A lot is in flux for AT&T as the service provider has nearly completed its Project VIP, is set to close its acquisition of DirecTV soon, has just purchased $18.9 billion worth of AWS spectrum in the recent auction and is expanding into Mexico. The carrier's CFO sees a very different company emerging in the next five years, and it'll be one that's focused on business first.
By business, AT&T Inc. (NYSE: T) CFO John Stephens is referring to the enterprise, which he thinks AT&T is uniquely positioned to serve. Speaking Wednesday at the Deutsche Bank conference, he said that going forward AT&T will first be a company that serves businesses with wireless and wireline services. (See AT&T, Verizon CFOs Predict Title II Litigation.)
"IoT and business just naturally go together, and we believe we have a significant advantage over many competitors because of our great wireless network that many don’t have and our great wireline footprint," he said. (See AT&T Connects Cars & Trash Cans .)
Half of AT&T's wireless business last year was made up of business customers. Stephens feels this is a space it can uniquely play in from the Internet of Things to cloud to strategic services like security, which is a priority for its business customers now, he said. (See AT&T's New Security Strategy.)
Helping fuel this view of the carrier's future are the recent acquisitions it has made, including of DirecTV, which is expected to close in the first half of the year, as well as Iusacell and Nextel Mexico in Mexico. Stephens sees AT&T's ability to bundle its 57 million broadband locations with DirecTV's video offering as a huge advantage for the combined companies. (See AT&T Eyes TVE Blitz With DirecTV and AT&T: Merger Review Halt Won't Hurt Us.)
The carrier's international business will start small, but he said Mexican expansion is a great way for AT&T to "invest at a modest level to get a great spectrum position and business and geography that adds on to our platform." (See AT&T Names Iusacell CEO, Closes Acquisition, AT&T to Buy Nextel Mexico for $1.9B and AT&T Highlights Mexican Ambitions.)
Part of Stephen's reasons for emphasizing the carrier's strength in the enterprise and broadband is that its wireless business, which accounts for 20% of its revenue stream, will bring in fewer customers than anticipated in the first quarter. The carrier filed an 8K with the Securities and Exchange Commission (SEC) last night reiterating its 2015 guidance, but noting that postpaid subscriber additions for the first quarter would come in around 400,000, driven by tablets. That would be lower than last year's 625,000 postpaid additions and below analyst expectations. (See AT&T Grows Revenues, Subs in Q4.)
Stephens instead talked up the carrier's churn numbers, which declined quarter-over-quarter to 1.22% and are expected to dip even lower in the first quarter. He said AT&T has seen a shift in feature phone users to smartphones, and, while he expects to continue to lose feature phone users, he doesn't plan to incentivize them to stick around as he expects AT&T's prepaid business to make up for those losses.
"We're going to come out of this a much different company -- focused on business, video and broadband, international and consumer mobility," Stephens said of AT&T's ongoing changes. "I don’t think there will be another company normally associated with our industry that has the combination of assets and opportunity for growth on a long-term basis that we do."
— Sarah Thomas, , Editorial Operations Director, Light Reading