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