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AT&T Reports Wireless Customer Growth and $25 Billion Charge for Landlines

AT&T reported a large fourth-quarter loss after booking a $25 billion accounting charge largely tied to its legacy landline businesses.

January 25, 2023
4 minutes
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AT&T Inc. is an American multinational conglomerate holding company headquartered at Whitacre Tower in Downtown Dallas, Texas. It is the world's largest telecommunications company, the second largest provider of mobile telephone services, and the largest provider of fixed telephone services in the United States through AT&T Communications. As of 2018, AT&T is ranked #9 on the Fortune 500 rankings of the largest United States corporations by total revenue.

The company added subscribers for its core wireless business in its latest quarter and said it plans to keep spending this year on the build-out of 5G infrastructure and the fiber network.

AT&T reported a large fourth-quarter loss after booking a $25 billion accounting charge largely tied to its legacy landline businesses. AT&T shares gained about 6% in early Wednesday trading.

The latest results, excluding the charge, were largely in line with Wall Street’s expectations but executives forecast adjusted earnings for 2023 that were below analysts’ estimates. This was due to pension accounting.

"I see the economy as being relatively stable at the moment," said John Stankey, Chief Executive. "We're not seeing anything that's causing us to be extremely concerned about it, but who knows what could happen later in the year."

The company is still dealing with some inflationary pressures, including energy and wages. This is reflected in the company's 2023 guidance, according to Mr. Stankey.

"I think inflation is a tough thing to have a healthy economic environment in," Mr. Stankey said. "The good news is I think we're through the worst of it."

The Dallas company said it added 656,000 postpaid phone connections in the December quarter, which is a metric that investors use to gauge the strength of a cellphone carrier’s main profit center. This is higher than the 644,800 connections that analysts were expecting for the period.

AT&T added more phone connections under postpaid billing plans than rival Verizon Communications Inc. during the December quarter. Verizon said it added 217,000 phone connections during the quarter. T-Mobile US Inc. gained 927,000 postpaid phone customers during the same period, the company said earlier this month when it released preliminary results.

AT&T has refocused on its wireless and broadband internet services since it scrapped plans to build a media conglomerate. It slashed its dividend last year and has been paying down debt left from its takeovers of DirecTV and Time Warner. AT&T is now focusing on its core businesses and is committed to delivering value for its shareholders.

Pascal Desroches, AT&T's finance chief, said in an interview that he thinks the customer is solid. He noted that last year, AT&T saw the normalization of the payment cycles back to prepandemic levels in terms of how quickly the company collects. Desroches said that this hasn't gotten any worse.

Last summer, the company said more of its customers were beginning to fall behind on bills. Mr. Desroches said bad debt was slightly worse than prepandemic levels.

AT&T is expecting to generate around $14 billion in cash flow in 2022 and around $16 billion in 2023. The company is projecting capital spending of around $24 billion in 2023, which is in line with its spending in 2022. However, beyond 2023, AT&T's capital investments are expected to decline.

The company's adjusted per-share earnings for the full year are expected to be between $2.35 and $2.45, below the $2.53 a share that analysts surveyed by FactSet expected. The company said noncash pension charges tied to higher interest rates as well as a higher tax rate weighed on its 2023 adjusted earnings guidance.

AT&T lost a total of 43,000 broadband connections in the latest quarter, despite adding 280,000 fiber connections. The company continues to build out its fiber network, but this has not been enough to offset the overall loss of broadband connections.

AT&T's roughly $25 billion goodwill impairment charge pushed operating costs to $52.4 billion, up from $26.2 billion a year earlier. The charge reflects write downs for the company's wireline and Mexico businesses. AT&T also took a $1.4 billion asset abandonment charge tied to wireline conduits no longer needed. Higher bad debt expenses and increased depreciation also pushed operating costs higher.

Excluding the company's $25 billion charge and other one-time items, adjusted earnings came to 61 cents a share in the fourth quarter, exceeding estimates from Wall Street analysts of 57 cents a share.

AT&T's quarterly revenue from continuing operations rose 0.8% to $31.34 billion in the recent quarter. The company's wireless-service revenue climbed 5.2% during the same period. For 2023, AT&T said it expects its wireless-service revenue to grow by at least 4%.

John Liu
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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