AT&T’s Financial Performance: Navigating Challenges and Seeking Growth

AT&T Inc., a leading provider of nationwide wireless service, advanced fiber-based broadband, and managed professional services, has released its financial results for the third quarter and first nine months of 2024. The report highlights the company’s efforts to adapt to industry changes and position itself for future success, despite facing some headwinds.

Consolidated Financial Overview

AT&T’s total operating revenues decreased slightly by 0.5% in the third quarter and 0.4% for the first nine months of 2024 compared to the same periods in 2023. This was primarily driven by declines in Business Wireline service and Mobility equipment revenues, partially offset by growth in Mobility service, Consumer Wireline, and the Latin America segment.

Operations and support expenses increased significantly by 15.8% in the third quarter and 5.0% for the first nine months, largely due to a $4,422 million non-cash goodwill impairment in the Business Wireline reporting unit. This impairment was driven by a faster-than-anticipated industry-wide decline in legacy services. Depreciation and amortization expenses also rose, reflecting the company’s network modernization efforts and ongoing capital investments.

As a result, operating income decreased by 63.4% in the third quarter and 24.6% for the first nine months. The operating income margin declined from 19.1% to 7.0% in the third quarter and from 20.1% to 15.2% for the first nine months.

Net income attributable to AT&T plummeted by 96.2% in the third quarter and 43.8% for the first nine months, primarily due to the goodwill impairment and lower operating income.

Segment Performance

The Communications segment, which includes Mobility, Business Wireline, and Consumer Wireline, saw a 0.6% decrease in operating revenues in the third quarter and a 0.8% decline for the first nine months. This was driven by lower Business Wireline revenues, partially offset by growth in Mobility and Consumer Wireline.

Mobility Results Mobility service revenues increased by 4.0% in the third quarter and 3.6% for the first nine months, driven by subscriber gains and higher average revenue per user (ARPU). Equipment revenues, however, declined by 5.7% in the third quarter and 7.9% for the first nine months due to lower wireless device sales volumes.

Mobility operating income grew by 3.5% in the third quarter and 2.8% for the first nine months, with the operating margin improving from 32.7% to 33.3% in the third quarter and from 31.9% to 32.5% for the first nine months. The EBITDA margin also increased from 43.0% to 45.1% in the third quarter and from 42.2% to 44.5% for the first nine months.

Business Wireline Results Business Wireline service revenues decreased by 13.2% in the third quarter and 11.1% for the first nine months, reflecting lower demand for legacy voice, data, and network services, as well as the impact of product simplification and the contribution of the cybersecurity business to the LevelBlue joint venture.

Business Wireline operating income turned negative in the third quarter and decreased by 89.1% for the first nine months, with the operating margin declining from 6.7% to -0.9% in the third quarter and from 7.1% to 0.9% for the first nine months. The EBITDA margin also decreased from 32.5% to 29.4% in the third quarter and from 32.4% to 29.9% for the first nine months.

Consumer Wireline Results Consumer Wireline revenues increased by 2.6% in the third quarter and 3.0% for the first nine months, driven by growth in broadband services, particularly fiber connections. Legacy voice and data service revenues continued to decline.

Consumer Wireline operating income grew by 22.5% in the third quarter and 40.5% for the first nine months, with the operating margin improving from 4.8% to 5.7% in the third quarter and from 4.3% to 5.9% for the first nine months. The EBITDA margin also increased from 31.0% to 32.8% in the third quarter and from 30.7% to 32.7% for the first nine months.

Latin America Segment The Latin America segment, which provides wireless services and equipment in Mexico, saw a 3.0% increase in operating revenues in the third quarter and a 12.2% rise for the first nine months. This was driven by growth in both service and equipment revenues, partially offset by unfavorable foreign exchange impacts.

The Latin America segment’s operating income improved in the third quarter and for the first nine months, with the operating margin increasing from -2.9% to 1.0% in the third quarter and from -3.4% to 0.6% for the first nine months. The EBITDA margin also increased from 15.6% to 16.4% in the third quarter and from 15.7% to 16.5% for the first nine months.

Liquidity and Capital Resources

AT&T maintained a strong liquidity position, with $2,586 in cash and cash equivalents as of September 30, 2024. Cash provided by operating activities was $26,875 for the first nine months of 2024, slightly lower than the $26,936 generated in the same period of 2023.

Cash used in investing activities totaled $12,127 for the first nine months of 2024, primarily for capital expenditures of $13,420 (including $1,571 in vendor financing payments). The company’s capital investments were focused on network upgrades, fiber deployment, and strategic initiatives.

Cash used in financing activities was $18,855 for the first nine months of 2024, mainly for debt repayments, dividend payments, and vendor financing payments. AT&T’s total debt stood at $129,012 as of September 30, 2024, with a weighted average interest rate of approximately 4.2%.

The company’s credit facilities, including a $12,000 revolving credit agreement, provide additional liquidity and flexibility. AT&T remained in compliance with the covenants for its credit facilities as of September 30, 2024.

Competitive and Regulatory Environment

AT&T operates in a dynamic and evolving regulatory landscape. The company continues to navigate changes in federal and state regulations, as well as the ongoing debate around net neutrality rules and digital discrimination policies.

The company supports regulatory and legislative measures to reduce unnecessary burdens and enable it to compete effectively, while also seeking to ensure that legacy regulations are not extended to newer technologies like broadband and wireless services.

The availability of spectrum for 5G and future services remains a key concern, as the federal government’s ability and intent to make additional spectrum bands available in a timely manner remains uncertain.

Outlook and Challenges

AT&T faces several challenges in the near term, including the impact of the goodwill impairment in the Business Wireline unit, the ongoing secular decline in legacy services, and the need to navigate the evolving regulatory landscape.

However, the company’s focus on growth areas, such as Mobility, fiber-based broadband, and managed professional services, provides opportunities for future success. The continued expansion of the company’s 5G network and the deployment of fiber infrastructure are expected to be key drivers of revenue and profitability.

Additionally, AT&T’s efforts to streamline operations, optimize costs, and leverage its strong liquidity position should help the company navigate the current environment and position it for long-term growth and value creation.

Overall, AT&T’s financial performance in the third quarter and first nine months of 2024 reflects the challenges facing the industry, but the company’s strategic initiatives and adaptability suggest it is well-positioned to capitalize on emerging opportunities and deliver value to its shareholders.