John Stankey, AT&T (NYSE: T) CEO, speaking at the J.P. Morgan Stanley Technology, Media and Telecom Conference, portrayed the company as working through various internal and external issues but remained confident in the company’s ability to deliver free cash flow of $16 billion or better for full-year 2023. He expects continued Adjusted EBITDA growth of three percent or more for the year, bolstered by steady operational execution and ongoing benefits from cost reduction initiatives.
Stankey acknowledged that 1Q23 FCF was impacted by the annual incentive compensation that is paid in the first quarter. He expects improved FCF conversion through the rest of the year. First, handset payments peaked in the first quarter and will be lower for full-year 2023 compared to 2022. Additionally, Stankey expects aggregate capital expenditures to be roughly in line with full-year $24 billion guidance for the remainder of 2023, following a five percent year-over-year increase in 1Q23 capex.
He said the company is focused on attracting high-quality customer relationships to drive sustainable, profitable long-term growth. In wireless, Stankey expects 2Q23 postpaid net additions to be influenced by: continued normalization of industry growth, temporary impacts from competitor rate plan launches, and a one-time reduction of about 75,000 customers from an existing government contract that AT&T opted not to renew given its uneconomic return profile.
Aside from these impacts, he claims the company is not seeing a material shift in its market share across the wireless industry, despite new cable MVNO entrants. Stankey says AT&T remains on track with its network expansion commitments and expects to deploy midband 3.45 GHz and C-band spectrum to 200 million people by year-end 2023, and to pass over 30 million residential and business locations with fiber in its traditional service area by the end of 2025.
Stankey believes AT&T’s position as the largest-scale domestic fiber builder gives it an advantage in managing costs despite higher material and labor costs that have moderately impacted the company’s fiber build. In addition, AT&T is realizing lower maintenance and repair costs where fiber has been deployed.
He points out that a combination of better initial penetration rates and higher ARPU levels have improved the rate of return metrics on AT&T’s fiber investments. These improved returns are offsetting any increase in deployment costs.
The company recently closed on the Gigapower joint venture with BlackRock to extend fiber outside its operating footprint, Inside Towers reported. Stankey says AT&T remains committed to providing more Americans with access to high-speed, reliable fiber connectivity.
At the end of 1Q23, AT&T served nearly 105 million postpaid and prepaid wireless subscribers and 7.5 million fiber broadband connections. The company reiterated its guidance of about $24 billion aggregate capex in 2023.
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