AT&T tops profit, cash flow estimate while customer growth slows
AT&T reported profit and free cash flow that topped analysts’ estimates, offering a brighter picture as the phone giant faces a challenging restructuring effort, a heavy debt load and the potentially high costs of cleaning lead out of its old copper phone network.
Second-quarter earnings, excluding special items, were 63 US cents a share and free cash flow was US$4.2 billion, the company said on Wednesday (Jul 26) in a statement. Revenue gained about 1 per cent to US$29.9 billion. Analysts, on average, predicted profit of 60 US cents a share, free cash flow of US$3.77 billion and sales of US$30 billion, according to data compiled by Bloomberg.
AT&T reiterated a target to reach US$16 billion or more in free cash flow this year, after generating a surprisingly low US$1 billion in free cash flow in the first quarter, setting off alarms about its ability to pay a dividend.
The company added fewer customers than analysts’ expected in the second quarter. In the three months ended June 30, AT&T added 326,000 mobile phone subscribers. AT&T has been offering free phones in order to fuel customer growth for several quarters. The appeal of those promotions may be wearing out.
The company cautioned last month that the pace of subscriber gains had slowed due to competition from rivals and cable TV companies. Analysts expected 397,200 new mobile phone customers.
The Dallas-based company has been struggling with high costs as it has raced to build out a superfast 5G network and catch up with its larger wireless rivals.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
At the same time, AT&T is paying down more than US$143.3 billion in debt. In an effort to help control spending and preserve cash, the company is shrinking its corporate footprint to about nine hub offices, down from more than 300.
As a result, it’s in the process of assigning or reassigning 60,000 managers and requiring them to be in the office in person at least three days a week. The changes are expected to eliminate thousands of jobs.
Adding to the list of woes, the Wall Street Journal reported earlier this month that AT&T, Verizon Communications and Lumen Technologies have lead contamination in more than 2,000 legacy network cables at locations across the country, including at playgrounds, bus stops and waterways.
AT&T and the others may be on the hook for billions of dollars to clean up the hazardous cables and address potential lawsuits.
AT&T and Verizon inherited the original, ageing copper-wire networks that date to the early 20th century from their predecessors. The companies now earn the bulk of their profits from fibre optic and wireless connections. Estimates for the potential clean-up and legal costs have varied widely among analysts, who are hungry for more details from the companies.
AT&T said last week in a court filing that less than 10 per cent of its copper-wire network had lead coverings. The company said Tuesday that its tests in Lake Tahoe, California, and areas in Detroit where contamination was reported, showed no public health threat. AT&T says it is conducting additional tests on reported lead areas. BLOOMBERG
Share with us your feedback on BT's products and services
