Fiber continued to be the key driver for AT&T's consumer broadband business in Q2 2021 as the company tacked on another 246,000 fiber broadband subs in the period, broadening that grand total to 5.43 million. Consumer fiber broadband subscriber additions in Q2 outpaced additions of 225,000 in the year-ago period.

Figure 1: (Source: AT&T)

AT&T reiterated that it expects to rake in about 1 million net fiber subscribers for all of 2021. AT&T's fiber gains outpaced losses from other parts of the company's fixed wireline business – AT&T lost 195,000 "non-fiber" broadband subs in the period (ending Q2 with 8.38 million) along with a loss of another 23,000 DSL subs, lowering that total to just 356,000.

AT&T's consumer wireline biz reaches "major inflection point"

With all aspects of its consumer fixed wireline business rolled up, AT&T added 28,000 broadband subs, for a total of 14.17 million. Broadband ARPU hit $54.76 in Q2 2021, improving from $51.61 a year ago. With broadband revenue growth having surpassed legacy declines, AT&T has "reached a major inflection point in our consumer wireline business," Pascal Desroches, AT&T's senior EVP and CFO, declared on today's earnings call.

Desroches estimated that nearly 80% of net new fiber subscriber additions are new AT&T broadband customers. That's a significant change considering that AT&T's fiber subscriber growth appeared to come largely from upgrades of its high-speed Internet customers on older technologies such as VDSL and DSL back in 2019.

Rate of fiber subs expected to accelerate

AT&T expects to see a "step up" on the pace of fiber subscriber additions in the back half of 2021 as the company pushes ahead with the early stages of a fiber network expansion that will reach another 3 million premises this year, Jeff McElfresh, CEO of AT&T Communications, said. The bulk of that inventory will come online toward the back half of 2021, he added.

"This is not a quarterly game. This is a long-term plan. And we're just building momentum quarter to quarter," McElfresh said, reiterating later that AT&T has a long-term investment plan to pass 30 million homes/locations with fiber. Speaking at an investor day in March, McElfresh noted that the company was already sizing up plans to expand fiber to another 4 million locations in 2022.

AT&T, he said, will continue to explore 5G as a way to expand the reach of consumer broadband and provide upgrade options to a dwindling base of DSL customers. But it's clear that the company is not yet ready to a place a bet on fixed wireless that's anywhere near the size of that of Verizon and T-Mobile. "We haven't made the choice or decision to launch widescale fixed wireless Internet, but rest assured that the strength of our wireless network is providing options for us as we migrate some of our legacy wireline DSL customers off of that technology over to a better technology served … with fiber or wireless," McElfresh said.

Pay-TV contracts as HBO Max expands

AT&T's pay-TV business continued to struggle in Q2, though losses have narrowed. AT&T shed another 473,000 "premium TV connections" (DirecTV, U-verse and OTT) in the quarter, improving on a loss of 887,000 a year ago and a loss of 620,000 in Q1 2021. AT&T ended the quarter with 15.41 million premium TV subs.

But AT&T is closer to getting that business off its books. John Stankey, AT&T's CEO, said there are indications that the proposed spin-out transaction with TPG could close "in the next few weeks." Expected to close in the second half of 2021, the separated company will consist of the DirecTV satellite TV business, the U-verse IPTV business and the newer AT&T TV OTT-TV service. AT&T will own 70% of the common equity and TPG will own 30%.

On the premium video end, AT&T's WarnerMedia unit, which is in the process of combining with Discovery Communications, added 2.84 million domestic HBO Max and HBO subs in Q2, for a total of 47.02 million.

Figure 2: (Source: AT&T)

HBO Max's wholesale business (sold through pay-TV partners) added 516,000 subs, for a total of 31.45 million. HBO Max's retail (direct-to-consumer) business tacked on 2.38 million subs, for a total of 12.07 million.

Thanks to momentum it's seeing from its launches in Latin America markets, AT&T announced it is boosting guidance on HBO Max. It now expects the service to have between 70 million to 73 million subs worldwide by the end of 2021. "To lean into HBO Max's fast start in Latin America, we may push back our launch in some European markets until early 2022," Desroches said.

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— Jeff Baumgartner, Senior Editor, Light Reading