AT&T executives emphasized the role of fiber, 5G and HBO Max as well as streamlining across its business, as it laid out its areas of strategic focus for the coming years.
“Fiber underpins the connectivity we deliver, serving both wired and wireless. We believe our hybrid fixed and mobile approach will differentiate AT&T and provide us with additional growth opportunities in the future as bandwidth demands continue to grow,” said John Stankey, AT&T’s president and CEO, at the company investor day on Friday.
AT&T sees itself as having three market areas: Broadband connectivity (both wired and wireless), “software-based entertainment” and “fantastic storytelling,” Stankey said, adding that the company’s primary focus is to grow customer relationships — not only to add to the number of customers, but to increase their daily interactions with AT&T’s products and services across all of those segments.
AT&T executives said that the company plans to expand HBO Max globally and anticipates reaching double-digit billions in revenues.
Verizon’s investor day focused on the transformative power of its network — and in particular, the growth that it wants to unlock via its massive investment in C Band spectrum. AT&T executives talked about their network as well, but often in terms of fiber and how it supports both wired and wireless demand; and AT&T also emphasized the power of its operational streamlining.
Jeff McElfresh, CEO of AT&T Communications, said that in 2020, the carrier saw “record level subscriber momentum that AT&T hasn’t seen in nearly a decade. For ’21, we expect to continue that momentum and grow share with our wireless and fiber products. And that growth will be fueled by the transformation of our operations, driving efficiencies to the bottom line and enabling us to deliver growth in an accretive manner.”
Some of AT&T’s investments in its business, McElfresh said, will extend to its pricing models for wireless and its strategy to offer its best deals to both current and new customers, because price is often the determining factor for whether a customer stays or goes. “We’re able to make these investments in our wireless subscribers due to the strong results from our transformation program. Our distribution transformation has yielded higher volumes with fewer doors, increased productivity per seller, material increases in the volumes we are now handling through our digital
channel and service improvements through our technology platforms,” he said.
McElfresh said that based on what it sees happening across its fiber and wireless networks, the demand for broadband is “strong and growing” and highlighted two trends: Demand for uplink capacity is growing at a faster pace than downlink capacity, because user-generated content is on a faster pace of growth due to applications such as video conferencing; and while both mobile and fixed broadband use is growing, AT&T sees increased dependence on the fixed network because it provides the performance and capacity that such applications require.
“While this trend has been recently influenced by COVID-19, as employees work from home and students learn from home, it’s a trend that we expect will continue,” McElfresh said. He said that AT&T expects that demand for “high-quality broadband” will increase by as much as five times in the next five years, driven by increasing numbers of connected devices in homes and shifts in video format. A shift in video quality along from full HD to 4K more than doubles data consumption, he noted.
“Meeting the growing demands for bandwidth will require a robust fiber network regardless of the last mile serving technology,” McElfresh added.
McElresh said that this year, AT&T will increase its fiber footprint in moer than 90 metro areas and expand to an additional 3 million new customer locations that are adjacent to its current footprint. He emphasized the efficiency that the expansion will bring in its build-out (including time from build to revenue), marketing and distribution, as well as that the network will be symmetrical for uplink/downlink demand and “easily upgradable” from one to multiple gigbytes.
McElfresh said that as of the end of last year, AT&T had 70% of its low- and mid-band spectrum activated, having more than doubled the spectrum “in production” as it built out the FirstNet network over the past four years. That means the carrier still has more capacity to add, which McElfresh said would be done to “drive performance” in the top 50 urban markets and support its customer growth.
He said AT&T was “pleased” with the outcome of the C Band auction, where it purchased 80 megahertz of spectrum for a total of $27.4 billion. McElfresh said that those airwaves are now the largest band of contiguous spectrum in AT&T’s mid- and low-band spectrum portfolio, and that it will start deploying the first phase of C Band (40 megahertz) towards the latter part of 2021. (The spectrum is slated to become available in two tranches: The first in December 2021 and the second in December 2023.) He said that AT&T “[believes] millimeter wave has its purpose,” in specific high-traffic entertainment and venues and transportation hubs, and it’s “best served when there is dense fiber to support it, which is why we’re convinced leaning into an aggressive fiber expansion is the right play, right now.”
He said that AT&T is “already hard at work readying the network” and expects to cover between 70-75 million potential customers by the end of 2022 and hit 100 million POPs early in 2023. As the initial FirstNet build comes to a close, AT&T will shift more toward densification and C Band deployment as an “allocation shift within our current portfolio” rather than a lot of additional capex spending, he said. AT&T also plans to expand fiber footprint by an additional 4 million locations next year, following on the 3 million this year.
“The large consumption that we are anticipating over the next five years will be hard to meet with a wireless-only solution,” McElfresh said. “To be honest with you, that’s not our point of view. And that’s why our hybrid fixed and mobile approach … is the appropriate strategy with our network architecture.” He continued, “There will be portions of the footprint that will not be economical to serve with fiber. And we would intend to put at the edge of our fiber network this wireless C-band asset, along with our other mid-band spectrum to serve some of the limited use cases that we think are available for a fixed wireless solution.” But, he added quickly, FWA is not the primary focus for the C band or for AT&T’s overall strategy to serve broadband demand.
“Our value proposition is to serve customers how they want to be served with enough bandwidth and capacity and speed,” is how Jason Kilar, CEO of WarnerMedia, put it. “We’ll let the technology architecture … meet that demand or that need for that particular customer segment. … So as we design our network and our offers in the market, you will see us densify our wireless network on the top of our investments in fiber. We choose to serve our customers that demand high-speed bandwidth with fiber, and we will utilize our wireless networks to serve those other niche use cases in areas where fiber economics do not make sense.”
AT&T executives said that the company will continue to pay down debt and look to sell off additional non-core assets, which it has been doing for several years now.
Among other notable details from the investor day is that AT&T has launched a Wi-Fi 6 customer gateway with better in-home coverage and plans to take a page from its enterprise offerings by introducing a wireless backup option for its consumer gateways.
The company also plans to launch an ad-supported version of HBO Max in June and has $80 million in upfront commitments from advertisers already. It will expand HBO Max’s global reach and launch it in markets across Europe, Latin America and the Caribbean this summer. AT&T expects HBO Max and HBO revenue to more than double over the next 5 years to $15 billion.
