AT&T Exec: 5G Private Networks are coming soon + 5G Security Conundrum?

Just two weeks after Verizon won a 5G Private Network contract in the UK, AT&T now says that Private 5G Networks are coming soon to your office or campus.  AT&T’s Rita Marty wrote in a blog post that many companies want “5G in a private space.”

“We’ve done exactly that at AT&T Stadium in Dallas. Fans will get experiences like live stats projected over the field on their smartphone camera.”

“Some organizations want a truly private, standalone 5G system. They envision full control of a “local area network” similar to corporate Wi-Fi, but with the performance, reliability and security of cellular.  Nellis Air Force Base in Nevada is testing one flavor: a 5G-powered command-and-control center on a trailer. It will form the hub of a moveable, private cellular network for local personnel in a conflict area.

Ms. Marty alluded to network slicing and edge computing in her blog post.  Those are two ultra hyped technologies that have yet to be deployed at scale by any 5G network operator.

“Other organizations are enhancing their 5G coverage with the ability to control specific local traffic themselves. They can peel off (via network slicing) certain data flows for “edge computing.” This means alarms in a factory, for instance, could be processed right on the premises – and thus much more quickly. MxD, a manufacturing innovation center in Chicago, is showing how fractions of seconds can help solve quality, safety and inventory issues.

Network slicing allows 5G network operators to create different sub-networks (which can be private) networks with different properties. Each sub-network slices the resources from the physical network to create its own independent, no-compromised network for its preferred applications.  It requires a 5G standalone core network, the implementation of which has not been standardized and AT&T has yet to deploy.

Most of AT&T’s activities in mobile edge computing and private 5G networks are in trials and testing.  AT&T is working to bring enhanced capabilities to their edge computing solutions by testing AT&T Network Edge (ANE) with cloud providers.  AT&T says ANE’s potential benefits include:

  • Lower latency: Deliver low-latency connectivity to high performance compute
  • Network routing optimization: Network integration with cloud providers
  • Extended cloud ecosystem: AT&T intends to develop an extended ANE ecosystem, allowing customers to use cloud services like they do today.

Image Credit:  AT&T

Private networks also need careful thought and consultation, Ms. Marty stated. “Considerations include design, spectrum, and who’s going to actually run it. Even a standalone network, and even 5G, must be set up properly to achieve the highest security against cyberattacks,” she added.

5G Security Conundrum:

As leader of AT&T’s 5G security team, Ms. Marty has her work cut out for her.  Especially considering choosing which of the 3GPP 5G SA security specs to support.  Many of them are not complete and targeted for 3GPP Release 17.  Also, European network operators have taken different approaches to 5G security and this will likely be a global phenomenon.

The real work on 5G security is being done by 3GPP with technical specification (TS) 33.501 Security architecture and procedures for 5G system being the foundation 5G security document.  That 3GPP spec was first published in Release 16, but the latest version dated 16 December 2020 is targeted at Release 17.  You can see all versions of that spec here.

3GPP’s 5G security architecture is designed to integrate 4G equivalent security. In addition, the reassessment of other security threats such as attacks on radio interfaces, signaling plane, user plane, masquerading, privacy, replay, bidding down, man-in-the-middle and inter-operator security issues have also been taken in to account for 5G and will lead to further security enhancements.

Another important 3GPP Security spec is TS 33.51 Security Assurance Specification (SCAS) for the next generation Node B (gNodeB) network product class, which is part of Release 16.  The latest version is dated Sept 25, 2020.

Here’s a chart on 3GPP and GSMA specs on 5G Security,  courtesy of Heavy Reading:

Question: When do you plan to implement the following 5G security specifications? (n=105-108) (Source: Heavy Reading)

Scott Poretsky, Ericsson’s Head of Security, wrote in an email:

“The reason for the inconsistent implementation of the 5G security requirements is the language in the 3GPP specs that make it mandatory for vendor support of the security features and optional for the operator to decide to use the feature.  The requirements are defined in this manner because some countries did not want these security features implemented by their national telecoms due to these security features also providing privacy.  The U.S. was not one of those countries.”

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References:

https://about.att.com/innovationblog/2021/private_5G_networks.html

https://www.business.att.com/learn/top-voices/att-continues-development-of-network-edge-compute.html

https://techblog.comsoc.org/2018/05/18/ieee-comsoc-papers-on-network-slicing-and-5g/

5G Security Issues Raise Mission Critical Questions & Issues

 

AT&T Lab to research 5G use cases, 5G+ available in Houston, TX

AT&T is opening a lab in Plano, Texas, to research 5G use cases with help from Nokia and Ericsson. AT&T says the 5G Innovation Studio will provide a venue for developing next-generation products, such as holographic communications and drone services, and cutting down on their time to market.

The studio is outfitted with AT&T 5G connectivity, using its millimeter wave and sub-6 GHz spectrum. It also boasts standalone 5G core network (5G SA) and edge capabilities, along with network KPIs to enable creation, testing and validation of new 5G experiences.

AT&T VP of 5G Product and Innovation Jay Cary disclosed the Lab in this video. The goal of the Lab is to help bring products to market faster, providing a space where customers can explore and try out tech using advanced network capabilities. Along with current and potential customers, and Ericsson and Nokia, industry players like Microsoft will be involved, as well as smaller companies according to Raj Savoor, VP of Network Analytics and Automation at AT&T (formerly with AT&T Labs in Pleasanton, CA).

“Startups are a big part of the innovation ecosystem, and in fact, one of the first use cases was in collaboration with the drone infrastructure startup, EVA,” Savoor wrote in an email.

“We deployed a test environment representative of our Microsoft Azure Edge Zone with AT&T, which provided a low-latency path between the drone and the compute environment. This allowed much more responsive control over the drone’s flight path and is just one example of what’s possible when you combine 5G with edge computing,” Raj added.

“To really bring to life the unforeseen possibilities of 5G, we’ve partnered with Ericsson and Nokia who are helping us build out the technology and really the environment we need to be able to deliver those end-to-end consumer experiences that are really going to wow you and me when we see them on our phones,” Cary said.

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Separately, AT&T’s 5G+ [1.] will be available for customers to experience during Houston Rockets games and other events at the Houston Toyota Center.

First responders in Houston will also gain access to 5G+ on FirstNet®, America’s public safety network.  They will maintain voice communication through always-on priority and preemption on 4G-LTE and the intuitive FirstNet network will determine the best route for data traffic, whether that’s 5G+ or 4G-LTE spectrum.

Note 1.  AT&T’s 5G+ is the version of its 5G that uses millimeter wave (mmWave) spectrum. A 5G capable device that supports mmWave frequencies is needed to get access. [Note that the mmWave frequencies for IMT/5G have not yet been standardized in ITU-R M.1036 Recommendation.]

AT&T stipulates that it may temporarily slow data speeds if the network is busy. The move falls in line with AT&T’s strategy of treating existing customers similarly to new ones.

AT&T 5G+ is available in parts of 38 cities and more than 20 venues across the U.S. Learn more about AT&T’s 5G network at att.com/5gforyou and check out AT&T’s 5G coverage in the Houston area and across the Gulf coast of Texas here.

References:

https://www.fiercewireless.com/5g/at-t-launches-5g-innovation-studio-ericsson-nokia

https://www.prnewswire.com/news-releases/att-announces-availability-of-super-fast-5g-service-at-toyota-center-301265296.html

https://www.att.com/maps/wireless-coverage.html

https://about.att.com/newsroom/2021/5g_plus.html

 

AT&T Provides Update on Fiber Rollouts, 5G Expansion, and Financial Outlook

Here are the highlights of AT&T Investor Day Announcements:

3 million new fiber locations:

AT&T plans to deploy fiber-to-the-premises (FTTP) to another 3 million-plus residential and business locations across more than 90 metro areas in 2021, and is already sizing up plans to push that to an additional 4 million locations in 2022, Jeff McElfresh, CEO of AT&T Communications, said today during the company’s investor day event.

“The margin economics are attractive.  These areas are adjacent to our current footprint, driving cost efficiencies in our build as well as our marketing and distribution efforts.”

McElfresh expects its fiber subscriber volumes increase in the second half of the year after the initial buildouts, but noted that he likes what AT&T is seeing in the early part of 2021. The company noted that about 70% of its gross broadband adds in fiber buildout areas are new AT&T customers.

“And if we keep up with that pace, our vision would be to have over half of our portfolio, or 50% of our network, covered by that fiber asset.  As our integrated fiber plan improves the yield performance on that fiber it will further give us conviction on continuing that investment in the coming years.”

AT&T is also looking to broaden its reach of fiber amid rising data demand and network usage that has occurred during the pandemic, and isn’t expected to stop any time soon.  That’s shown in the graph’s below:

Click here for a larger version of this image. (Source: AT&T)

 

References:

https://www.lightreading.com/opticalip/fttx/atandt-to-plant-fiber-in-3m-locations-this-year-sizes-up-4m-more-in-2022/d/d-id/768057?

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AT&T’s 5G Strategy:

AT&T’s 5G network now covers 230M Americans in 14,000 cities and towns and AT&T 5G+ is now available in parts of 38 cities in the U.S. 

Note: AT&T may temporarily slow data speeds if the network is busy.

“Connectivity is at the heart of everything we do – 140 years and counting. From our fiber network backbone to the layers of wireless spectrum technology, we provide 5G network coverage that delivers the speeds, security and lower latency connections that customers and businesses need,” said Jeff McElfresh, CEO – AT&T Communications. “Over the past five years, AT&T has invested more capital in the U.S. than any other public company.”

Here is what the company said about its 5G Strategy:

AT&T has planned a balanced approach to 5G. Our strategy of deploying 5G in both sub-6 (5G) and mmWave (5G+) spectrum bands provides a great mix of speeds, latency and coverage for consumers and businesses. We rolled out nationwide 5G that now covers 230 million people, and offer 5G+ providing ultra-fast speeds to high-density areas where faster speeds can have huge impacts for our customers. So far, AT&T has deployed 5G+ nodes in parts of 38 cities across the U.S.

AT&T 5G is opening up some impressive opportunities for businesses and consumers and mid-band and mobile edge computing will help us go even further. There is an emerging multi-sided business model across 5G, edge computing and a variety of use cases from healthcare to gaming.

Our mobile edge computing plus 5G network will help satisfy the need for ultra-responsive networks and open up new possibilities for consumers and businesses. With our investments, we will take advantage of new technologies like spatial computing to enable applications across industries from manufacturing automation to watching immersive sports.

Reference: https://about.att.com/story/2021/5g_strategy.html

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C-band spectrum deployment to begin in 2021:

  • AT&T acquired 80 MHz of C-band spectrum in the FCC’s Spectrum Auction 107. The company plans to begin deploying the first 40 MHz of this spectrum by the end of 2021.
  • AT&T expects to spend $6-8 billion in capex deploying C-band spectrum, with the vast majority of the spend occurring from 2022 to 2024. Expected C-band deployment costs are already included in the company’s 2021 capex guidance and in its leverage ratio target for 2024.
  • AT&T expects to deliver 5G services over its new C-band spectrum licenses to 70 to 75 million people in 2022 and 100 million people in “early” 2023.
    • Funding C-band spectrum: AT&T’s investment in C-band spectrum via Auction 107 totals $27.4 billion, including expected payments of $23 billion in 2021.
    • To meet this commitment and other near-term priorities, in 2021 the company expects to have access to cash totaling at least $30 billion, including cash on hand at the end of 2020 of $9.7 billion, commercial paper issued in January 2021 of $6.1 billion and financing via a term loan credit agreement of $14.7 billion.

Jeff McElfresh, CEO of AT&T Communications, explained the operator’s focus on both 5G and fiber: “Our value proposition is to serve customers how they want to be served with enough bandwidth and capacity and speed, and we’ll let the technology service architecture meet that demand or that need.”

“When you get up into the midband segment of spectrum, while it offers us really wide bandwidth for speed and capacity, its coverage characteristics don’t penetrate [buildings and other locations] as effectively as the lowband does,” he said. “And 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.”

–>Yet McElfresh didn’t really address how AT&T Communications would overcome those challenges.

References:

https://about.att.com/story/2021/att_analyst_day.html

https://www.lightreading.com/opticalip/atandt-serves-up-5g-plans-with-healthy-dose-of-pragmatism/d/d-id/768059?

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Financial Targets and Guidance:

  • End-of-year 2021 debt ratio target of 3.0x. The company expects to end 2021 with a net debt-to-adjusted EBITDA ratio of about 3.0x,3 reflecting an anticipated increase in net debt of about $6 billion to fund the C-band spectrum purchase.
    • 2024 debt ratio of 2.5x or lower. During 2024, AT&T expects to reach a net debt-to-adjusted EBITDA ratio of 2.5x or lower.3 To achieve this target, the company expects to use all cash flows after total dividends to pay down debt and will continue to look for opportunities to monetize non-strategic assets. The company also does not plan to repurchase shares during this period.

Click here for a larger version of this image. (Source: AT&T)

  • 2021 guidance unchanged. AT&T’s 2021 financial guidance, announced in January 2021, is unchanged on a comparative basis. For the full year, the company continues to expect:
    • Consolidated revenue growth in the 1% range
    • Adjusted EPS to be stable with 20204,5
    • Gross capital investment6 in the $21 billion range, with capital expenditures in the $18 billion range
    • 2021 free cash flow7 in the $26 billion range, with a full-year total dividend payout ratio in the high 50’s% range

References:

https://about.att.com/story/2021/att_analyst_day.html

 

 

AT&T Adds 5G to Nationwide Business-Focused Broadband Network

AT&T is adding fixed 5G wireless solutions to what it claims is the first nationwide business-focused broadband network, which combines AT&T Wireless Broadband and its business fiber optics network.

AT&T’s business fiber network already connects more than 2.5M business customer locations with fixed and wireless solutions nationwide, delivering speeds 20 times faster than cable. AT&T is now adding more 5G power to AT&T Wireless Broadband.

Beginning in April, the telcoand media giant will be offering new fixed wireless router options from Sierra Wireless and Cradlepoint to give businesses better access to all the benefits of 5G – and the flexibility to choose the right speeds and quality of service options for their business.

AT&T Wireless Broadband with 5G is helping businesses boost their performance with a variety of router choices. Businesses can use it as a primary connection, a secondary connection to enhance reliability, to set up a temporary work site, or even to deliver highly secure connectivity needs for work-from-home employees independent of their home broadband connection.

AT&T Wireless Broadband has no overage charges. This fixed wireless solution is an essential ingredient we laid out more than two years ago in our pathway to 5G for businesses. New 5G routers, combined with the AT&T Wireless Broadband plans, will together provide options that make sense for how businesses use the service.

“It is now almost a full year since the global pandemic accelerated remote work adoption by almost a decade – and throughout the rapid evolution of related business needs, AT&T has been there to enable continued success,” said Mo Katibeh, Chief Product and Platform Officer, AT&T Business. “And today, we’re excited to build on the first, true nationwide business-focused broadband network with fixed wireless 5G connectivity. It’s the ideal solution for businesses to continue to innovate, serve their customers and enable employees to efficiently and effectively work – even when they can’t walk down the hall to someone else’s office.”

Other Voices:

“We work in construction sites across the country, designing and building the electrical systems for new buildings, and we need to be agile for fast-moving construction projects,” says Joe Meadors, Vice President of Information Services for Gaylor Electric. “While working in our trailers at these construction sites across the country, quick service turn up, reliability and flexibility, without overage costs, are hugely important. The lower latency and higher bandwidth that will come with AT&T Wireless Broadband using 5G will be perfect for keeping us connected on the job sites.”

Louis Malooley, Owner and General Manager of AlphaGraphics in Atlanta uses AT&T Business Fiber to keep his printing and marketing business connected. With equivalent Fiber speeds for downloads and uploads, he can reliably process huge documents and presentations that need immediate attention. With AT&T Office@Hand, he can keep employees connected and productive while on the go with voice, fax, text messaging, and audio and video conferencing cloud -based services. “You guys are reliable. The service just works,” he said.

“At The Washington Post, we value being forward-looking especially when it comes to new ways to think about news gathering, production and immersive storytelling. As our staff works outside of the office, even in remote areas, it’s critical that we have fast and reliable technology tools, such as wireless connectivity and 5G capabilities, to keep our teams connected and to ensure our readers can be quickly informed,” said Shailesh Prakash, Chief Information Officer at The Washington Post.

“AT&T is very strong in the global enterprise mobility services market, offering professional services, mobile platforms, devices, and managed applications, with single billing and point of care, to provide business transformation,” says Kathryn Weldon, Research Director at GlobalData. “AT&T continues its investment in the breadth, densification and technical capabilities in mobile security, device management, and end-to-end gigabit connectivity options for businesses looking to transform to match today’s environment. In 2020, AT&T announced a collaboration with Cradlepoint, to bring end-to-end gigabit LTE and 5G wireless WAN solutions to enterprise and public safety customers; and alliances with Nokia and Ericsson to build private cellular networks solutions over CBRS. AT&T’s enterprise mobility management portfolio leverages the best platforms available, alongside professional services to manage and secure devices.”

Why choose “enterprise-grade” solutions?

AT&T says they have always been focused on delivering enterprise-grade solutions. Businesses of all sizes turn to us because we’re mission-tested and compete on a global scale.

Dating back to March 2020, AT&T quickly saw large-scale work-from-home policies become commonplace. Enterprise-grade solutions were quickly needed for everyone working from home, and broadband connectivity was essential. And the right data plans were critical for AT&T’s customers. (Shared, pooled rate plans are desired for thousands of businesses across every vertical industry.)

AT&T says they have continued delivering enterprise-grade solutions to solve real business CIO and CTO challenges – collaboration tools for employees, managing networks that balance performance and privacy, and protecting its users, devices, data, and applications.

  • Enterprise-grade work-from-everywhere collaboration: All of us are accessing different video and voice platforms throughout the day. Businesses everywhere must ensure they have the right software-based collaboration tools to meet their needs. This is why we deliver recognized industry leading enterprise-grade options – for well over a decade blending the wired and wireless worlds to ensure businesses never miss a call. And we don’t limit you to only mobile solutions. AT&T creates the seamless ability for your business to be on, across all devices – mobile, desk phones, tablets, personal computers – in the office, or on the go.
  • Enterprise-grade security: From small businesses to global enterprises, everyone needs unified protection against security threats for office, home office and roaming users. Businesses must protect their employees against these threats, while also restricting access to unauthorized content. We provide remote workforce security solutions, including AT&T’s Global Security Gateway, to protect work-from-home capabilities.
  • Enterprise-grade customer experience: To help ensure seamless employee remote capabilities, businesses of all sizes have turned to us to help navigate the shift to work from home. In fact, from mid-March through May 2020 when the pandemic quickly dispersed the workforce to work from home, we quickly delivered over 16,000 business-critical requests for our customers. Businesses turn to us because we’re mission-tested, compete on a global scale and provide trusted advice to develop the right path aligning to their needs. And, of course, because most businesses don’t close on the weekends, we don’t either in our 24×7 customer support. Surprisingly, some of our competitors don’t do this … that’s an odd “customer-first approach.”

Businesses can learn more about AT&T’s remote and home workforce connectivity solutions and sign up for AT&T Wireless Broadband. You can check out AT&T’s connectivity solutions here, and check out all our AT&T Wireless Broadband Plans and find out how your business can sign up here.

SOURCE AT&T Communications

Leichtman Research Group: Top U.S. Broadband Providers Add; PayTV Providers Lose Subscribers in 2020

Leichtman Research Group reports that largest U.S. broadband network providers added almost twice as many fixed subscribers in 2020 as they did the previous year, largely due to the Covid-19 pandemic.  However, some large broadband providers (like AT&T) lost customers.

The largest cable and wireline phone providers in the U.S. – representing about 96% of the market – acquired about 4,860,000 net additional broadband Internet subscribers in 2020, compared to a pro forma gain of about 2,550,000 subscribers in 2019.

These top broadband providers now account for 105.8 million subscribers, with top cable companies having 72.8 million broadband subscribers, and top wireline phone companies having 33 million subscribers.

Comcast and Charter accounted for 4.19 million, or 86%, of the total number of net additions, with the other six cablecos’ adds coming in significantly lower, ranging from 210,000 for Cox to just under 38,000 for Atlantic Broadband.

For wireline telcos, the best performance came from Verizon, which added a fairly respectable 173,000 fixed broadband customers, but three of the eight posted net customer losses.  In particular, AT&T’s net broadband losses came in at 5,000 while CenturyLink and Frontier both lost well over 100,000 customers.

[As per the report below, AT&T’s DirecTV lost more than 3.26 million subscribers which was ~60% of all U.S. pay TV losses in 2020.]

Notes:

*    LRG estimate

**   Includes recent small acquisitions/sales and LRG pro forma estimates

^    Frontier’s total for 4Q 2020 is an LRG estimate due to later year-end reporting

TDS includes 283,900 wireline broadband subscribers, and 209,400 cable broadband subscribers

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Key findings for the year 2020 include:

  • Overall, broadband additions in 2020 were 190% of those in 2019, and more than in any year since 2008
  • Top cable and wireline phone companies represent approximately 96% of all subscribers
  • The top cable companies added about 4,820,000 subscribers in 2020 – compared to about 3,145,000 net adds in 2019, and the most in any year since 2006
    • Charter’s 2,215,000 net broadband additions in 2020 were more than any company had in a year since 2006
  • The top wireline telecom companies added about 40,000 subscribers in 2020 – compared to a loss of about 590,000 subscribers in 2019
    • Telcos had positive net annual broadband adds for the first year since 2014
  • At the end of 2020, cable had a 69% market share vs. 31% for Telcos

“With the impact of the coronavirus pandemic, there were more net broadband additions in 2020 than in any year since 2008,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc (LRG).  “The top cable and Telco broadband providers in the U.S. cumulatively added about 4,860,000 subscribers in 2020, compared to about 5,100,000 subscribers in 2018 and 2019 combined.”

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Separately, LRG found that the largest pay-TV providers in the U.S. – representing about 95% of the market – lost about 5,120,000 net video subscribers in 2020, compared to a pro forma net loss of about 4,795,000 in 2019.

The top pay-TV providers now account for about 81.3 million subscribers – with the top seven cable companies having 43.9 million video subscribers, satellite TV services having about 21.8 million subscribers, the top telephone companies having 7.9 million subscribers, and the top publicly reporting Internet-delivered (vMVPD) pay-TV services having 7.7 million subscribers.

AT&T had a net loss of about 3,260,000 subscribers across its four pay-TV services (DIRECTV, AT&T U-verse, AT&T TV, and AT&T TV NOW) in 2020 – compared to a net loss of about 4,095,000 subscribers in 2019.

AT&T “Premium TV” services (not including the vMVPD service AT&T TV NOW) lost 15.3% of subscribers in 2020 – compared to a 4.6% loss among all other traditional pay-TV services.

Key findings for the year include:

  • Satellite TV services lost about 3,440,000 subscribers in 2020 – compared to a loss of about 3.700,000 subscribers in 2019
  • The top seven cable companies lost about 1,915,000 video subscribers in 2020 – compared to a loss of about 1,560,000 subscribers in 2019
  • The top telco TV companies lost about 405,000 video subscribers in 2020 – compared to a loss of about 630,000 subscribers in 2019
  • The top publicly reporting Internet-delivered (vMVPD) services (Hulu + Live TV, Sling TV, AT&T TV NOW, and fuboTV) added about 640,000 subscribers in 2020 – compared to about 1,095,000 net adds in 2019
  • Traditional pay-TV services (not including vMVPDs) lost about 5,765,000 subscribers in 2020 – compared to a net loss of about 5,890,000 in 2019

“Net pay-TV losses of over 5 million subscribers in 2020 were slightly higher than in 2019, and more than in any previous year,” said Bruce Leichtman, president and principal analyst for Leichtman Research Group, Inc.  “Overall, the top pay-TV providers lost 5.9% of subscribers in 2020, compared to 5.2% in 2019.”

About Leichtman Research Group, Inc.

Leichtman Research Group, Inc. (LRG) specializes in research and analysis on broadband, media and entertainment industries. LRG combines ongoing consumer surveys with industry tracking and analysis, to provide companies with a richer understanding of current market conditions, and the potential impact and adoption of new products and services. For more information about LRG, please call (603) 397-5400 or visit www.LeichtmanResearch.com.

References:

https://www.leichtmanresearch.com/about-4860000-added-broadband-from-top-providers-in-2020/

https://www.leichtmanresearch.com/major-pay-tv-providers-lost-about-5120000-subscribers-in-2020/

https://telecoms.com/508907/pandemic-provided-a-shot-in-the-arm-for-us-fixed-broadband/

Verizon is again top U.S. telco brand; AT&T falling behind T-Mobile

According to Brand Finance’s new rankings, Verizon recently widened its lead over AT&T as the world’s most valuable telecoms brand. The firm reported Verizon’s brand rose 8% in its rankings to a value of $68.9 billion.

For the second year in a row Verizon has claimed the title of the world’s most valuable telecoms brand following an 8% increase in brand value to US$68.9 billion. This brand value growth has not only propelled it back into the top 10 most valuable brands globally in the Brand Finance Global 500 2021 ranking, but has meant the brand has continued to widen the lead over second placed AT&T (brand value down 13% to US$51.4 billion). 15 further US brands feature in the Brand Finance Telecoms 150 2021 ranking, with a combined brand value of US$182.8 billion.

Two years since the beginning of Verizon’s business transformation program, Verizon 2.0 – focusing on the transformation of the network, the go-to-market, the brand, and the culture of the business – the brand continues to make leaps and bounds across the industry. The giant is widely recognized to have the best-in-class network and the widest coverage in the US, with the network’s usage surging during the pandemic, handling a staggering 800 million phone calls and 8 billion texts per day.

Meanwhile, Cowen and Company sees T-Mobile overtaking AT&T to be the second most popular telecom brand after Verizon.  Cowen analysts conduct quarterly surveys of mobile customers, asking them to rank providers for “overall brand/image.”

In the 4th Quarter of 2020, the perceived difference between T-Mobile and AT&T was at its narrowest point since they started conducting their survey. As per the chart below, there was only a 0.06 difference between the two brands (we do not know how Cowen calculated the Rank Spread).

 

Cowen stated this brand perception issue will be an important to watch during 2021 because “network quality/coverage has historically been one of the main reasons for subscribers to leave their current wireless provider and likely a key driver of brand perception.”

The Cowen Telco Perceptions report (clients only) comes months after T-Mobile boasted that it surpassed AT&T in terms of total number of mobile phone customers.

Analyst Craig Moffett was shocked with AT&T’s $23.4 billion spent at the recently completed C-band auction.  He wrote in a note to clients:

“At $23.4B, AT&T spent more than would have been expected a month ago, but expectations for their spend had been rising (notwithstanding the fact that they have only financed half of what they bought, and even that with only short-term debt), so the surprise may not be large there, either. But again, it’s a shock to see the number.”

“AT&T emerges from the auction with leverage of 4.1x EBITDA (assuming all debt financing). Can their dividend be sustained?”

AT&T bought 80 MHz of C-band spectrum in almost all of the top 50 U.S. markets.

How will they be able to finance the buildout of their 5G network to deploy that spectrum?

If you have an opinion on that, please post a comment in the box below this article. Thanks in advance!

References:

https://www.lightreading.com/5g/perception-wars-atandt-slowly-slides-into-third-place/d/d-id/767879?image_number=1

https://brandirectory.com/rankings/telecoms/

Analysis: AT&T spins off Pay TV business; C-Band $23.4B spend weakens balance sheet

AT&T has agreed to create a new company for its U.S. video business unit together with private equity firm TPG Capital.  The company will be called New DirecTV and include:  today’s Direct TV, U-verse TV and AT&T TV (AT&T’s OTT video service) which AT&T said was “the future of TV” only 11 months ago.   That was, indeed, a very short lived future!

The new company will have an estimated enterprise value of $16.25 billion. It will be headed by DirecTV CEO Bill Morrow and have its headquarters in El Segundo (California) and Denver (Colorado).

AT&T will own 70 percent of the new company, while TPG will hold 30 percent and will pay AT&T $1.8 billion in cash.

AT&T CEO John Stankey said the agreement is in line with the operator’s strategy to focus on core assets such as 5G, fiber optic network build-outs and HBO Max. The New DirecTV will provide “dedicated management focus” for the pay-TV operations while reducing AT&T’s huge debt burden.

AT&T bought DirecTV in 2015 for $48.5 billion but the actual value was closer to $66 billion including debt.  AT&T recently struck $15.5 billion off the value of the DirecTV, reflecting the service’s dimmer prospects.  AT&T said it would get about $7.8 billion in cash from the transaction to help pay down debts. Those proceeds include $5.8 billion that the new company will borrow from banks and pay back to AT&T.

“The disruption in pay TV did exceed our original expectations,” AT&T finance chief John Stephens said in an interview, adding that the satellite-TV business had helped generate cash for the company even as its customer base declined. Mr. Stephens said the new ownership structure is “a very attractive transaction, getting TPG’s expertise and that upfront cash payment.”

The new company will not include the WarnerMedia HBO Max streaming platform, AT&T’s Latin American video operations Vrio, AT&T’s regional sports networks, U-verse network assets and AT&T’s Sky Mexico investment.

At completion, all existing AT&T video subscribers will become New DirecTV customers and all existing content deals, including NFL Sunday Ticket on DirecTV, will become of the new company.  New DirecTV will have a commercial agreement with AT&T and continue to provide bundled pay-TV services for mobile and internet customers.

New DirecTV video subscribers will also continue to receive HBO Max (which currently costs $15 per month) plus any associated discounts. AT&T and New DirecTV will also continue to serve customers through multiple distribution channels, including retail, online, call centers and indirect sellers; and share revenues for ad inventory management and ad sales.

The new company’s board will have two representatives from both AT&T and TPG, with Morrow holding the fifth seat.  Most AT&T video services employees will move to New DirecTV. The new company plans to recognize its unionized labor force and will assume and honor all existing collective bargaining agreements.

The deal is expected to close in second half of this year. Under the terms of the agreement, AT&T will receive $7.8 billion from New DirecTV, including $7.6 billion in cash and the assumption from AT&T of $200 million worth of existing DirecTV debt. AT&T will use the proceeds to reduce its debt. TPG will contribute $1.8 billion in cash to New DirecTV in exchange for preferred units and its 30 percent stake in the new company.

“This agreement aligns with our investment and operational focus on connectivity and content, and the strategic businesses that are key to growing our customer relationships across 5G wireless, fiber and HBO Max. And it supports our deliberate capital allocation commitment to invest in growth areas, sustain the dividend at current levels, focus on debt reduction and restructure or monetize non-core assets,” said AT&T CEO John Stankey.

“As the pay-TV industry continues to evolve, forming a new entity with TPG to operate the U.S. video business separately provides the flexibility and dedicated management focus needed to continue meeting the needs of a high-quality customer base and managing the business for profitability. TPG is the right partner for this transaction and creating a new entity is the right way to structure and manage the video business for optimum value creation.”

“We look forward to working with AT&T, Bill and the entire talented team at the new DIRECTV to create a seamless customer experience through the separation of the company,” John Flynn, Principal at TPG said. “We are particularly excited by the opportunity to grow new DIRECTV’s streaming video service, leveraging the company’s leading pay-TV platform, talented labor force and large subscriber base to transition it into a leading next-generation video provider with best-in-class content and customer experience.”

AT&T lost 7 million domestic pay-TV subscribers over the last two years. Comcast lost about 2 million such customers over the same period. Dish Network Corp. , DirecTV’s satellite-TV rival, shed roughly 1 million subscribers.

Financing the Deal:

New DirecTV has secured $6.2 billion in committed financing from its bank group, $5.8 billion of which will be used to pay AT&T and assume the $200 million of agreed debt.

AT&T also agreed to cover up to $2.5 billion in losses tied to DirecTV’s NFL Sunday Ticket package.

AT&T financial impact:

AT&T’s net debt load, which was listed above $180 billion after the Time Warner transaction, recently stood around $148 billion.

In 2021, AT&T expects to apply the cash proceeds from the transaction toward debt reduction and does not expect a material impact to its 2021 financial guidance for:

• Consolidated revenue growth in the 1% range

• Adjusted EPS to be stable with 2020

• Gross capital investment in the $21 billion range with capital expenditures in the $18 billion range

Following close of the transaction, AT&T expects to deconsolidate the U.S. video operations from its consolidated results. The company will continue to look at ways of “monetizing non-core assets.”

Opinion – AT&T’s C-Band Spend Adds to Debt and Weakens its Balance Sheet:

The company added that it has proactively managed its debt portfolio, reducing near-term debt maturities by about $33 billion in 2020 and lowering the overall portfolio average rate to 4.1 percent at the end of 2020, down 20 basis points from first-quarter 2020 levels.

However, AT&T has not said how it would pay for the $23.4B they spent to acquire spectrum at the recently completed C-Band auction, other than the $14.7B it raised raised in a loan-credit agreement with Bank of America earlier this year.

Moody’s Investors Service on Wednesday told clients that AT&T’s C-Band spectrum splurge could pressure AT&T’s credit rating, which sits two notches above junk territory. In a brief note Thursday, Moody’s called the DirecTV deal “moderately credit positive” because it would produce cash to help cover the spectrum costs.

Oppenheimer analysts believe that spectrum build-out in new 5G deployments will take at least a year and the resulting revenue won’t show up for a few years.  We believe that AT&T will be very hard pressed to fund the spectrum buildout within the next two or three years due to delays in installing hundreds of thousands of small cells and fiber to them for backhaul.

Analyst Craig Moffett had this to say: “At $23.4B, AT&T spent more than would have been expected a month ago, but expectations for their spend had been rising (notwithstanding the fact that they have onlyfinanced half of what they bought, and even that with only short-term debt), so the surprise may not be large there, either. But again, it’s a shock to see the number.”

“AT&T emerges from the auction with leverage of 4.1x EBITDA (assuming all debt financing)……AT&T, in particular, will face enormous pressure to withdraw its hyper-aggressive promotional stance in order to produce enough free cash flow to sustain their dividend – but that is cold comfort for an industry whose ROI will inarguably be even worse than it has been in the past.”

SNL Image

Craig noted that C-Band spectrum will require many more small cells which require permits, time and effort to install. That will delay AT&T’s 5G network expansion using the newly acquired spectrum:

“3.5 GHz spectrum (again, as a rough proxy for C-Band) requires sixteen times as many cell sites as would 2.0 GHz spectrum for the same free space coverage. And because C-Band will have very limited ability to penetrate obstructions (trees, walls and windows, intervening buildings, etc.), real world propagation limitations will likely be even greater than what a free space model would suggest.”

References:

https://investors.att.com/~/media/Files/A/ATT-IR/press-release/atandt-tpg-video-announcement-feb-25.pdf

https://www.wsj.com/articles/at-t-to-spin-off-directv-unit-in-deal-with-tpg-11614288845 (paywall)

https://otp.tools.investis.com/clients/us/atnt2/sec/sec-show.aspx?FilingId=14659869&Cik=0000732717&Type=PDF&hasPdf=1 (SEC 8K report on $14.7B loan with BoA)

 

Highlights of AT&T CFO and CTO remarks at Morgan Stanley Investor Conference

Network quality driven by significant investments in 5G and fiber:

AT&T believes that its recent and anticipated network investments will bolster its network foundation to compete as the need for high-quality connectivity only continues to increase.  At a Morgan Stanley European Investor Conference, AT&T CFO John Stephens indicated that AT&T’s integrated fiber strategy is expected to improve the company’s connectivity offering for both consumer and enterprise markets and enhance its 5G network quality in a cost-efficient manner.

COVID-19 Impact:

AT&T CTO Andre Fuetsch said:  “Obviously what happened was everyone basically started working, started schooling from home, and all of a sudden we had to readjust our lives to work from home, learn from home, and all of a sudden we had to adapt very quickly to that.  Within our homes, we had to have these different personas that we normally don’t do — whether it’s doing your day job, performing that duty, helping your children get online so they can do their schooling, and then all the other things in life. That was a blurring, in a way, of these sort of enterprise and consumer segments coming together.”

“All of this technology is great, but at the end of it, we are humans and anything we can do to help facilitate [and] build better, stronger human connections” will benefit society at large, Fuetsch added. “This year we’re really getting pushed and challenged to do that. I really think this type of technology is just going to make things better.”

Artificial Intelligence (AI) Improves Operations:

Some of these technologies, like Artificial Intelligence (AI), are already helping AT&T improve its operations, especially among its field technicians, he said, noting that AT&T’s entire routing and scheduling program relies heavily on AI.

“Any given day we have 35,000 network technicians driving around in trucks installing, and repairing, and maintaining our network. It’s essentially a very complex logistics algorithm and, as you can imagine with a company of our scale, just a single percentage improvement in efficiencies can lead to big, big dollars,” Fuetsch said.

AT&T is also trialing the use of drones with computer vision analytics to help improve inspections of its roughly 70,000 cell sites. When those drones take flight, they are scanning towers, looking for excessive heat dissipation, corrosion, loose cables, and bird nests, among other signs that indicate a required repair.

“All of this is getting fed back into a neural network, which is basically AI based,” and that program identifies the repair checklist, the technician and skill sets required, and the parts needed to remedy the problem, Fuetsch said.

AT&T’s experiences here and elsewhere gives him confidence that “the camera is still and will be the killer app” for the foreseeable future. However, the use of cameras is undergoing dramatic changes, he said.

“We carry about 400 petabytes a day across our network. About 50% of that traffic we carry is video traffic. Most of that is going out in a sort of downstream way. The future is going to be about upstream,” Fuetsch said.

Use of Video Cameras:

Fuetsch envisions new applications that “can help better manage our lives through a simple video camera” with the aid of video analytics and sensing. These advancements are occurring not just despite the scourge of COVID-19, but rather because of it in some ways as well, he said.

“This pandemic has really created some new norms here. I think the good news for operators is connectivity is so important and so relevant for everything we do. As we go into 2021, certainly with hopefully a light at the end of the tunnel here in terms of the pandemic with the latest news we’re hearing about vaccines, I’m actually very optimistic.”

“As we go into 2021, certainly with hopefully a light at the end of the tunnel here in terms of the pandemic with the latest news we’re hearing about vaccines, I’m actually very optimistic,” Fuetsch added.

References:

https://about.att.com/story/2020/john_stephens_update.html

https://www.sdxcentral.com/articles/news/att-cto-claims-covid-19-blurred-consumer-enterprise-divide/2020/11/

 

 

U.S. Wireless Carrier’s Aggressive Promotions for iPhone 12 explained

Business Insider:

  • The launch of the iPhone 12 has sparked a battle for U.S. carriers to entice devices upgrades.
  • AT&T, T-Mobile, and Verizon’s aggressive promotional pricing reflects the higher perceived lifetime value of attracting and retaining 5G wireless consumers.

The U.S. wireless carriers are betting that steep iPhone 12 promotions will more than pay off over time.  Here’s why:

  • U.S. wireless carriers are turning to promotions now in hopes that they will be able to secure new or retain customers throughout the 5G era. The most common time for wireless carriers to lose or gain subscribers is when customers switch smartphones, per The Wall Street Journal.
  • The unusually aggressive device promotions also likely reflect the higher lifetime value of 5G customers. By 2025, 5G subscribers are expected to generate 2.5x more revenue per connection for carriers than the average cellular connection, according to Juniper Research forecasts cited by Light Reading.
  • Wireless carriers are also likely attempting to meet US customers halfway, since so many people are cutting back on spending amid the economic slowdown. In Q2 2020, the average sale price of smartphones in the US sank to $503, representing a 10% year-over-year decline, according to Canalys.

Analyst colleague Craig Moffett generated this iPhone 12 Q & A in a blog post for his clients:

1.  Why was Verizon featured so prominently in Apple’s iPhone launch?

Answer: Their millimeter wave broadband, sparsely available though it may be, is the only credible showcase for what 5G can do.

2. Why do Apple’s new iPhone’s sold outside of the U.S. not support millimeter wave signals?

Answer: Millimeter wave drains battery life incredibly quickly, and generates unwanted heat in the handset.

3.  Why do Apple’s new phones in the U.S. default to turning off the very feature that is supposedly the reason to buy them?

Answer: To reduce heat and extend battery life.

4.  What are the use cases that make 5G worth having?

Answer: We don’t know yet.

5.  Why did AT&T decide to offer such a rich promotion – a free iPhone with almost any trade-in – for their existing subscribers?

Answer: Again, we don’t know.

6.  Will 5G produce a high ROI for wireless carriers?

Answer: Most expect that 5G will mean higher capital intensity (capex), and therefore lower ROI.

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References:

https://www.businessinsider.com/att-tmobile-verizon-usher-aggressive-promos-for-iphone-12-lineup-2020-10

https://www.moffettnathanson.com/?Section=Media%20/Telecom

Analysis of AT&T’s Q3-2020 Earnings

AT&T today reported a drop in third-quarter revenues and profit, due mainly to the impact of the coronavirus pandemic on its entertainment business. Subscriber numbers showed some signs of recovery, with over 1 million postpaid net adds in the mobile market and broadband growth thanks to subsidised offers during the pandemic. AT&T said it now expects to generate free cash flow of at least USD 26 billion this year and pay out just over 50 percent of that in dividends.

Quarterly revenues fell to $42.3 billion from $44.6 billion in the year-ago quarter. WarnerMedia (-10%) was affected by the pandemic measures, while mobile service revenues (-0.3%) suffered from lower roaming. Legacy wireline services also continued to erode, and Latin America revenues were hurt by forex pressure. These declines were partly offset by higher mobile equipment sales (+6.4%) and higher advertising revenues as sports broadcasts resumed.

While operating costs were somewhat lower due to the slowdown in media production, operating profit still declined to $6.1 billion from USD 7.9 billion a year ago due to COVID-related incremental costs. In total, AT&T estimates the coronavirus crisis reduced EPS by 21 cents, including 2 cents in extra costs and 19 cents from lower revenue. The operator’s reported net earnings fell to $2.8 billion or 39 cents per share from  $3.7 billion or 50 cents a share in Q3 2019.

After capital expenditure (capex) was reduced to $3.9 billion and operating cash flow increased to $12.1 billion, AT&T was left with free cash flow of $8.3 billion in Q3. The company reduced net debt by $2.9 billion compared to the end of June, leaving it with leverage of 2.66x adjusted EBITDA at the end of September. Over the full year, capex is still expected at around $20 billion.

AT&T mobile revenues were up 1% to $17.9 billion thanks to higher equipment sales, while EBITDA was slightly lower at $7.7 billion. Subscriber growth rebounded from the slower second quarter, with a total 5.5 million net additions. That included 1.1 million postpaid net adds, with 645,000 new phones, and postpaid ARPU was up slightly from Q2 to $49.94. The operator also added 245,000 new prepaid lines, while the remaining growth was new connected devices, which rose to nearly 76 million in total on the mobile network.

Mobility is AT&T’s largest and most important business, accounting for 42% of consolidated revenues.  Analyst Craig Moffett wrote: “The subscriber results in Mobility were better than just “good.” They were a genuine positive. But can AT&T’s success be sustained in the face of a 5G investment cycle that favors T-Mobile today, and that will require big spending (to buy mid-band spectrum. e.g. C-band) tomorrow?”

AT&T managed to slow the decline of TV subscribers to losses of 627,000, half the number of the year-earlier period. That left the company with just under 17.8 million pay-TV subscribers at the end of the period (including 683,000 OTT customers), down 17.5 percent year-on-year. Pay-TV ARPU improved to $130.55 (excluding OTT).

For the first time in six quarters, AT&T’s IP broadband subscribers – FTTH and U-verse broadband subs, not including legacy DSL – posted growth. Broadband subscribers benefitted from relaxed terms to help people work and learn from home during the pandemic. AT&T added a net 158,000 subscribers, its first growth in six quarters, for a total base of 14.1 million at the end of September. The growth was entirely in AT&T Fiber, which grew by 357,000 subscribers to 4.7 million. Fiber connections finally grew fast enough to keep up with U-verse declines.  Growth of 2.4% YoY in premium broadband ARPU only (AT&T doesn’t report DSL ARPU) was probably enough to offset the aforementioned 1.4% YoY decline in total subscribers; total broadband revenue growth very likely turned positive in the quarter.

Total Business Wireline revenue was $6.3B, down 2.5% YoY. That’s a deceleration in the rate of decline from last quarter’s 3.5% (although excluding IP sales in the second quarter a year ago, the decline last quarter would have been a gentler 1.7%, so Q3 may be better seen as a small acceleration in the rate of decline). Still, the result was better than the expectation of $6.25B by 1.4%.

HBO also showed growth, reaching over 38 million paying subscribers in the US for the linear channel HBO and SVOD service HBO Max combined. That beat AT&T’s year-end target of 36 million subscribers. The total includes 28.7 million subscribers for HBO Max, up from 26.6 million at the end of June.

With respect to AT&T’s competition in the telco space, Moffitt wrote:  “AT&T’s positioning vis-à-vis the newly merged T-Mobile/Sprint demands attention. New T-Mobile will be competing on the basis of not only lower prices, but also a best in-class 5G network. T-Mobile has a much better mid-band spectrum position than either AT&T or Verizon. Both will need to spend money to keep up. Verizon is in a position to do so. AT&T is not. With the C-Band auction coming in December, AT&T doesn’t have much time to free up some balance sheet headroom.”

AT&T said in a slide presentation that the company is focused on market-based priorities:
• 5G wireless and fiber-based connectivity
• Expanding reach of software-based entertainment platforms
• Relentless commitment to customer experience

AT&T CFO John Stephens, speaking on the company’s Q3 earnings call, said AT&T is on track to grow its fiber base by 25% this year and add 1 million total new FTTP subscribers for all of 2020.  That’s very impressive!

“My intent is to exit next year (2021) … gaining subscribers, gaining share and growing the broadband business,” said AT&T CEO John Stankey on the earnings call . “We still have a lot of fallow fiber that we can sell into. You saw that this quarter.”   AT&T will look to expand its fiber footprint, but didn’t elaborate on how much more FTTP (AT&T Fiber) or how the associated capex it would spend to increase its fiber footprint.

“We think policy in the country, where it stands right now, is attractive for investment in infrastructure and attractive for investment in fiber. I don’t think we need policy to get better. We just need to ensure that the policy doesn’t whipsaw back to some place that is inconsistent with incenting infrastructure investment,” Stankey said.

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References:

https://about.att.com/story/2020/q3_earnings_2020.html

https://investors.att.com/financial-reports/quarterly-earnings/2020

https://investors.att.com/~/media/Files/A/ATT-IR/financial-reports/quarterly-earnings/2020/q3-2020/ATT_3Q2020_Earnings_Deck.pdf

https://seekingalpha.com/article/4380658-t-inc-t-ceo-john-stankey-on-q3-2020-results-earnings-call-transcript?part=single