AT&T Earnings Disappoint; 5G pricing ~ broadband fixed line & LAN replacement for business customers?

AT&T reported 2019 Q1 net income of $4.1 billion, or 56 cents per share, down from $4.66 billion, or 75 cents per share, in the same quarter the year before.  Earnings, adjusted for one-time gains and costs, were 86 cents per share, beating analysts’ estimate by 1 cent.  AT&T earnings  continued its streak of either missing or just hitting analyst expectations.  EPS was in line with expectations, while revenues were off $270M despite growing 17.8% Y/Y fueled by the Time Warner acquisition.  Revenue grew 18 percent to $44.83 billion in the period, which missed Street forecasts. Thirteen analysts surveyed by Zacks expected $45.09 billion.

The U.S.’s second-largest wireless carrier after Verizon added 80,000 cellphone customers who pay a monthly bill, the more lucrative type of wireless customer. AT&T also added “prepaid” cellphone customers.

During AT&T’s earnings call, CEO Randall Stephenson said that he anticipates that there is a chance 5G mobile plans could more closely resemble broadband internet plans versus current LTE plans. For example, with LTE plans, it is priced based on how much data you need, but other than that, a customer on a 1GB data plan versus a customer on a 50GB data plan will experience the same speeds.

However, with 5G, Stephenson said, “I will be very surprised if, as we move into wireless, the pricing regime in wireless doesn’t look something like the pricing regime you see in fixed line. If you can offer a gig speed, there are some customers that are willing to pay a premium for 500 meg to a gig speed, and so forth. So I expect that to be the case. We’re two to three years away from seeing that play out.”

“Right now, from 5G what we’re seeing is exclusively businesses,” said Stephenson. “It’s serving as a LAN replacement product.” Business customers are installing a 5G router, but when more devices start showing up on the market with embedded 5G modems, “then you don’t even need the router,” he said.

AJW Comment: A 5G private LAN competes with private LTE and IEE 802.11ax.  It’s hardly a slam dunk commercial success and is not even a use case for IMT 2020.  ONCE AGAIN, THERE IS NO STANDARD FOR 5G UNTIL IMT 2020 HAS BEEN APPROVED!

5g-spectrum

3GPP Rel 15 “5G NR” (not a standard)  is being deployed in two distinct sets of spectrum, with very different characteristics

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Stephenson noted that business customers pay more for higher speeds in AT&T’s fixed line offerings, and the company expects the same to hold true with 5G. Ultimately, the company expects a 5G “pricing regime” that will look similar to its fixed-line pricing regime. But it doesn’t expect that to play out for two to three years.

“We’ll have 5G coverage nationwide next year. We’ll offer 5G to both businesses and consumers.”

The AT&T CEO was also very bullish on the company’s FirstNet business for emergency services. FirstNet “has passed the halfway mark,” he said, adding that it serves 7,000 agencies with 570,000 subscribers. And he reiterated his point that FirstNet is helping AT&T speed the build-out of 5G.

AT&T CFO John Stephens elaborated, “We’re at 53% of our network buildout for FirstNet. For 5G we’re operational in 19 markets today, using that 39GHz mmWave spectrum.”

Stephenson added, “Turning up FirstNet is having exactly the impact we hoped it would have. The value proposition is now one of quality and speed and delivery of video.”  FirstNet is driving a non-inconsequential impact on subscriber gains. In addition, it’s giving AT&T more penetration in rural communities and allowing the company to take market share. “FirstNet is going to be strategic for us for a number of years,” said Stephenson.

11 thoughts on “AT&T Earnings Disappoint; 5G pricing ~ broadband fixed line & LAN replacement for business customers?

  1. AT&T reports disappointing income from its wireless business

    https://finance.yahoo.com/video/t-reports-disappointing-income-wireless-200009081.html
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    AT&T CEO: We’re Going to Double Dip, Charge 5G Customers for Both Data and Performance

    This would be a substantial change from how wireless performance is typically billed. Historically, as Stephenson notes, wireless service has been sold to customers based on total data consumption, while wireline fixed access has been sold primarily in terms of speed.

    https://www.extremetech.com/extreme/290257-att-ceo-were-going-to-double-dip-charge-5g-customers-for-both-data-and-performance

  2. AT&T gains fiber, wireless subs in Q1

    AT&T reported mixed results in the first quarter as it grew its fiber subscribers by 297,000 and netted 80,000 postpaid wireless subscribers. Strong gains in broadband services overcame losses among its various video units and the new WarnerMedia group posted an 11.6% rise in operating income from the same period a year ago.

    AT&T fiber subscribers now number 3.1 million, the company announced today on its quarterly earnings conference call. AT&T added 297K new fiber subscribers in 1Q19.

    AT&T reports seeing about 25% penetration after launching fiber in new markets, but through bundling other AT&T services, executives say 50% penetration in these markets is achievable. To put AT&T’s fiber numbers in context, Verizon through its Fios footprint, counts 6.1 million FTTP connections, up 52K in 1Q19.

    “This is probably one of the more exciting areas of the business in terms of where we have invested heavily and now we’re seeing the fruits of the investment,” said AT&T Chairman and CEO Randall Stephenson on today’s call. “Whenever we go into a neighborhood and turn up fiber, 25% [of market penetration] comes fast and 50% is eminently achievable.”

    Broadband growth is helping stabilize AT&T’s Entertainment Group, AT&T executives said today. The Entertainment Group has the unfortunate reality of housing AT&T’s many video offerings, all of which are in decline.

    REFERENCES:

    https://uk.reuters.com/article/uk-at-t-results/att-misses-revenue-estimates-as-pay-tv-subscribers-bleed-away-idUKKCN1S01HA

    https://www.zdnet.com/article/at-t-q1-mixed-but-the-company-adds-wireless-smartphone-subscribers/

    https://www.telecompetitor.com/att-fiber-subscribers-surpasses-3-million-now-passes-over-12-million-locations/

  3. AT&T: Phishing, cloud security seen as biggest cyber threats- 4/29/2019

    AT&T issued its findings from a cybersecurity survey of more than 700 attendees at a cybersecurity conference last month in which large enterprises expressed the most confidence in dealing with distributed denial-of-service and internet of things attacks. Phishing held the greatest threat to the respondents at 29%, followed closely by cloud security at 27%.

    https://www.informationsecuritybuzz.com/study-research/att-cybersecurity-study-reveals-perception-vs-reality-of-cyberthreats/

    1. AT&T adds second low-power, wide-area IoT network: NB-IoT joins LTE-M

      AT&T has officially launched its narrowband internet of things (IoT) network in the U.S., which joins its existing LTE-M network to add a second low-power wide-area network option for IoT uses. In a blog post from Chris Penrose, SVP for AT&T IoT Solutions, he wrote that the expansion of IoT network options “will help unlock the next wave of IoT connections” and is “a big step toward massive IoT and 5G.”

      The carrier said that it will expand NB-IoT connectivity to its network in Mexico later this year, which Penrose said would be “the start of a unique North American footprint.”

      Penrose said that NB-IoT, which was deployed via an upgrade to AT&T’s existing LTE network sites, is “optimized for stationary use cases with basic data requirements”: simple sensors, smoke detectors, door locks, industrial monitors, smart agriculture uses, and so on.

      LTE-M, meanwhile, has higher bandwidth and the ability for full mobility and voice as well as firmware and software updates, according to AT&T. Penrose said that some of the device types deployed on its LTE-M network include medical wearables, utility meters, pet trackers and devices for asset management.

      “With NB-IoT, we now have two complementary Low-Power Wide Area networks – including our LTE-M network in the U.S. and Mexico. Both networks are designed for the IoT within licensed spectrum and provide carrier-grade security,” Penrose wrote, adding “Having both networks offers our business customers more options to implement IoT solutions with security, interoperability, and lower costs.”

      He went on to say that AT&T is working with its suppliers to certify $5 NB-IoT device modules, and that “multi-mode modules that support both NB-IoT and LTE-M are not far behind.” Penrose also noted that AT&T has an integrated IoT module in the works that includes prepaid IoT connectivity.

      The GSMA has said that IoT network coverage was expected to reach 93% of the world’s biggest IoT markets by the second quarter of this year. GSMA Intelligence has predicted that there will be 3.5 million cellular IoT connections — including 1.9 billion licensed LPWA connections — by 2025.

      https://www.rcrwireless.com/20190429/internet-of-things/att-turns-up-nb-iot-network

  4. That’s interesting about the FirstNet comments. I wonder how some of the numbers AT&T CFO Stephens cites are calculated? When he says 53% buildout, this must be population and not service territory.

    There are many rural areas to be built and as alluded to above, they still don’t have deals with many of the public service agencies. For instance, Santa Clara County was using Verizon when they exceeded their bandwidth limits last summer https://www.forbes.com/sites/fredcampbell/2018/09/17/repealed-net-neutrality-regulations-wouldnt-have-applied-to-santa-clara-county-firefighters/#67aadf963eb0.

    Also, is 39 GHz relevant to FirstNet? I thought FirstNet was about the reserved spectrum in the 700 MHz band?

    “We’re at 53% of our network buildout for FirstNet. For 5G we’re operational in 19 markets today, using that 39GHz mmWave spectrum.”

    Granted the bandwidth that 39 GHz provides could provide real-time 4k video transmission, but the cells would have to be so close together would they be relevant in a rural area or an area that is struck by a massive disaster (e.g. a flood).

  5. AT&T CEO Stephenson noted that business customers pay more for higher speeds in AT&T’s fixed line offerings, and the company expects the same to hold true with 5G. Ultimately, the company expects a 5G “pricing regime” that will look similar to its fixed-line pricing regime. That’s very surprising since 5G is supposed to be a mobile broadband service – not a broadband fixed wireless service!

  6. AT&T brought its high-band millimeter-wave 5G network to parts of downtown New York City bringing its launch total to 21 cities, the telecom announced noting that, as in other markets, the service will be limited to business customers. The carrier added that it will expand its 5G coverage to sub-6 GHz frequencies “in the coming months.”

    AT&T has multiple versions of 5G, with 5G+ denoting its super-fast but limited range millimeter-wave flavor. The company also has “sub-6” spectrum that covers wider areas but at slower speeds which it will simply call “5G.” Both of those forms of actual 5G are different than 5GE, the rebranding of AT&T’s improved but existing 4G network that is currently available across the country.

    “As a densely-populated, global business and entertainment hub, New York City stands to benefit greatly from having access to 5G, and we’ve been eager to introduce the service here,” said Amy Kramer, president of AT&T’s New York region, in a statement. “While our initial availability in NYC is a limited introduction at launch, we’re committed to working closely with the City to extend coverage to more neighborhoods throughout the five boroughs.”

    Though limited in range, New York becomes the twenty-first city where AT&T has deployed 5G, extending the company’s early lead in the 5G race over Verizon (nine cities), T-Mobile (six) and Sprint (five). Those rival carriers, however, are letting anyone use their respective networks, not just select businesses or developers.

    It is still unclear when AT&T will make 5G available to everyone, but the company plans to deploy a nationwide 5G network on its wider-ranging “sub-6” spectrum in the “first half of 2020.”

    https://www.cnet.com/news/at-t-turns-on-5g-in-new-york-but-it-still-isnt-available-to-consumers/

    Despite technically being the first US provider to launch its 5G network last year, AT&T is lagging behind Verizon when it comes to offering a 5G service that regular people can sign up for. Verizon’s 5G network is now available in a total of nine cities, and the company plans to expand to over 30 by the end of the year. However, even Verizon’s network is having difficulties reaching people, thanks to its reliance on the short-range mmWave technology, which means that you can only connect to its network in very limited parts of each city. But where you do get service, data speeds can be mind-blowingly fast.

    The coverage of AT&T’s latest 5G deployment may be limited and it might only be available to businesses, but at least today’s announcement is about an actual 5G network instead of the “5GE” network, which is how the company is misleadingly referring to its 4G network. AT&T tried to claim that 5GE was a stop-gap between 4G and 5G that would offer significant advantages over current 4G technology, but the evidence paints a different story: real-world tests suggest that the network was no faster — in some cases, it was slower — than competing 4G services.

    https://www.theverge.com/2019/8/6/20756924/att-5g-nyc-launch-busines-limited-mmwave

  7. AT&T Communications must provide better services as compared to their competitors and affordable prices to stand in the market and to increase its income.

  8. Great article assessing AT&T earnings and related topics! I think other website proprietors should take the IEEE Techblog website as a model. Very clean user style and great website layout/navigation/ design, as well as excellent content. You’re an expert on this topic!

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