WEBVTT -  AT&T CEO John Stankey Talks Earnings

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>We begin this out with stocks inching lower as earning

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<v Speaker 2>season enters full swing. AT and T shares gaining after

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<v Speaker 2>crushing customates on mobile subscriber gains. Joining us now to

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<v Speaker 2>discuss the Man of Souff, the Boss, the AT and

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<v Speaker 2>T C. John Stankey, John, Welcome to the program Sir.

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<v Speaker 2>I want to talk about execution. There's so many issues

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<v Speaker 2>to talk about with your company, but just execution. These

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<v Speaker 2>numbers this morning, John, the streets looking for like three

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<v Speaker 2>hundred and twenty five thousand, and you deliver four hundred

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<v Speaker 2>and thirty two thousand monthly wireless phone subscribers in two Q.

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<v Speaker 2>What went right, John, What was the strategy behind again

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<v Speaker 2>that big.

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<v Speaker 1>Well, I think going into the break, Jonathan, you referred

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<v Speaker 1>to the results as fantastic and I would agree with you,

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<v Speaker 1>and I think the team did an excellent job executing,

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<v Speaker 1>as you said, and it's not just in our wireless business.

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<v Speaker 1>It was nearly three hundred and seventy thousand fiber net ads.

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<v Speaker 1>That's a record for us in this quarter. Look, what

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<v Speaker 1>went right is what we told people was going to

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<v Speaker 1>happen this year, as we gave guidance for the next

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<v Speaker 1>three years. We said, because of the investments we've been

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<v Speaker 1>making in this business over the last five years at

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<v Speaker 1>a sustained and targeted level, and the m and A

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<v Speaker 1>work that we had done acquiring more spectrum and picking

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<v Speaker 1>up some additional footprint from Lumen, that you should see

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<v Speaker 1>a step up in growth as a result of those things.

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<v Speaker 1>The team had the asset base it needed to execute

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<v Speaker 1>and drive growth at a faster level. And you saw

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<v Speaker 1>the manifestation of that's starting to happen here in this quarter,

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<v Speaker 1>and it's showing up in an accelerated service revenue growth.

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<v Speaker 1>It's showing up and accelerated even of growth. I would

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<v Speaker 1>even go into our business segment and point out that

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<v Speaker 1>we had growth and our strategic services for business for

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<v Speaker 1>the first time in a very very long time, and

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<v Speaker 1>as a result of that, we expect that that's going

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<v Speaker 1>to sustain itself through twenty eight. So we're executing well,

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<v Speaker 1>we're hitting on all the cylinders and the engine and

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<v Speaker 1>when that happens the business and deliver the kind of

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<v Speaker 1>results you're scene, and I'm pretty confident we can keep

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<v Speaker 1>that moving going forward.

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<v Speaker 2>John, there's a number that jumped off the page for

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<v Speaker 2>me this morning as well. It's forty two point five.

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<v Speaker 2>Forty two point five percent of households that purchase the

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<v Speaker 2>broadband service from you also buy mobile phone service too.

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<v Speaker 2>How important has that convergence model been just behind the

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<v Speaker 2>success you're having and how important will it be for

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<v Speaker 2>the remainder of the year.

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<v Speaker 1>It's extremely important. It's actually that number is forty five percent.

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<v Speaker 1>If you were to normalize it for the lumen footprint

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<v Speaker 1>that we just recently brought in, that's diluting the number

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<v Speaker 1>a little bit. And as you see in our report,

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<v Speaker 1>that's been ticking up steadily. And it's important because one,

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<v Speaker 1>those customers are more lucrative customers. When they buy multiple

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<v Speaker 1>products and services from US. Two, churn goes down, and

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<v Speaker 1>that's one reason why you're starting to see our churn

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<v Speaker 1>numbers improve this quarter, because we're starting to get that

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<v Speaker 1>benefit of that base that is buying both together from

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<v Speaker 1>US and three brand affinity, the customers happiness with AT

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<v Speaker 1>and T and their pression of the brand as much

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<v Speaker 1>higher as a result of that because the products are

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<v Speaker 1>better together. So it's really important we continue down that path,

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<v Speaker 1>and it's frankly one of the most important things is

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<v Speaker 1>you think about our competitive positioning moving forward, because we

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<v Speaker 1>can provide world class networks and both wireless and fix

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<v Speaker 1>that tackle ninety eight percent of what a customer needs

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<v Speaker 1>to do on the Internet. Occasionally they walk off one

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<v Speaker 1>of our networks, and as you look at our partnerships

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<v Speaker 1>that we're working with the satellite industry, by this time

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<v Speaker 1>next year, we'll be able to solve that problem. And

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<v Speaker 1>so we're the natural place for people to come and

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<v Speaker 1>meet their needs on the Internet and do it easily

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<v Speaker 1>on one bill, with one set of services and one

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<v Speaker 1>support infrastructure. We think we're in a great position as

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<v Speaker 1>a result of that.

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<v Speaker 3>And John, this is a reason why there has been

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<v Speaker 3>really a price war between different different providers, simply because

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<v Speaker 3>everybody wants that package right, they want to get everybody.

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<v Speaker 3>How has the competitive landscape changed though over the past

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<v Speaker 3>couple of years with the introduction of satellite services, of

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<v Speaker 3>what we're seeing with Starlink, of what we're seeing elsewhere.

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<v Speaker 1>I don't characterize it as a price war. I think

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<v Speaker 1>there's been a stratification of pricing for customers depending on

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<v Speaker 1>what kind of services they want to buy. There's the

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<v Speaker 1>segment of the market that needs, high performings, symmetrical gigabit services,

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<v Speaker 1>very robust wireless plans. That segment of the market is

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<v Speaker 1>willing to pay for that, and they pay a premium

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<v Speaker 1>as a result of that exceptional value that they get back.

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<v Speaker 1>We've played very, very well in that space given our

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<v Speaker 1>asset base. But there's also a segment of the market

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<v Speaker 1>that's more value oriented, and I would say choices have

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<v Speaker 1>come into the market because of good regulatory posture that

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<v Speaker 1>have allowed investment that weren't there before, and those choices

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<v Speaker 1>are putting more value oriented products and services at more

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<v Speaker 1>attractive price points, but the product and service maybe isn't

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<v Speaker 1>as robust and at AT and T we've played really

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<v Speaker 1>well up market, but not as well down on the

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<v Speaker 1>value space. That we've been working hard to get our

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<v Speaker 1>product portfolio so that it matches up across the entire

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<v Speaker 1>continuum of the market. You saw that in the results

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<v Speaker 1>this quarter because our account additions new accounts to AT

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<v Speaker 1>and T hit like a three year high, and that's

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<v Speaker 1>because we're doing a lot better job down market. And

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<v Speaker 1>there's nothing wrong with having a more affordable product that's

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<v Speaker 1>tuned to certain parts of the market. I don't consider

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<v Speaker 1>that a price war. I consider that meeting market needs

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<v Speaker 1>as long as you're doing the things that you can

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<v Speaker 1>do up market, which we've done very well. And I

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<v Speaker 1>think when you see margins the way they are at

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<v Speaker 1>at and T this is like a record for us.

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<v Speaker 1>That's a good sign that we're getting that balance correct.

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<v Speaker 3>Over the next five to ten years. John, how do

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<v Speaker 3>you see the breakdown of the mix of broadband and

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<v Speaker 3>fiber on one hand, the wireless or the more budget

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<v Speaker 3>sensitive areas, and then satellite from the likes that you're

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<v Speaker 3>seeing from Starlink.

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<v Speaker 1>Look, my point of view is they have a fantastic product.

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<v Speaker 1>There's great innovation that's moving in that space, and it

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<v Speaker 1>fits a part of the market that hasn't been well served,

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<v Speaker 1>especially in less densely populated areas. And the interesting part

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<v Speaker 1>about that is our investment has largely been an urban

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<v Speaker 1>and densely populated suburban. We haven't pushed real hard in

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<v Speaker 1>the rural and less densely populated areas that tends to

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<v Speaker 1>be more the stronghold of cable companies. I think they'll

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<v Speaker 1>do pretty well in that space, bringing an alternative and

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<v Speaker 1>competition in there. I think it's going to be very

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<v Speaker 1>hard to come into the more densely urban populated areas

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<v Speaker 1>to compete with that bundle that I just talked about

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<v Speaker 1>earlier of fiber that is the best product in the market,

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<v Speaker 1>best performing, it's the lowest marginal cost, our great wireless

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<v Speaker 1>density that far outstrips what you can do from directed

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<v Speaker 1>device and satellite. Years of investment in the hard to

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<v Speaker 1>reach places like stadiums. Everybody who went to a World

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<v Speaker 1>Cup game knows how important being able to connect in

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<v Speaker 1>a stadium is to experience what goes on socially and

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<v Speaker 1>actually in the arena so that you can see a

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<v Speaker 1>few replays that they're not showing there. We've been doing

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<v Speaker 1>that for a long long time, and it's going to

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<v Speaker 1>be very very hard to catch up on that infrastructure.

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<v Speaker 1>And I think we're going to do really really well

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<v Speaker 1>competing in metro and suburban areas, which is where our

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<v Speaker 1>investments have been.

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<v Speaker 3>And John, you've talked a lot about how fiber puts

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<v Speaker 3>you in a really good position in the AI era

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<v Speaker 3>and how an increasing number of businesses really do need

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<v Speaker 3>that kind of connectivity and the latency that's so important

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<v Speaker 3>to improve. And I'm just wondering, aside from the demand

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<v Speaker 3>side from your actual corporate side, if you've been able

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<v Speaker 3>to calculate any of their turn on investment of your

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<v Speaker 3>own uses of artificial intelligence. I know you've been really

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<v Speaker 3>vocal about how it has improved in efficiency dramatically. Has

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<v Speaker 3>there been any ROI Have there been any structural changes

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<v Speaker 3>that you're able to disclose.

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<v Speaker 1>Yeah, we've been We've been really disciplined about this, and

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<v Speaker 1>I'm satisfied that where we've been investing in places like

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<v Speaker 1>in our software development organization, what we've been doing in

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<v Speaker 1>our customer service channels, our applications into engineering, some of

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<v Speaker 1>the things that we've been doing and building the right

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<v Speaker 1>algorithms for pricing support that we've gotten very strong returns.

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<v Speaker 1>And as a result of that, I would almost argue

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<v Speaker 1>people inside of our company maybe think we've been a

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<v Speaker 1>little too judicious about how we've managed investment. We're trying

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<v Speaker 1>to find that right balance of innovation and allowing things

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<v Speaker 1>to run and the discipline of ensuring that what we're

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<v Speaker 1>doing drives return. I would also say that I'm very

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<v Speaker 1>well aware that a lot of this investment is a

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<v Speaker 1>competitive necessity. When we improve operations like customer service and

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<v Speaker 1>call centers, I don't know that that's necessarily sustainable. I

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<v Speaker 1>think those are ultimately efficiencies that get competed away in

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<v Speaker 1>the market. They go to the customer in the form

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<v Speaker 1>of lower prices or better service. There are the things

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<v Speaker 1>that we do that really give us strategic advantage, like

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<v Speaker 1>maybe writing software for capabilities that we didn't have before

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<v Speaker 1>that make us better at pricing or better at driving

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<v Speaker 1>yields on the network or more efficient. Those are the

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<v Speaker 1>ones that maybe we get to keep some of the

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<v Speaker 1>benefit on. And if I were to say that we

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<v Speaker 1>need to do something better moving forward, we need more

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<v Speaker 1>of the ones that drive strategic advantage to balance out

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<v Speaker 1>some of the ones that we know are just the

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<v Speaker 1>table stakes that we need to compete in the market

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<v Speaker 1>and drive the great margin performance that you're seeing right

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<v Speaker 1>now in the quarterly results we just published.

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<v Speaker 2>John, I'd love to finish my talking about the stock

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<v Speaker 2>as well, just listening to you speak about the degree

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<v Speaker 2>of investment you've put into the business to serve these areas,

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<v Speaker 2>densely populated urban areas across this country. And when I

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<v Speaker 2>think about other companies right now spending a fortune raising

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<v Speaker 2>loads of capital and going through this massive capex cycle,

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<v Speaker 2>I'm thinking of tech and what's happening there. You're in

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<v Speaker 2>a different position. You've done some work already. Then I

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<v Speaker 2>see this headline, you're accelerating the pace of planned share repurchases.

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<v Speaker 2>Can you walk us through just the characteristic of what's

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<v Speaker 2>on offer now your stock and how well understood you

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<v Speaker 2>think it is with investors at the moment.

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<v Speaker 1>Well, you know, Look, I think the markets eventually get

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<v Speaker 1>things right. It doesn't mean that they get it right

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<v Speaker 1>every month, or that there isn't momentary dislocations and readjustments.

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<v Speaker 1>And my point of view, obviously, I'm probably speaking my book.

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<v Speaker 1>I think we're in a little bit of a dislocation

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<v Speaker 1>right now, and there's certainly a desire to raise capital

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<v Speaker 1>to move to new opportunities in the AI space, and

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<v Speaker 1>I think there's been some rotation out of our stock

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<v Speaker 1>as a result of that. But here's what I know.

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<v Speaker 1>We've built this business for the future. To your point,

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<v Speaker 1>we're building symmetrical networks that have as much upstream bandwidth

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<v Speaker 1>as they have downstream bandwidth, and we think that's going

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<v Speaker 1>to be critical in the air world, just like memory

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<v Speaker 1>is critical, just like chips are critical, just like data

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<v Speaker 1>center infrastructure is critical, and I do believe that the

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<v Speaker 1>market will eventually understand that what we have built is

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<v Speaker 1>indispensable for the kind of workloads we're going to see

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<v Speaker 1>in this AI environment working forward, and that AT and

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<v Speaker 1>T is uniquely positioned in the investments we've made over

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<v Speaker 1>the last five years to serve more of those workloads

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<v Speaker 1>more effectively than anybody else. And eventually the market will

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<v Speaker 1>figure that out, and when the cash shows up, valuation

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<v Speaker 1>will ultimately correct itself. And I have the confidence that

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<v Speaker 1>that's the case. Our job as a management team is

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<v Speaker 1>to continue to execute and stay focused on the plan

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<v Speaker 1>that we've laid out, and I believe this quarter as

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<v Speaker 1>a testament that this management team is in fact doing that.

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<v Speaker 2>Message received in the salt market this morning, the stock

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<v Speaker 2>kind of the pre market by four percent. John. We

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<v Speaker 2>appreciate your time, sir. Thank you, Johns. Thank you. There

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<v Speaker 2>the IT and T CEO