The paragraph introduces the AT&T Second Quarter 2024 Earnings Call and provides an overview of the company's performance during the second quarter. The call is led by Brett Feldman, Senior Vice President of Finance and Investor Relations, and features CEO John Stankey and CFO Pascal Desroches. The team highlights the company's strong results and growth in wireless and broadband subscribers, as well as their investment-led strategy and focus on becoming a leading provider of converged 5G and fiber services. The paragraph also mentions the team's execution and consistency in delivering results.

In the second quarter, AT&T's Mobility EBITDA grew by more than 5%, driven by service revenue and margin expansion. This was due to their focus on the customer and efficient growth strategies. They expect even higher growth in the second half of the year, thanks to new devices, seasonal purchasing, and promotions. Their Consumer Wireline business also saw growth, with an increase in broadband subscribers and EBITDA. This was driven by their investments in 5G and fiber, which have a positive impact on each other. Additionally, more customers are choosing to bundle their mobility and broadband services with AT&T. Overall, AT&T is on track to meet their full-year financial guidance due to these durable trends.

AT&T's ownership and operation of both 5G and fiber networks has led to higher share in both mobility and broadband services. This has resulted in greater returns on invested capital and the company plans to continue expanding its fiber footprint and offering converged services. The convergence strategy aligns with the company's focus on sustainable growth and puts them ahead of their competitors in terms of profitability.

AT&T's investment-led strategy has been a key factor in their success, making them the largest capital investor in U.S. connectivity infrastructure since 2019. They have been able to reduce their net debt and leverage, leading to greater financial flexibility for sustained investment in growth and shareholder returns. In the second quarter, revenues were down slightly due to declines in Business Wireline service and low-margin mobility equipment, but adjusted EBITDA still grew 2.6%. Adjusted EPS was $0.57, with $0.09 of headwinds from previous items. For the full year, AT&T expects adjusted EPS in the range of $2.15 to $2.25.

In the second quarter, the company saw an increase in free cash flow due to growth in adjusted EBITDA, improved conversion of EBITDA into free cash flow, and lower capital investment. Capital investment for the quarter was down $1 billion compared to the previous year. The company also had a lower net impact from securitization. In terms of Mobility operating results, there was an increase in postpaid phone net-adds and a decline in churn. Service revenues grew by 3.4%, driven by a balanced go-to-market strategy. Postpaid phone ARPU also increased by 1.4%. However, there was a decrease in equipment revenues due to a lower upgrade rate. The company expects modest growth in postpaid phone ARPU and Mobility service revenue for the full year. Mobility EBITDA also saw an increase of over $450 million year-over-year and is expected to continue growing in the higher end of the mid-single-digit range for the full year.

In the sixth paragraph, John mentions that the Mobility outlook predicts higher activity levels in the second half of the year, with increased marketing spend and benefits from pricing actions. The strong subscriber and EBITDA growth in the first half of the year puts the Mobility business in a good position to meet financial targets. Moving on to Consumer Wireline, the company saw growth in fiber subscribers and added 52,000 total broadband subscribers in the quarter. The company expects this trend to continue, driven by the pace of new fiber locations, market dynamics, and seasonality. They are on track to pass 30 million fiber locations by the end of 2025.

AT&T is seeing better-than-expected returns on their fiber investments, which may allow them to expand their initial build targets by 10-15 million locations. They are also pleased with the performance of their fixed wireless service, AT&T Internet Air, and have added 139,000 subscribers in the quarter. Second quarter broadband revenues grew 7% and they expect continued growth for the full year. Consumer Wireline EBITDA increased by 7.1% due to growth in broadband revenues and cost transformation. Business Wireline EBITDA was down 13.9% due to industry-wide declines in legacy voice services, but there were some improvements in the second quarter due to favorable timing and cost-saving initiatives. However, they expect some pressure in the third quarter due to the lack of recurring IP sales from the previous year.

In the second quarter, the company's cybersecurity business was deconsolidated into a joint venture, resulting in a decline in quarterly revenues. However, the Business Wireline segment is performing as expected and is expected to experience a decline in EBITDA for the full year. The company remains focused on growth opportunities, such as 5G and fiber expansion, and is excited about emerging products like AT&T Internet Air and Dynamic Defense. The company's capital allocation strategy remains consistent, with a focus on balancing growth, paying down debt, and returning value to shareholders. The company has reduced its net debt and is making progress towards its target of a net debt to adjusted EBITDA ratio of 2.5 times by the first half of 2025. The company has manageable debt maturities and a majority of its long-term debt is fixed at a rate of 4.2%.

The company reduced its debt and supplier financing obligations in the second quarter, resulting in an improved free cash flow. They expect to continue reducing these obligations and anticipate a decline in DIRECTV cash distributions. They generated $4.6 billion in free cash flow in the quarter and $7.7 billion in the first half of the year. They expect to meet their full-year free cash flow guidance. The first question in the Q&A was about higher activity levels in wireless in the second half, with concerns about upgrade rates for the new iPhone.

The speaker responds to a question about the company's recent comments and initiatives. They mention that they are focused on customer needs and will be able to adapt to any changes in the market. They also discuss seasonality and the impact of new device cycles on the business. They mention that they are well-positioned to adjust to these changes and have looked at recent notes about the situation.

The speaker discusses the consistency of their approach to handling different upgrade cycles for their customers' accounts and mentions that they will respond to any meaningful features in new devices. They also mention the possibility of AI devices changing the market, but state that it usually takes a few cycles for these features to be perfected. They also mention that AI can be experienced without changing hardware and that they have successfully navigated similar cycles in the past. The other speaker adds that there is nothing to add to this statement.

The company is performing well and ahead of their full-year guidance. They plan to discuss their performance with Gigapower at the Communacopia session and believe they have a strong formula for selling fiber and convergence. They are acknowledged as being competent in this area and are not selling fixed wireless broadly across their footprint.

The speaker provides an update on the company's progress with ACP and in-region fiber. They mention that they have reached 28 million locations and are close to their goal of 30 million. They also state that they are actively working on partnerships and collaborations to further expand their reach. The speaker remains confident in the company's ability to meet their commitments and deliver results.

The ACP effect has had some impact on the company's fixed broadband business, but it is not the only reason for a slight decline this quarter. Most customers affected by the ACP transition are in the process of switching and the company is satisfied with how its prepaid business has performed. There may be some shrink in transitional promotions, but they are consistent with the company's expectations and guidance. The company plans to provide an update on its capital allocation strategy as it approaches its target debt ratio in the first half of next year.

The speaker expects to provide guidance for next year and there will be no surprises. The company's priorities include growing the business, leaving a strong and sustainable franchise for future generations, maintaining commitments to bondholders and dividends, and potentially investing in growth and changing the approach to returning value to shareholders. The speaker also discusses the pace of fiber build-outs and potential impact on 2025 trends.

John Stankey responds to a question about the potential for growth in Internet Air, stating that the company's fiber targets are on track to be met next year and the returns on their investments have been better than expected. He also mentions the potential for joint marketing and product innovation to further improve returns and suggests that the company may continue to invest in growth beyond their current targets.

The company is currently in the process of finalizing their strategy for the latter part of the year and will provide more information to the Board. They have various tools and options available to them, such as partnerships and organic growth, to drive good returns for the business. They will continue to grow their Internet Air business and improve their rates, but their strategy is different from others as they are selective in offering it and only do so in places where it makes sense for their transition to new technology and where they have excess capacity.

The speaker mentioned that there is a race to convergence in the market, which not everyone agrees with. They believe that AT&T has a 500 basis point market-share advantage in areas where they have deployed fiber, and this supports their argument that there should be a race to convergence. They also mentioned that AT&T is in a unique position to take advantage of the economics in this market.

The speaker, John Stankey, discusses the impact of recent events such as network outages and data breaches on the company's go-to-market strategy and future financials. He emphasizes the importance of their focus on convergence and how it leads to happier customers and greater organic growth. He also mentions the long-term nature of the "race" to reorganize assets in the industry.

The author believes that customers prefer to have a few trusted relationships with suppliers of critical services. They believe that the company that can provide great value and connectivity to customers will be successful in the long run. However, they acknowledge that this will be an ongoing race and they are disappointed by recent instances where they have let down their customers. They prioritize reliability, privacy, and data security, but acknowledge the challenges of operating in a dynamic environment.

The speaker discusses the changes and challenges the company is facing, particularly in the current threat environment. They are proud of the progress they have made and their response to any missteps or issues. They are confident in their financial guidance and public statements regarding these issues and are striving to do better in the future.

During a conference call, Brett Feldman asks if the next question is ready. The next question comes from Sebastiano Petti of JPMorgan, who asks about a $480 million one-time payment for wireless transformation in the back-half of the year. Pascal Desroches explains that this was previously reported and is accounted for in their guidance. John Stankey adds that they view capacity as a fixed resource and are careful in managing it, mentioning their use of fixed wireless and deployment of spectrum.

The speaker discusses the importance of investing in the network and monetizing scarce resources effectively. They mention their deliberate approach to deploying capacity and their strategies for ensuring a good return on investment. They also emphasize the importance of fiber over wireless for high-density traffic and advocate for policy changes to improve spectrum availability.

The speaker discusses three potential options for addressing the growing demand for wireless capacity. First, they suggest making use of existing licensed spectrum through policy and rule changes. Second, they mention the benefits of O-RAN and its potential to increase capacity through distributed radiation points and a multi-vendor environment. Finally, they highlight the role of their dense fiber assets in supporting this strategy.

The speaker discusses the company's tools in place for efficient growth and the importance of market discipline in selling their product and service. They also touch on the strength of postpaid phone net adds and the competitive landscape in the Mobility sector. They mention their progress on cost-cutting targets and the potential for EBITDA growth to outpace service revenue performance.

The company has been successful in picking up customers in the consumer space through various methods and continues to improve their marketing strategies. They have seen growth in converged services and are managing their costs effectively, leading to margin accretion. The company is repositioning itself as a 5G and fiber provider and is making progress in reducing costs and addressing regulatory issues.

The speaker discusses the progress being made in terms of regulatory flexibility and cost structure changes, which has been led by the management team. They express confidence in the company's future growth and sustainability, thanks to technology advancements and a more cost-effective operating environment. The speaker also mentions the benefits of the company's fiber network in terms of reliability and customer experience. They believe that the business will continue to see cost reductions and improved margins, while also growing the business. The call then moves on to the next question.

Bryan Kraft asks about concerns over a potential slowdown in wireless industry volumes and pricing power. John Stankey acknowledges that there has been a moderation in volumes, but AT&T's unique position allows for growth through both industry growth and share-take opportunities. The company is also working on improving its performance in the mid-part of the business market.

The speaker believes that the quality of growth is becoming more important and is confident in the quality of growth in the current quarter. They have been consistently finding quality customers and offering competitive services. They have also been able to demonstrate more value to customers and improve ARPUs. The speaker thanks everyone for their time and notes that they have been consistently executing their strategy.

The speaker discusses the objective of the management team to consistently improve the company's performance and manage issues more effectively. They believe that the company is currently on the right track and there is still room for improvement. The call ends with the speaker thanking participants for their time and interest in AT&T.

This summary was generated with AI and may contain some inaccuracies.