Senior EVP & CFO, AT&T Inc.
AT&T CFO: 'We’re still going to get paid' in a recession
AT&T CFO Pascal Desroches joins Yahoo Finance Live anchor Brian Sozzi and Julie Hyman to discuss earnings, cash-flow guidance, recessionary risks, inflation, phone subscribers, and the outlook for growth.
Don't Miss: Valley of Hype: The Culture That Built Elizabeth Holmes
WATCH HERE:
• Elizabeth Holmes: 'Valley of Hype' [p...
Subscribe to Yahoo Finance: https://yhoo.it/2fGu5Bb
About Yahoo Finance:
At Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financ...
About Pascal Desroches
Pascal Desroches, AT&T's CFO, has discussed the company's ongoing transition away from legacy copper infrastructure toward fiber and wireless services. In a March 2025 interview, he stated that AT&T expects to "largely get out of the copper business" over the next five years and projected $3 billion-plus in savings over three years from that shift. He described the company's strategy as growing its core mobile and fiber businesses while legacy revenues decline, and said AT&T aims to return value to shareholders through dividends and share buybacks. Desroches also noted that over 70% of consumers want to buy connectivity services from a single provider, and he expressed admiration for Apple's customer loyalty. In a July 2022 interview, Desroches addressed recession risks and free cash flow guidance. He said that even in a recession, AT&T expects customers to pay their bills due to the "mission-critical nature" of its services, though he acknowledged delinquency trends were slightly worse than pre-pandemic levels. Desroches described price increases for some customers on older plans as a "painful step" that had shown early positive results. He also stated that AT&T had taken "hard steps" including dispositions and a dividend reduction to position the company for long-term investment and growth.
Transcript (11 segments)
I
Interviewer0:12
AT&T is lowering its full-year free cash flow guidance, taking a hit from higher capital investments and timing of customer collections. Joining us now to break this all down is AT&T's CFO Pascal Desroches. Pascal, good to see you here this morning. The stock is under a good deal of pressure here, down close to 10% right now, and it looks to be concerns about free cash flow guidance and how consumers are paying their bills. Take us through what you are seeing from that typical AT&T consumer right now.
P
Pascal Desroches0:40
Good morning, Brian. Good morning, everyone. Maybe the way to start is just taking a step back. The fundamentals of the business remain really strong. We are growing customers at a rate we haven't seen in some time. Our adjustment to our free cash flow guide really reflects two items. One, because we're growing faster, we're investing more to support that growth, so that is one piece of it, and you're seeing that in the form of higher payments for devices as we are growing more customers than we anticipated. Two, we're seeing, and this is a recent phenomenon, we're seeing about a two-day delay in collections for customer receivables. Our history would show that even in recessionary periods, customers pay their bills, albeit maybe a little slower than they do in normal, less stress times, but they do pay.
I
Interviewer2:10
Pascal, when you sit around the table and talk with your team about some of these trends in the past six weeks with the consumer, I mean, is this the first signs of a recessionary impact on your business?
P
Pascal Desroches2:21
Yeah, again, I think it would be... I don't want to set off alarm bells because I think it's too early to say whether or not we are being impacted by a recession. Clearly, even in recessionary periods, and I think John Stankey mentioned this on the call today, that our customers still paid us because of the critical nature of our services. We're still going to get paid. It's really slower than we've seen historically, but this recent trend is a more... this comes back in the near term. So that's really the reason for one of the reasons for the adjustment in our guide.
J
Julie3:16
I'm Pascal, it's Julie here. Just to get a little more granular on this if we could. I'm curious what the default rate or the non-payment rate does look like in a full year in a full-fledged recession right, and what it's like now versus that scenario. What would characterize that scenario?
P
Pascal Desroches3:37
Here is the way I would characterize it. Overall, we are seeing delinquency trends and bad debt levels slightly worse than pre-pandemic levels, not nearly what we have seen in prior recessions. And even in prior recessions, the level of... to show up more in the data.
I
Interviewer4:11
Would that mean closing unprofitable stores? Would that mean pausing some of the network infrastructure investments even that you've been accelerating over these past couple years?
P
Pascal Desroches4:24
You know, here is the thing. The bigger context to keep in mind: we undertook a significant number of dispositions last year, and we reduced our dividend. We did take those very important and hard steps in order to really position us for investing in the long-term benefit for long-term growth in this business, and that's exactly what we're doing. The investment cycle in this business is long-term, and to try to... in order not to be beholden to... invest in the long term, still cover our dividend obligations, and deliver an attractive return to shareholders. That's what we're set up for. With that said, in terms of how we're readying ourselves in the event of a recession, look, this company has been under a restructuring the last several years. We have, during that time, reduced our workforce. We are shutting down products and services that are no longer viewed as strategic, and we are reinvesting in other places, in other parts of our business that are growing. So we have been restructuring the business for the last two years. We are on track for delivering $4 billion of... so we feel really good that we have positioned the company to be ready for a time just like this.
I
Interviewer6:17
Do you envision a continued reduction in the workforce then with some of the work that you've already been doing?
P
Pascal Desroches6:24
Yeah, look, we have said this at our Investor Day that there will be areas like some of our support services that we're going to continue to rationalize. There will be... we are shutting down portions of our legacy footprint that will come with dispositions of assets, reduction in some of the infrastructure. So that has been and will continue going.
I
Interviewer6:51
Pascal, lastly, I believe you're still looking for overall this year $1 billion worth of inflation. Of course, inflation continues to be a very... increase prices to a portion of our customers, but I thought the way we went about it was very smart. We targeted those customers that we thought... we had new plans, and they were still on old plans. Those new plans could work better for them, provide them with more value, albeit for a slightly higher price. And look, it's too early to call it to say we have succeeded in doing that, but early signs are really good that that strategy and that approach has worked. And look, in terms of as we look forward, you know, John Stankey has said this that given the inflation we're seeing in inputs, the responsible thing is to not take... so much for spending some time with us this morning, and we know it's busy. Very much for having me. Thanks, take care. You take care.