00:00:02
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
00:00:07
Speaker 2: We begin this out with stocks inching lower as earning season enters full swing. AT and T shares gaining after crushing customates on mobile subscriber gains. Joining us now to discuss the Man of Souff, the Boss, the AT and T C. John Stankey, John, Welcome to the program Sir. I want to talk about execution. There's so many issues to talk about with your company, but just execution. These numbers this morning, John, the streets looking for like three hundred and twenty five thousand, and you deliver four hundred and thirty two thousand monthly wireless phone subscribers in two Q. What went right, John, What was the strategy behind again that big.
00:00:41
Speaker 1: Well, I think going into the break, Jonathan, you referred to the results as fantastic and I would agree with you, and I think the team did an excellent job executing, as you said, and it's not just in our wireless business. It was nearly three hundred and seventy thousand fiber net ads. That's a record for us in this quarter. Look, what went right is what we told people was going to happen this year, as we gave guidance for the next three years. We said, because of the investments we've been making in this business over the last five years at a sustained and targeted level, and the m and A work that we had done acquiring more spectrum and picking up some additional footprint from Lumen, that you should see a step up in growth as a result of those things. The team had the asset base it needed to execute and drive growth at a faster level. And you saw the manifestation of that's starting to happen here in this quarter, and it's showing up in an accelerated service revenue growth. It's showing up and accelerated even of growth. I would even go into our business segment and point out that we had growth and our strategic services for business for the first time in a very very long time, and as a result of that, we expect that that's going to sustain itself through twenty eight. So we're executing well, we're hitting on all the cylinders and the engine and when that happens the business and deliver the kind of results you're scene, and I'm pretty confident we can keep that moving going forward.
00:02:04
Speaker 2: John, there's a number that jumped off the page for me this morning as well. It's forty two point five. Forty two point five percent of households that purchase the broadband service from you also buy mobile phone service too. How important has that convergence model been just behind the success you're having and how important will it be for the remainder of the year.
00:02:21
Speaker 1: It's extremely important. It's actually that number is forty five percent. If you were to normalize it for the lumen footprint that we just recently brought in, that's diluting the number a little bit. And as you see in our report, that's been ticking up steadily. And it's important because one, those customers are more lucrative customers. When they buy multiple products and services from US. Two, churn goes down, and that's one reason why you're starting to see our churn numbers improve this quarter, because we're starting to get that benefit of that base that is buying both together from US and three brand affinity, the customers happiness with AT and T and their pression of the brand as much higher as a result of that because the products are better together. So it's really important we continue down that path, and it's frankly one of the most important things is you think about our competitive positioning moving forward, because we can provide world class networks and both wireless and fix that tackle ninety eight percent of what a customer needs to do on the Internet. Occasionally they walk off one of our networks, and as you look at our partnerships that we're working with the satellite industry, by this time next year, we'll be able to solve that problem. And so we're the natural place for people to come and meet their needs on the Internet and do it easily on one bill, with one set of services and one support infrastructure. We think we're in a great position as a result of that.
00:03:46
Speaker 3: And John, this is a reason why there has been really a price war between different different providers, simply because everybody wants that package right, they want to get everybody. How has the competitive landscape changed though over the past couple of years with the introduction of satellite services, of what we're seeing with Starlink, of what we're seeing elsewhere.
00:04:06
Speaker 1: I don't characterize it as a price war. I think there's been a stratification of pricing for customers depending on what kind of services they want to buy. There's the segment of the market that needs, high performings, symmetrical gigabit services, very robust wireless plans. That segment of the market is willing to pay for that, and they pay a premium as a result of that exceptional value that they get back. We've played very, very well in that space given our asset base. But there's also a segment of the market that's more value oriented, and I would say choices have come into the market because of good regulatory posture that have allowed investment that weren't there before, and those choices are putting more value oriented products and services at more attractive price points, but the product and service maybe isn't as robust and at AT and T we've played really well up market, but not as well down on the value space. That we've been working hard to get our product portfolio so that it matches up across the entire continuum of the market. You saw that in the results this quarter because our account additions new accounts to AT and T hit like a three year high, and that's because we're doing a lot better job down market. And there's nothing wrong with having a more affordable product that's tuned to certain parts of the market. I don't consider that a price war. I consider that meeting market needs as long as you're doing the things that you can do up market, which we've done very well. And I think when you see margins the way they are at at and T this is like a record for us. That's a good sign that we're getting that balance correct.
00:05:43
Speaker 3: Over the next five to ten years. John, how do you see the breakdown of the mix of broadband and fiber on one hand, the wireless or the more budget sensitive areas, and then satellite from the likes that you're seeing from Starlink.
00:05:58
Speaker 1: Look, my point of view is they have a fantastic product. There's great innovation that's moving in that space, and it fits a part of the market that hasn't been well served, especially in less densely populated areas. And the interesting part about that is our investment has largely been an urban and densely populated suburban. We haven't pushed real hard in the rural and less densely populated areas that tends to be more the stronghold of cable companies. I think they'll do pretty well in that space, bringing an alternative and competition in there. I think it's going to be very hard to come into the more densely urban populated areas to compete with that bundle that I just talked about earlier of fiber that is the best product in the market, best performing, it's the lowest marginal cost, our great wireless density that far outstrips what you can do from directed device and satellite. Years of investment in the hard to reach places like stadiums. Everybody who went to a World Cup game knows how important being able to connect in a stadium is to experience what goes on socially and actually in the arena so that you can see a few replays that they're not showing there. We've been doing that for a long long time, and it's going to be very very hard to catch up on that infrastructure. And I think we're going to do really really well competing in metro and suburban areas, which is where our investments have been.
00:07:23
Speaker 3: And John, you've talked a lot about how fiber puts you in a really good position in the AI era and how an increasing number of businesses really do need that kind of connectivity and the latency that's so important to improve. And I'm just wondering, aside from the demand side from your actual corporate side, if you've been able to calculate any of their turn on investment of your own uses of artificial intelligence. I know you've been really vocal about how it has improved in efficiency dramatically. Has there been any ROI Have there been any structural changes that you're able to disclose.
00:07:56
Speaker 1: Yeah, we've been We've been really disciplined about this, and I'm satisfied that where we've been investing in places like in our software development organization, what we've been doing in our customer service channels, our applications into engineering, some of the things that we've been doing and building the right algorithms for pricing support that we've gotten very strong returns. And as a result of that, I would almost argue people inside of our company maybe think we've been a little too judicious about how we've managed investment. We're trying to find that right balance of innovation and allowing things to run and the discipline of ensuring that what we're doing drives return. I would also say that I'm very well aware that a lot of this investment is a competitive necessity. When we improve operations like customer service and call centers, I don't know that that's necessarily sustainable. I think those are ultimately efficiencies that get competed away in the market. They go to the customer in the form of lower prices or better service. There are the things that we do that really give us strategic advantage, like maybe writing software for capabilities that we didn't have before that make us better at pricing or better at driving yields on the network or more efficient. Those are the ones that maybe we get to keep some of the benefit on. And if I were to say that we need to do something better moving forward, we need more of the ones that drive strategic advantage to balance out some of the ones that we know are just the table stakes that we need to compete in the market and drive the great margin performance that you're seeing right now in the quarterly results we just published.
00:09:33
Speaker 2: John, I'd love to finish my talking about the stock as well, just listening to you speak about the degree of investment you've put into the business to serve these areas, densely populated urban areas across this country. And when I think about other companies right now spending a fortune raising loads of capital and going through this massive capex cycle, I'm thinking of tech and what's happening there. You're in a different position. You've done some work already. Then I see this headline, you're accelerating the pace of planned share repurchases. Can you walk us through just the characteristic of what's on offer now your stock and how well understood you think it is with investors at the moment.
00:10:07
Speaker 1: Well, you know, Look, I think the markets eventually get things right. It doesn't mean that they get it right every month, or that there isn't momentary dislocations and readjustments. And my point of view, obviously, I'm probably speaking my book. I think we're in a little bit of a dislocation right now, and there's certainly a desire to raise capital to move to new opportunities in the AI space, and I think there's been some rotation out of our stock as a result of that. But here's what I know. We've built this business for the future. To your point, we're building symmetrical networks that have as much upstream bandwidth as they have downstream bandwidth, and we think that's going to be critical in the air world, just like memory is critical, just like chips are critical, just like data center infrastructure is critical, and I do believe that the market will eventually understand that what we have built is indispensable for the kind of workloads we're going to see in this AI environment working forward, and that AT and T is uniquely positioned in the investments we've made over the last five years to serve more of those workloads more effectively than anybody else. And eventually the market will figure that out, and when the cash shows up, valuation will ultimately correct itself. And I have the confidence that that's the case. Our job as a management team is to continue to execute and stay focused on the plan that we've laid out, and I believe this quarter as a testament that this management team is in fact doing that.
00:11:32
Speaker 2: Message received in the salt market this morning, the stock kind of the pre market by four percent. John. We appreciate your time, sir. Thank you, Johns. Thank you. There the IT and T CEO
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
00:00:07
Speaker 2: We begin this out with stocks inching lower as earning season enters full swing. AT and T shares gaining after crushing customates on mobile subscriber gains. Joining us now to discuss the Man of Souff, the Boss, the AT and T C. John Stankey, John, Welcome to the program Sir. I want to talk about execution. There's so many issues to talk about with your company, but just execution. These numbers this morning, John, the streets looking for like three hundred and twenty five thousand, and you deliver four hundred and thirty two thousand monthly wireless phone subscribers in two Q. What went right, John, What was the strategy behind again that big.
00:00:41
Speaker 1: Well, I think going into the break, Jonathan, you referred to the results as fantastic and I would agree with you, and I think the team did an excellent job executing, as you said, and it's not just in our wireless business. It was nearly three hundred and seventy thousand fiber net ads. That's a record for us in this quarter. Look, what went right is what we told people was going to happen this year, as we gave guidance for the next three years. We said, because of the investments we've been making in this business over the last five years at a sustained and targeted level, and the m and A work that we had done acquiring more spectrum and picking up some additional footprint from Lumen, that you should see a step up in growth as a result of those things. The team had the asset base it needed to execute and drive growth at a faster level. And you saw the manifestation of that's starting to happen here in this quarter, and it's showing up in an accelerated service revenue growth. It's showing up and accelerated even of growth. I would even go into our business segment and point out that we had growth and our strategic services for business for the first time in a very very long time, and as a result of that, we expect that that's going to sustain itself through twenty eight. So we're executing well, we're hitting on all the cylinders and the engine and when that happens the business and deliver the kind of results you're scene, and I'm pretty confident we can keep that moving going forward.
00:02:04
Speaker 2: John, there's a number that jumped off the page for me this morning as well. It's forty two point five. Forty two point five percent of households that purchase the broadband service from you also buy mobile phone service too. How important has that convergence model been just behind the success you're having and how important will it be for the remainder of the year.
00:02:21
Speaker 1: It's extremely important. It's actually that number is forty five percent. If you were to normalize it for the lumen footprint that we just recently brought in, that's diluting the number a little bit. And as you see in our report, that's been ticking up steadily. And it's important because one, those customers are more lucrative customers. When they buy multiple products and services from US. Two, churn goes down, and that's one reason why you're starting to see our churn numbers improve this quarter, because we're starting to get that benefit of that base that is buying both together from US and three brand affinity, the customers happiness with AT and T and their pression of the brand as much higher as a result of that because the products are better together. So it's really important we continue down that path, and it's frankly one of the most important things is you think about our competitive positioning moving forward, because we can provide world class networks and both wireless and fix that tackle ninety eight percent of what a customer needs to do on the Internet. Occasionally they walk off one of our networks, and as you look at our partnerships that we're working with the satellite industry, by this time next year, we'll be able to solve that problem. And so we're the natural place for people to come and meet their needs on the Internet and do it easily on one bill, with one set of services and one support infrastructure. We think we're in a great position as a result of that.
00:03:46
Speaker 3: And John, this is a reason why there has been really a price war between different different providers, simply because everybody wants that package right, they want to get everybody. How has the competitive landscape changed though over the past couple of years with the introduction of satellite services, of what we're seeing with Starlink, of what we're seeing elsewhere.
00:04:06
Speaker 1: I don't characterize it as a price war. I think there's been a stratification of pricing for customers depending on what kind of services they want to buy. There's the segment of the market that needs, high performings, symmetrical gigabit services, very robust wireless plans. That segment of the market is willing to pay for that, and they pay a premium as a result of that exceptional value that they get back. We've played very, very well in that space given our asset base. But there's also a segment of the market that's more value oriented, and I would say choices have come into the market because of good regulatory posture that have allowed investment that weren't there before, and those choices are putting more value oriented products and services at more attractive price points, but the product and service maybe isn't as robust and at AT and T we've played really well up market, but not as well down on the value space. That we've been working hard to get our product portfolio so that it matches up across the entire continuum of the market. You saw that in the results this quarter because our account additions new accounts to AT and T hit like a three year high, and that's because we're doing a lot better job down market. And there's nothing wrong with having a more affordable product that's tuned to certain parts of the market. I don't consider that a price war. I consider that meeting market needs as long as you're doing the things that you can do up market, which we've done very well. And I think when you see margins the way they are at at and T this is like a record for us. That's a good sign that we're getting that balance correct.
00:05:43
Speaker 3: Over the next five to ten years. John, how do you see the breakdown of the mix of broadband and fiber on one hand, the wireless or the more budget sensitive areas, and then satellite from the likes that you're seeing from Starlink.
00:05:58
Speaker 1: Look, my point of view is they have a fantastic product. There's great innovation that's moving in that space, and it fits a part of the market that hasn't been well served, especially in less densely populated areas. And the interesting part about that is our investment has largely been an urban and densely populated suburban. We haven't pushed real hard in the rural and less densely populated areas that tends to be more the stronghold of cable companies. I think they'll do pretty well in that space, bringing an alternative and competition in there. I think it's going to be very hard to come into the more densely urban populated areas to compete with that bundle that I just talked about earlier of fiber that is the best product in the market, best performing, it's the lowest marginal cost, our great wireless density that far outstrips what you can do from directed device and satellite. Years of investment in the hard to reach places like stadiums. Everybody who went to a World Cup game knows how important being able to connect in a stadium is to experience what goes on socially and actually in the arena so that you can see a few replays that they're not showing there. We've been doing that for a long long time, and it's going to be very very hard to catch up on that infrastructure. And I think we're going to do really really well competing in metro and suburban areas, which is where our investments have been.
00:07:23
Speaker 3: And John, you've talked a lot about how fiber puts you in a really good position in the AI era and how an increasing number of businesses really do need that kind of connectivity and the latency that's so important to improve. And I'm just wondering, aside from the demand side from your actual corporate side, if you've been able to calculate any of their turn on investment of your own uses of artificial intelligence. I know you've been really vocal about how it has improved in efficiency dramatically. Has there been any ROI Have there been any structural changes that you're able to disclose.
00:07:56
Speaker 1: Yeah, we've been We've been really disciplined about this, and I'm satisfied that where we've been investing in places like in our software development organization, what we've been doing in our customer service channels, our applications into engineering, some of the things that we've been doing and building the right algorithms for pricing support that we've gotten very strong returns. And as a result of that, I would almost argue people inside of our company maybe think we've been a little too judicious about how we've managed investment. We're trying to find that right balance of innovation and allowing things to run and the discipline of ensuring that what we're doing drives return. I would also say that I'm very well aware that a lot of this investment is a competitive necessity. When we improve operations like customer service and call centers, I don't know that that's necessarily sustainable. I think those are ultimately efficiencies that get competed away in the market. They go to the customer in the form of lower prices or better service. There are the things that we do that really give us strategic advantage, like maybe writing software for capabilities that we didn't have before that make us better at pricing or better at driving yields on the network or more efficient. Those are the ones that maybe we get to keep some of the benefit on. And if I were to say that we need to do something better moving forward, we need more of the ones that drive strategic advantage to balance out some of the ones that we know are just the table stakes that we need to compete in the market and drive the great margin performance that you're seeing right now in the quarterly results we just published.
00:09:33
Speaker 2: John, I'd love to finish my talking about the stock as well, just listening to you speak about the degree of investment you've put into the business to serve these areas, densely populated urban areas across this country. And when I think about other companies right now spending a fortune raising loads of capital and going through this massive capex cycle, I'm thinking of tech and what's happening there. You're in a different position. You've done some work already. Then I see this headline, you're accelerating the pace of planned share repurchases. Can you walk us through just the characteristic of what's on offer now your stock and how well understood you think it is with investors at the moment.
00:10:07
Speaker 1: Well, you know, Look, I think the markets eventually get things right. It doesn't mean that they get it right every month, or that there isn't momentary dislocations and readjustments. And my point of view, obviously, I'm probably speaking my book. I think we're in a little bit of a dislocation right now, and there's certainly a desire to raise capital to move to new opportunities in the AI space, and I think there's been some rotation out of our stock as a result of that. But here's what I know. We've built this business for the future. To your point, we're building symmetrical networks that have as much upstream bandwidth as they have downstream bandwidth, and we think that's going to be critical in the air world, just like memory is critical, just like chips are critical, just like data center infrastructure is critical, and I do believe that the market will eventually understand that what we have built is indispensable for the kind of workloads we're going to see in this AI environment working forward, and that AT and T is uniquely positioned in the investments we've made over the last five years to serve more of those workloads more effectively than anybody else. And eventually the market will figure that out, and when the cash shows up, valuation will ultimately correct itself. And I have the confidence that that's the case. Our job as a management team is to continue to execute and stay focused on the plan that we've laid out, and I believe this quarter as a testament that this management team is in fact doing that.
00:11:32
Speaker 2: Message received in the salt market this morning, the stock kind of the pre market by four percent. John. We appreciate your time, sir. Thank you, Johns. Thank you. There the IT and T CEO
