million compared with $192 million in the second quarter of 2021.

The pressure in the business wireline segment will give AT&T the opportunity for a simplified product portfolio reset and the deployment of more fiber, which is a growth factor for the struggling segment, Stankey said. “Our fiber expansion also helps us to gain market share in SMB, an underpenetrated segment for us,” he said.

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Business wireless services, on one hand, climbed 7.4 percent to $2.18 billion compared to $2.03 billion a year ago, which the carrier attributed to growth in 5G and fiber. Business wireless equipment revenues also grew 11.9 percent to reach $874 million compared to $781 million in Q2 2021.

Overall, AT&T’s Business Solutions segment dipped 2.4 percent to $8.64 billion during the second quarter compared with $8.86 billion in the same period one year earlier.

AT&T CFO Pascal Desroches said the company doesn’t expect business wireline revenue to grow in the short term and the company is looking to 2024 for stabilization.

“We know this transformation won’t happen overnight. Similar to our turnaround in mobility and consumer wireline, we are confident we have the right strategy in place and in our ability to execute it successfully,” Stankey said.

The Dallas-based carrier’s mobility segment revenue totaled $19.93 billion during the quarter, a 5.2 percent bump up compared with $18.94 billion in the same quarter a year ago. The overall communications business, which includes high-speed internet, video and legacy voice services, climbed 2 percent to $28.70 billion during the quarter compared with $28.13 billion in the second quarter of 2022. In mobility, AT&T said its service revenue grew 4.6 percent due to higher services and equipment revenue and subscriber growth. Equipment revenue climbed 7.2 percent year over year.

Stankey said the carrier has added nearly 2 million AT&T Fiber locations this year, reaching its target of covering 70 million people with mid-band 5G spectrum two quarters early. AT&T now expects to approach the 100 million mark by the end of 2022. AT&T’s goal is to convert more broadband internet subscribers to fiber subscribers. AT&T Fiber, said Stankey, will have a “multi-decade lifespan.”

On the wireless side, AT&T broke records for another sequential quarter with 813,000 post-paid phone net adds and 1,058,000 post-paid net adds overall in the second quarter. Desroches said the results represented AT&T’s best second quarter for postpaid phone net adds in more than a decade.

Diluted earnings per share during AT&T’s fiscal second quarter, ended June 30, 2022, was 56 cents, up from 22 cents one year ago. Total revenue was $29.64 billion, a 17.1 percent decrease from $35.74 billion in the same quarter one year earlier, which the carrier attributed to the impact of its divested businesses and lower business wireline revenue. Net income for the quarter was $4.54 billion compared to $1.87 billion one year before.