The paragraph is an introduction to AT&T's Fourth Quarter 2024 Earnings Call. It begins with the operator providing instructions for participants and then introduces Brett Feldman, the Senior Vice President of Finance and Investor Relations, who is hosting the call. Brett Feldman introduces the key executives, including CEO John Stankey and CFO Pascal Desroches, and highlights the importance of the safe harbor statement regarding forward-looking comments. John Stankey then expresses satisfaction with AT&T's strong performance in 2024, meeting or exceeding financial guidance. He also extends sympathies to those affected by catastrophic wildfires in Southern California, emphasizing the importance of staying connected in such challenging times and thanking AT&T teams for their efforts.

The paragraph highlights AT&T's strong performance in 2024, driven by growth in 5G and fiber subscribers. The company added 1.7 million postpaid phone net additions and achieved 3.5% service revenue growth, maintaining low postpaid phone churn. AT&T Fiber continued its success, adding over 1 million subscribers annually for seven years and was recognized by Ookla for having the fastest and most reliable internet speeds. The company has seen six consecutive quarters of positive broadband net additions, resulting in margin expansion and free cash flow growth. AT&T's investment in 5G and fiber supports its sustainable growth strategy, aiming for long-term returns.

In the previous year, AT&T invested around $22 billion to enhance its converged broadband network, aiming for top industry leadership by building a high-capacity, low-cost infrastructure. If tax incentives are extended by the Trump administration, further investments in U.S. communications infrastructure are anticipated. AT&T strengthened its competitive position and aims to grow 5G and fiber subscribers in 2025 by improving customer experience. They target $3 billion in cost savings by integrating AI and phasing out legacy copper network operations by 2029, beginning the transition away from legacy voice services with FCC approval.

The paragraph outlines AT&T's strategic plans to modernize its communication infrastructure by transitioning away from legacy products and increasing investment in wireless networks and fiber expansion. The company plans to invest around $22 billion and aims to maintain a net debt to adjusted EBITDA ratio of 2.5 times. They intend to initiate stock repurchases of about $10 billion in the second half of 2025, as part of a larger $40 billion shareholder return plan, which includes $20 billion in dividends and potential share repurchases. Additionally, AT&T has $10 billion in financial flexibility for strategic initiatives or further shareholder returns. The company emphasizes a customer-centric approach by aligning its brand and services with customer needs.

The paragraph outlines AT&T's commitment to improving customer satisfaction through the introduction of the AT&T guarantee, a first-of-its-kind promise in the telecommunications industry. This guarantee assures reliable connectivity, desirable deals, and prompt service for both wireless and fiber networks, covering consumers, small businesses, and enterprise customers. With complete control over their 5G and fiber networks, AT&T is able to offer this unique promise, focusing on delivering an exceptional customer experience. The company expects this initiative to enhance customer loyalty and attract new clients, supporting its strategic goals for 2025 and beyond.

The company reviewed its fourth quarter financial summary, expressing satisfaction with subscriber growth and revenue increases. Fourth quarter revenues rose nearly 1%, driven by wireless and broadband services, despite a decline in business wireline. Adjusted EBITDA grew by 2.2%, with increased performance in Mobility and Consumer Wireline. Adjusted EPS remained at $0.54, despite $0.04 of expected challenges. Free cash flow for the fourth quarter was $4.8 billion, including $1.1 billion from DIRECTV. Operating cash rose to $11.9 billion, with future DIRECTV cash distributions to be reported differently. Capital expenditures were $6.8 billion, with investment at $7.1 billion. The company met its 2024 financial guidance, achieving Mobility service growth of 3.5% and Consumer Wireline growth of over 7%, led by an 18% fiber revenue increase.

The article discusses the company's financial performance, highlighting a 3.1% growth in consolidated technical difficulty, surpassing their expectations. The adjusted EPS for the year was $2.26, exceeding the projected range. For 2025, they plan to report adjusted EPS excluding DIRECTV, with 2024's adjusted EPS at $1.95 after exclusion. Capital investment matched the high end of its $21-22 billion guidance, and free cash flow slightly exceeded expectations at $17.6 billion, with plans to exclude DIRECTV influences in 2025. The Mobility segment displayed strong results, with increased revenues, EBITDA growth, and a 482,000 increase in postpaid phone net additions, supported by low churn and operational efficiencies. Mobility EBITDA grew 6.3% for the year, aligning with projections, and postpaid phone ARPU increased nearly 1%.

The paragraph discusses the company's financial performance, highlighting growth in both the Mobility and Consumer Wireline sectors. In the Mobility sector, ARPU growth is fueled by targeted pricing and plan mix, with postpaid phone churn slightly increasing and upgrade rates decreasing. The expectation is for stable performance in this sector through 2025, with service revenue and EBITDA anticipated to grow at the higher end of their forecasted ranges. In the Consumer Wireline sector, record growth was achieved with 307,000 new AT&T Fiber subscriptions, driven by demand for superior service and network expansion. Additionally, AT&T Internet Air added 158,000 subscribers, totaling over half a million net additions for the year. The success of these services has more than compensated for declines in legacy copper services, contributing to a total of 123,000 broadband net adds for the quarter. Fiber ARPU also showed an increase both sequentially and from the previous year.

In the fourth quarter, AT&T's fiber revenue increased significantly, contributing to overall broadband revenue growth and surpassing expectations for Consumer Wireline EBITDA. The company's strategy to focus on high-margin fiber services and move away from legacy copper networks is driving this success and is expected to continue in 2025. AT&T's fiber penetration reached 40%, with a notable portion of households also choosing AT&T for wireless services, indicating strong demand for their converged offerings. In contrast, Business Wireline revenues and EBITDA declined significantly due to a general industry decline in legacy services, with expectations for continued declines in the coming years.

In the fourth quarter of 2024, the company saw a 3.5% increase in Business Solutions wireless service revenues and sustained growth in FirstNet connections. They strengthened their balance sheet by reducing net debt by $8.8 billion for the year, including a $5.7 billion reduction in the fourth quarter. This reduction included a $2.4 billion non-cash FX benefit and a $1.5 billion cash distribution from previously restricted assets. The company ended 2024 with a net debt to adjusted EBITDA below 2.7 times, lowered vendor and direct supplier financing by $400 million year-over-year, and saw a significant reduction over the past two years. No major changes in these financing levels are expected in 2025, and the sale of their 70% stake in DIRECTV to TPG is anticipated to close mid-year.

Since signing an agreement, AT&T has received $1.7 billion in pretax cash distributions from DIRECTV and expects to receive an additional $5.9 billion in after-tax payments by 2029, with $5.4 billion anticipated this year. The company plans to maintain its dividend per share and begin share buybacks in the second half of 2025 as it targets a net debt to adjusted EBITDA ratio of 2.5. AT&T aims to enhance shareholder value through capital appreciation and returns starting in 2025. The company's 2025 financial guidance, unchanged from earlier projections, expects growth in adjusted EPS and free cash flow, with growth driven by a 3% or better increase in consolidated adjusted EBITDA. Adjusted EPS for 2025 is projected between $1.97 and $2.07, factoring in slightly higher depreciation and amortization due to 5G and fiber network investments, lower interest expenses, and a 23% effective tax rate. Planned share repurchases are not expected to significantly impact 2025 adjusted EPS.

The paragraph outlines the company's financial outlook and expectations for the coming years. It anticipates double-digit compound annual growth rate (CAGR) in adjusted earnings per share (EPS) starting in 2027, driven by expected annual adjusted EBITDA growth of at least 3% and benefits from share repurchases. The company also forecasts lower depreciation expenses beyond 2025 due to network modernization and removing legacy assets. The guidance for over $16 billion in free cash flow this year factors in reduced interest expenses from lower debt, the absence of network termination fees, and improved working capital impacts in 2025. Despite an increase in cash taxes, these items, along with EBITDA growth, are expected to be advantageous. Excluding DIRECTV, cash taxes in 2025 are projected to rise by $1.5 billion compared to 2024 due to current tax laws. The company also foresees a steady free cash flow throughout the year, typically lower in the first quarter due to device payment timings and incentive payouts. DIRECTV contributed $500 million to the previous year's first-quarter free cash flow. The company reiterates its long-term guidance shared in December and is now open for questions.

In the paragraph, John Stankey addresses regulatory questions related to legacy products and potential cost savings. He explains that the regulatory filing is part of a broader cost-saving strategy outlined during the Analyst Day, aimed at reducing costs over the next three years. However, any cost reductions from decommissioning the copper infrastructure will take time due to the necessary notice cycles and customer transitions. These steps are part of a long-term plan to achieve cost objectives by 2029 and reshape the business's cost structure. Stankey also touches on tax reform and its potential impact on Capital Expenditure (CapEx), hinting at possible acceleration in spending plans, although specifics regarding timing or areas are not provided.

The paragraph discusses the initial implementation of a new framework involving 1,300 wire centers and the collaboration with a commission to efficiently process and scale this framework. The author is optimistic about the new administration's interest in rapidly advancing these technologies, which are expected to stimulate investment. Additionally, there's hope that the single-party-controlled Washington will prioritize economic growth through tax reforms, which the author believes will drive investment and benefit the economy.

The speaker discusses a past peak of $24 billion in investment, linking a corresponding increase in tax bills to a current decline in capital investments. They express doubt about reaching that investment level again due to current reinvestment strategies. However, they consider accelerating the fiber build as a possible focus if there were some financial flexibility, possibly reallocating funds to investment in fiber or returning some to shareholders. They explain that scaling up fiber build efforts takes time, about 12 to 18 months, emphasizing a gradual approach to avoid disrupting supply chains or vendors. A decision to increase investment would depend on the certainty of tax cuts being implemented. The speaker concludes before transitioning to a question from David Barden of Bank of America.

The paragraph discusses the performance and strategies related to mobile net additions among fiber customers, noting that these gains equaled the total net additions for a quarter. John Stankey addresses the inquiry, indicating that analyzing this data may not provide significant insights due to variations in timing and strategies for penetration within the customer base. The focus should be on addressing unserved customer segments to achieve net additions. Pascal Desroches explains that the Reign real estate deal, contributing $850 million, is treated as a financing transaction and will not affect cash from operations or free cash flow, impacting the financing section of the balance sheet. Overall, the drivers of free cash flow leading to 2025 will be tied to expected EBITDA growth.

The paragraph discusses financial expectations and performances for AT&T. In 2024, the company anticipates a $0.5 billion headwind due to a termination fee related to their O-RAN modernization effort. However, they expect benefits from interest and working capital, with interest expenses expected to decrease into 2025. The discussion shifts to a Q&A session, where Michael Rollins from Citi inquires about the outlook for the wireless market and net additions, as well as the company's focus on balancing volume growth and average revenue per user (ARPU) in the 2025 guidance. Additionally, Rollins notes a significant increase in resale subscribers and questions whether this will become a major factor in Mobility service revenue growth in 2025. John Stankey responds by reiterating that the company's expectations remain consistent with the previous year, anticipating further normalization in the market.

The paragraph discusses the company's strategic approach to managing its customer base and subscription business. The speaker highlights their focus on acquiring durable, long-term customers and improving volume by gaining new subscribers while effectively managing the existing customer base. They emphasize their ability to balance these objectives, including adjusting pricing and plans to increase customer value and grow subscribers. The speaker also mentions their involvement with DISH, noting that this partnership and other MVNO reseller accounts have contributed to achieving positive volume growth. However, they do not provide specific details or breakdowns of these contributions. The paragraph concludes with a transition to the next question from Benjamin Swinburne of Morgan Stanley.

In the paragraph, Benjamin Swinburne asks about the impact of pent-up demand on fiber services following labor strikes, as well as the strong fiber ARPU growth and its outlook for 2025 amidst competition. He also inquires about Mobility's churn results and expectations for growth in gross additions. John Stankey responds that the pent-up demand effect is not substantial, though there was some impact from a 30-day market absence in the Southeast. The strong performance in the fourth quarter reflects this, but he doesn't foresee this trend continuing into the next quarter due to seasonality and the end of pent-up demand. They believe their footprint supports continued growth, and seasonality might slow it temporarily at the beginning of the year.

The paragraph discusses the company's market penetration and ARPU (average revenue per user) growth strategies. It highlights that there's no major trend change in market penetration or overall strategy. The company is managing its customer base by encouraging upgrades to higher speed plans and making strategic pricing adjustments. They see benefits from a recent price increase in some customer segments, and improvements as more customers shift from copper to fiber products, which typically results in higher ARPU. The company maintains competitive pricing below cable providers, helping them perform well in the market without needing to heavily discount their product. On the mobile side, while slight improvements in customer acquisition are expected, significant growth is unlikely due to a smaller overall growth pool. Pascal Desroches agrees with the points made, and the conversation then moves on to the next question from a different participant.

In this paragraph, Peter Supino from Wolfe Research asks about the average age of phones in the postpaid phone business and the impact of immigration changes on this business. John Stankey responds by stating that there isn’t a significant change in customers’ willingness to upgrade their handsets, despite various promotional efforts by carriers. He mentions that their company's upgrade forecasts remain consistent with expectations and that he does not anticipate any shifts in the near future. Stankey also notes that new devices will be introduced later in the year, which may influence customer decisions.

The paragraph discusses the impact of consumer behavior and market dynamics on device upgrades and the role of immigration in economic growth. The author observes that the durability and improved care of phones mean consumers are less likely to upgrade frequently. The author also mentions the company's limited participation in the immigrant market but recognizes that immigration contributes positively to economic growth. They express hope for smart immigration policies to support the U.S. economy’s growth.

The paragraph features a discussion during a Q&A session where James Schneider from Goldman Sachs asks John Stankey about the broadband market and competitive trends, particularly regarding pricing aggressiveness in the cable space. Stankey responds, indicating no current plans to change their tactics, as they believe their fiber product is superior where available. He also mentions the advantage of operating in markets with significant fiber infrastructure already in place. Additionally, there's a brief mention of the Business Wireline outlook and potential opportunities, like fiber connectivity for AI, that could improve revenue performance.

The paragraph discusses the company's expanding fiber distribution in metropolitan areas, which enhances their market presence. As they reach a broader market, they benefit from increased mass media awareness and word-of-mouth promotion. The company believes it is succeeding due to its superior product quality rather than lower pricing and notes that price-conscious consumers might prefer fixed wireless options. The focus is on providing high-performance, reliable services to households that need them. The company anticipates growth in fiber demand as consumption increases and is shifting its focus from legacy products to fiber and high-bandwidth connectivity services. However, these transitions may involve financial trade-offs.

The paragraph discusses expectations and performance related to fiber deployment and middle mile infrastructure, particularly as AI becomes more important. The speaker anticipates improved efficiency and fiber growth, noting that recent growth in the fiber business across all segments was anticipated and should continue. The focus remains on transitioning from legacy systems. Pascal Desroches highlights an opportunity with AT&T Internet Air (AIA) for business, indicating optimism for growth in this area. The conversation then shifts to wireless service revenue growth in the business sector, which appears to have exceeded consolidated growth expectations.

John Stankey discusses AT&T's market strategy, emphasizing the importance of improving distribution effectiveness, particularly in the mid and lower segments. He notes that while economic growth positively impacts the industry, AT&T's success depends on optimizing its distribution structure. During the Analyst Day, AT&T's plans for this improvement were outlined, but Stankey acknowledges that these changes take time and collaboration with partners. The focus is on providing partners with the right tools to enhance prospecting and conversion, and progress is being made towards ramping up capabilities, as reflected in their forecasts.

The paragraph discusses AT&T's strategy of using cloud computing and AI to enhance business operations, particularly in customer service. John Stankey highlights the company's achievements in leveraging AI technologies to improve efficiency and cost-effectiveness in call centers without solely replacing human employees. These advancements have led to notable reductions in call volumes while the customer base continues to grow, illustrating the successful application of AI in improving customer interactions and operational efficiency.

The paragraph discusses the internal use of AI, particularly generative AI, which has significantly improved code effectiveness and reduced development costs. It highlights the early stage of this revolutionary technology cycle, comparing its potential impact to the founding of the Internet. The speaker anticipates ongoing innovations that improve efficiency, such as reduced power consumption and enhanced model performance. The dynamic nature of AI development will lead to new applications and business models. Staying competitive requires adapting to these changes efficiently to avoid disadvantage relative to competitors.

The paragraph discusses the company's goal of effectively utilizing its unique data to better serve customers and improve market effectiveness by 2025. The speaker expresses a desire to demonstrate positive business momentum through the use of machine learning and AI, particularly in dynamically tuning wireless network capabilities. They highlight the company's commitment to innovation and consistent execution, mentioning the successful delivery of goals set for 2024 and ongoing efforts to enhance their performance as a communications company.

The company is approaching the midpoint of the year and plans to reassess its capital allocation strategy. This is part of a deliberate effort to continue investing in and improving the business, maintaining the consistency and progress seen in recent years. The speaker expresses gratitude for the audience's interest and wishes everyone a good remainder of the year, before handing the call back to the operator.

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