AT&T Shows Inflation Resilience With Profit, Subscriber Beat

Scott Moritz, Bloomberg News

An AT&T store in El Cerrito, California, U.S., on Tuesday, July 20, 2021. AT&T Inc. is scheduled to release earnings figures on July 22. Photographer: David Paul Morris/Bloomberg , Bloomberg

(Bloomberg) -- AT&T Inc. shares had their biggest gain since the early days of the pandemic after the company reported better-than-expected profit and customer growth.

Strong results from the telecommunications giant -- the first wireless carrier to release earnings this quarter -- suggest that the industry remains insulated from decades-high inflation and tighter consumer budgets.

AT&T shares rose as much as 10% in New York on Thursday, their biggest intraday gain since March 2020.

The No. 3 US wireless carrier added 964,000 subscribers in the third quarter, topping analyst estimates of 913,000. That included 708,000 regular monthly phone customers, ahead of the 631,000 average projection.

“AT&T keeps accelerating its wireless growth,” said Walt Piecyk, an analyst with Lightshed Partners. “It will be interesting to see if its peers can match it.”

US wireless leader Verizon Communications Inc. reports earnings on Friday. T-Mobile US Inc. will release results Oct. 27.

AT&T’s earnings, excluding some items, were 68 cents a share, while analysts were looking for 60 cents. Revenue came in slightly ahead of estimates. AT&T raised its full-year earnings forecast to at least $2.50 a share, up from a range of $2.42 to $2.46.

While AT&T may have dodged most of the effects of inflation, concerns about its cash supply remain. The company’s $3.8 billion free cash flow in the third quarter came up short of the $4.28 billion average analyst projection, but AT&T still expects to reach its $14 billion target for the year.

Investors became concerned about the company’s ability to pay its $8 billion dividend and hold to debt-reduction promises earlier this year when it lowered its free cash flow forecast from $16 billion in part due to late customer payments.

Speaking an an earnings call with analysts, Chief Executive Officer John Stankey said customers have returned to prepandemic bill paying patterns.

In consumer broadband, AT&T added 338,000 new fiber customers in the quarter, exceeding the 316,000 added in the prior quarter. However, the gains weren’t enough to offset the number of nonfiber broadband customers who canceled service. AT&T posted a net loss of 29,000 consumer broadband customers in the third quarter.

The company said it’s ahead of schedule on wireless upgrades in part due to “record levels” of spending on 5G and fiber-network build-outs in the first three quarters of the year. Looking ahead, AT&T expects spending to taper down by more than $2 billion in the fourth quarter.

AT&T sold its media business in order to focus entirely on 5G wireless and fiber broadband expansion. AT&T is exploring a JV to help build out fiber to new markets, as Bloomberg reported Wednesday. Stankey said on the earnings call that the company is evaluating ways to expand fiber networks outside its region.

(Updates shares in third paragraph, adds analyst in fifth.)