AT&T CEO John Stankey Talks Earnings | Bloomberg Talks

Well, I think going into the break, Jonathan, you referred to the results as fantastic and I would agree with you and I think the team did an excellent job executing, as you said, and it's not just in our wireless business. It was nearly 370,000 fiber net adds. That's a record for us in this quarter. Look, what went right is what we told people was going to happen this year as we gave guidance for the next 3 years. We said because of the investments we've been making in this business over the last 5 years at a sustained and targeted level and the M&A work that we had done acquiring more spectrum and picking up some additional footprint from Lumen, that you should see a step up in growth as a result of those things. The team had the asset base it needed to execute and drive growth at a faster level and you saw the manifestation of that starting to happen here in this quarter and it's showing up in an accelerated service revenue growth. It's showing up in accelerated EBITDA growth. I would even go into our business segment and point out that we had growth in our strategic services for business for the first time in a very, very long time and as a result of that we expect that that's going to sustain itself through 2028. So, we're executing well. We're hitting on all the cylinders in the engine, and when that happens, the business can deliver the kind of results you're seeing, and I'm pretty confident we can keep that moving going forward.

It's extremely important. It's actually that number is 45% if you were to normalize it for the Lumen footprint that we just recently brought in that's diluting the number a little bit, and as you know, you see in our report that's been ticking up steadily, and it's important because one, those customers are more lucrative customers when they buy multiple products and services from us. Two, churn goes down, and that's one reason why you're starting to see our churn numbers improve this quarter because we're starting to get that benefit of that base that is buying both together from us. And three, brand affinity, the customer's happiness with AT&T and their impression of the brand is much higher as a result of that because the products are better together. So, it's really important we continue down that path, and it's frankly one of the most important things as you think about our competitive positioning moving forward because we can provide world-class networks in both wireless and fixed that tackle 98% of what a customer needs to do on the internet. Occasionally, they walk off one of our networks, and as you look at our partnerships that we're working with the satellite industry, by this time next year, we'll be able to solve that problem. And so, we're the natural place for people to come and meet their needs on the internet and do it easily on one bill with one set of services and one support infrastructure. We think we're in a great position as a result of that.

You know, I don't characterize it as a price war. I think there's been a stratification of pricing for customers depending on what kind of services they want to buy. There's the segment of the market that needs high-performing symmetrical gigabit services, very robust wireless plans. That segment of the market is willing to pay for that and they pay a premium as a result of that exceptional value that they get back. We've played very, very well in that space given our asset base, but there's also a segment of the market that's more value-oriented. And I would say choices have come into the market because of good regulatory posture that have allowed investment that weren't there before. And those choices are putting more value-oriented products and services at more attractive price points, but the product and service maybe isn't as robust. And at AT&T, we've played really well up market but not as well down in the value space. And we've been working hard to get our product portfolio so that it matches up across the entire continuum of the market. You saw that in the results this quarter because our account additions, new accounts to AT&T, hit like a three-year high. And that's because we're doing a lot better job down market. And there's nothing wrong with having a more affordable product that's tuned to certain parts of the market. I don't consider that a price war. I consider that meeting market needs as long as you're doing the things that you can do up market, which we've done very well. And I think when you see margins the way they are at AT&T, this is like a record for us. That's a good sign that we're getting that balance correct.

Look, my point of view is they have a fantastic product. There's great innovation that's moving in that space and it fits a part of the market that hasn't been well served, especially in less densely populated areas. And you know, the interesting part about that is our investment has largely been in urban and in densely populated suburban. We haven't pushed real hard in the rural and less densely populated areas. That tends to be more of the stronghold of cable companies. I think they'll do pretty well in that space bringing an alternative and competition in there. I think it's going to be very hard to come into the more densely urban populated areas to compete with that bundle that I just talked about earlier of fiber that is the best product in the market, best performing. It's the lowest marginal cost. Our great wireless density that far outstrips what you can do from direct to device and satellite. Years of investment in the hard to reach places like stadiums. Everybody who went to a World Cup game knows how important being able to connect in a stadium is to experience what goes on socially and actually in the arena so that you can see a few replays that they're not showing there. We've been doing that for a long, long time and it's going to be very, very hard to catch up on that infrastructure and I think we're going to do really, really well competing in metro and suburban areas, which is where our investments have been.

Yeah, we've been really disciplined about this and I'm satisfied that where we've been investing in places like in our software development organization, what we've been doing in our customer service channels, our applications and engineering, some of the things that we've been doing and building the right algorithms for pricing support, that we've gotten very strong returns. And as a result of that, I would almost argue people inside of our company maybe think we've been a little too judicious about how we've managed investment. We're trying to find that right balance of innovation and allowing things to run in the discipline of ensuring that what we're doing drives return. I would also say that I'm very well aware that a lot of this investment is a competitive necessity. When we improve operations like customer service and call centers, I don't know that that's necessarily sustainable. I think those are ultimately efficiencies that get competed away in the market. They go to the customer in the form of lower prices or better service. The things that we do that really give us strategic advantage like maybe writing software for capabilities that we didn't have before that make us better at pricing or better at driving yields on the network or more efficient. Those are the ones that maybe we get to keep some of the benefit on and if I were to say that we need to do something better moving forward, we need more of the ones that drive strategic advantage to balance out some of the ones that we know are just the table stakes that we need to compete in the market and drive the great margin performance that you're seeing right now in the quarterly results we just published.

Well, you know, look, I think the markets eventually get things right. It doesn't mean that they get it right every month or that there isn't momentary dislocations and readjustments. In my point of view, obviously, I'm probably speaking my book. I think we're in a little bit of a dislocation right now and there's certainly a desire to raise capital to move to new opportunities in the AI space and, you know, I think there's been some rotation out of our stock as a result of that. But here's what I know, we've built this business for the future. To your point, we're building symmetrical networks that have as much upstream bandwidth as they have downstream bandwidth and we think that's going to be critical in the AI world just like memory's critical, just like chips are critical, just like data center infrastructure is critical. And I do believe that the market will eventually understand that what we have built is indispensable for the kind of workloads we're going to see in this AI environment working forward and that AT&T is uniquely positioned in the investments we've made over the last 5 years to serve more of those workloads more effectively than anybody else. And eventually the market will figure that out and when the cash shows up, valuation will ultimately correct itself and I have the confidence that that's the case. Our job as a management team is to continue to execute and stay focused on the plan that we've laid out and I believe this quarter is a testament that this management team is in fact doing that.