AT&T Inc. (NYSE: T) reported first-quarter results that showcased consistent 5G and fiber customer additions and profitable growth driven by increasing wireless service and broadband revenues.
“Our teams take pride in connecting more people to greater possibility through 5G and fiber,” said John Stankey, AT&T CEO. “We’re winning thanks to a proven and sustainable playbook that centers on simple, customer-centric experiences. As a result, we’re adding high-value customers, and when they choose AT&T, they stay with us. The work we’re doing today is establishing a foundation for durable, long-term growth, and we remain confident in our full-year guidance.”
Consolidated Financial Results
Revenues for the first quarter totaled $30.1 billion versus $29.7 billion in the year-ago quarter, up 1.4%. This increase primarily reflects higher Mobility, Mexico and Consumer Wireline revenues, partly offset by lower Business Wireline revenues.
Operating expenses were $24.1 billion, essentially stable with $24.2 billion in the year-ago quarter reflecting the benefits of our continued transformation efforts. Operating expenses decreased primarily due to lower domestic wireless equipment and associated selling costs from lower sales volumes; first-quarter 2022 3G network shutdown costs; lower personnel costs and higher returns on benefit-related assets. These decreases were partly offset by higher amortization of deferred customer acquisition costs, higher bad debt expense and increased depreciation. Additionally, business unit costs included year-over-year increases due to inflation.
Operating income was $6.0 billion versus $5.5 billion in the year-ago quarter. When adjusting for certain items, adjusted operating income* was $6.0 billion versus $5.8 billion in the year-ago quarter.
Equity in net income of affiliates of $0.5 billion primarily from the DIRECTV investment. With adjustment for our proportionate share of intangible amortization, adjusted equity in net income from the DIRECTV investment* was $0.9 billion.
Income from continuing operations was $4.5 billion versus $5.1 billion in the year-ago quarter. Earnings per diluted common share from continuing operations was $0.57 versus $0.65 in the year-ago quarter. Adjusting for $0.03, which includes our proportionate share of intangible amortization from the DIRECTV equity method investment and other items, earnings per diluted common share from continuing operations* was $0.60 compared to $0.63 in the year-ago quarter.
Cash from operating activities from continuing operations was $6.7 billion, down nearly $1 billion year over year reflecting timing of working capital, including lower securitizations. Capital expenditures were $4.3 billion in the quarter versus $4.6 billion in the year-ago quarter. Capital investment*, which includes $2.1 billion of cash payments for vendor financing, totaled $6.4 billion.
Free cash flow* was $1.0 billion for the quarter. Total debt was $137.5 billion at the end of the quarter, and net debt* was $134.7 billion. The company continues to expect to achieve a net debt-to-adjusted EBITDA* ratio in the 2.5x range by early 2025.
Communications Operational Highlights
(Prior year results for the Communications segment and each business unit have been recast to remove prior service credits. Additional information is provided in our Form 8-K dated March 3, 2023, and included as part of our earnings materials on the company’s Investor Relations website.)
First-quarter revenues were $29.2 billion, up 1.0% year over year due to increases in Mobility and Consumer Wireline, which more than offset a decline in Business Wireline. Operating income was $6.7 billion, up 3.9% year over year, with operating income margin of 23.1%, compared to 22.5% in the year-ago quarter.
Mobility
- Revenues were up 2.5% year over year to $20.6 billion due to higher service revenues, partially offset by lower equipment revenues. Service revenues were $15.5 billion, up 5.2% year over year, primarily driven by subscriber and postpaid ARPU growth. Equipment revenues were $5.1 billion, down 4.7% year over year, driven by lower volumes.
- Operating expenses were $14.3 billion, down 0.5% year over year primarily due to lower equipment costs driven by lower device sales, first-quarter 2022 3G network shutdown costs and lower content costs, partly offset by increased amortization of deferred customer acquisition costs, higher network and customer support costs, higher marketing costs and higher bad debt expense.
- Operating income was $6.3 billion, up 10.2% year over year. Operating income margin was 30.5%, compared to 28.3% in the year-ago quarter.
- EBITDA* was $8.4 billion, up 8.0% year over year with EBITDA margin* of 40.7%, up from 38.6% a year ago. This was the company’s best-ever first-quarter Mobility EBITDA*. EBITDA service margin* was 54.1%, up from 52.6% in the year-ago quarter.
- Total wireless net adds were 5.1 million including:
- 542,000 postpaid net adds with:
- 424,000 postpaid phone net adds
- (56,000) postpaid tablet and other branded computing device net losses
- 174,000 other net adds
- 40,000 prepaid phone net adds
- Postpaid churn was 0.99% versus 0.94% in the year-ago quarter.
- Postpaid phone churn was 0.81% versus 0.79% in the year-ago quarter.
- Prepaid churn was 2.73%, with Cricket substantially lower, versus 2.77% in the year-ago quarter.
- Postpaid phone ARPU was $55.05, up nearly 2.0% versus the year-ago quarter, due to prior-year pricing actions, higher international roaming and a mix shift to higher-priced unlimited plans.
- FirstNet® connections reached approximately 4.7 million across more than 25,000 agencies. FirstNet is the nationwide communications platform dedicated to public safety. The AT&T and FirstNet networks cover more than 99% of the U.S. population, and FirstNet covers more first responders than any other network in America.
Business Wireline
- Revenues were $5.3 billion, down 5.5% year over year due to lower demand for legacy voice and data services and product simplification, partly offset by growth in connectivity services.
- Operating expenses were $5.0 billion, down 1.0% year over year due to lower personnel and other costs associated with ongoing transformation initiatives, lower wholesale network access costs and lower marketing costs, partly offset by favorable compensation items in the prior year and increased depreciation expense.
- Operating income was $378 million, down 40.8%, with operating income margin of 7.1% compared to 11.3% in the year-ago quarter.
- EBITDA* was $1.7 billion, down 11.9% year over year with EBITDA margin* of 32.0%, compared to 34.4% in the year-ago quarter.
- AT&T Business serves the largest global companies, government agencies and small businesses. More than 750,000 U.S. business buildings are lit with fiber from AT&T, enabling high-speed fiber connections to more than 3 million U.S. business customer locations. Nationwide, more than 10 million business customer locations are on or within 1,000 feet of our fiber.2
Consumer Wireline
- Revenues were $3.2 billion, up 2.5% year over year due to gains in broadband more than offsetting declines in legacy voice and data and other services. Broadband revenues increased 7.3% due to fiber growth of 30.7%, partly offset by a 13.6% decline in non-fiber revenues.
- Operating expenses were $3.1 billion, up 4.8% year over year due to higher depreciation expense, higher network and customer support costs and increased amortization of deferred customer acquisition costs, partly offset by lower sales, advertising and content costs.
- Operating income was $94 million, down 40.9% year over year with operating income margin of 2.9%, compared to 5.0% in the year-ago quarter.
- EBITDA* was $955 million, up 3.2% year over year with EBITDA margin* of 29.5%, up from 29.3% in the year-ago quarter.
- Total broadband net losses, excluding DSL, were 23,000, reflecting AT&T Fiber net adds of 272,000, more than offset by losses in non-fiber services. AT&T Fiber now has the ability to serve 19.7 million customer locations and offers symmetrical, multi-gig speeds across parts of its entire footprint of more than 100 metro areas.
Latin America – Mexico Operational Highlights
Revenues were $883 million, up 28.0% year over year due to growth in both service and equipment revenues. Service revenues were $591 million, up 20.6% year over year, driven by favorable foreign exchange, higher wholesale revenues and growth in subscribers. Equipment revenues were $292 million, up 46.0% year over year due to higher sales and favorable foreign exchange.
Operating loss was ($30) million compared to ($102) million in the year-ago quarter. EBITDA* was $145 million compared to $59 million in the year-ago quarter.
Total wireless net adds were 10,000, including 58,000 prepaid net losses, 49,000 postpaid net adds and 19,000 reseller net adds.