With the rise of new competitors and evolving technology, AT&T finds itself in fierce competition for subscribers in the telecommunications industry. Read on to learn more about the challenges and opportunities facing the company in this fast-paced arena.
AT&T Stock (NYSE:T)
When AT&T (NYSE:T) publishes its first-quarter results before the market opens on Thursday, the topic that will be most heavily emphasized is the company’s ability to increase its customer base despite a contracting market.
Before we dive into the specifics of AT&T’s competition for subscribers, let’s take a step back and look at the telecommunications industry as a whole.
Over the past few decades, the industry has undergone significant changes, with the introduction of new technologies such as mobile phones, smartphones, and the Internet. As a result, telecommunications companies have had to adapt to stay competitive.
Today, the telecommunications industry is dominated by a few key players, including AT&T, Verizon, and T-Mobile. These companies offer a wide range of services, including mobile phone plans, internet services, and cable TV.
Despite the dominance of these major players, the industry is also seeing an influx of new competitors, such as Google Fiber, which is offering high-speed internet services in select cities across the US.
After reaching an all-time high during the pandemic, when social separation rendered the world more dependent than usual on phones and the internet, the amount of competition among providers of telecommunications services is growing, and analysts anticipate that demand will swing back toward normal levels. Because of this, some businesses stand to lose customers as the industry as a whole continues to make the substantial investments necessary to deliver the highest quality service.
There is a wide range of estimates on the number of “postpaid subscribers” that AT&T (NYSE:T) added. Postpaid subscribers are individuals who pay for their phone or internet service on a monthly basis. The majority of analysts whose projections are tracked by FactSet agree that there will be a net increase of 485,000 consumers, although individual predictions range anywhere from 344,000 to 500,000.
Analyst David Barden from BofA Global Research, for example, is on the higher end of the spectrum, estimating that there would be 485,000 net increases. “We expect AT&T to outperform on post-paid phone net adds this quarter as it benefits from its customer retention and acquisition tactics,” Barden said in a note earlier this week. “We expect AT&T to outperform on post-paid phone net adds this quarter.”
Bryan Kraft, an analyst at Deutsche Bank, is on the opposite side of the consensus fence, forecasting there will be 344,000 gains. That represents “healthy levels of wireless customer growth for AT&T this year,” but it is “not at the same level as last year,” he wrote in a note that was released on Tuesday.
AT&T increased its number of postpaid phone users by 691,000 over the first three months of the previous year, and then by more than 700,000 during each of the subsequent two quarters. During the last three months of 2018, the company gained 656,000 new subscribers.
The moderate pessimism that Kraft possesses can be attributed to the tendencies of the industry and the competition. He anticipates that the telecommunications industry will gain more than eight million postpaid phone users this year, which is a decrease from the 9.3 million subscribers that were added in 2022. According to Kraft, this slower growth is the result of T-Mobile (NASDAQ:TMUS) increasing its market share.
In August of the previous year, Barron recommended investing in T-Mobile (NASDAQ:TMUS) shares.
AT&T has made it quite apparent that it does not intend to run any promotions in the future in order to draw in new subscribers. In a conference call with investors from Deutsche Bank on February 27, Chief Financial Officer Pascal Desroches stated that “we have no intentions of degrading the economics of our business,” despite the fact that the industry has always been competitive.
AT&T needs to invest, hence they need the money. The business announced in January that it intends to invest $24 billion in capital expenditures this year to build out its 5G wireless and fiber networks, which is consistent with the levels that would be present in 2022. The consensus estimate among analysts was $22.1 billion.
It is important for the goals of the telecom firm to be supported by cost-cutting initiatives. The business announced earlier this year that it had achieved $5 billion in annual savings as part of a three-year plan that began at the beginning of 2020 and aimed to reach $6 billion in total cost reductions.
It is anticipated that the company would have adjusted earnings of 58 cents per share for the first quarter, with revenue of $30 billion. On Wednesday, AT&T stock price was down 0.6%, coming in at $19.71.
Featured Image: Unsplash @ Brendan Stephens
