AT&T is expecting to see significantly lower postpaid phone net adds by the end of this year’s second quarter compared to the first quarter.
The first quarterly reports showed AT&T acquired 424,000 postpaid phone net adds. AT&T’s Chief Financial Officer Pascal Desroches is estimating the second quarter will end with roughly 300,000 postpaid phone adds, give or take. That’s a 100,000 drop overall between the two quarters.
So what’s causing the decline? Pascal Desroches says a number of contributing factors are at play here.
One significant source is competition from other providers, some of whom have restructured their pricing tiers to convince people to switch companies. Desroches thinks these tactics are cooling off and hopefully will continue to decline churn during the third quarter. The third and fourth quarters generally report higher numbers as AT&T offers a number of end-of-year deals and sales.
Additionally, AT&T recently gave up a government contract that included 75,000 postpaid phones, deeming the deal unprofitable. The contract was left open for another carrier to swoop in and snag, but we’ll have to wait to see the second quarter-end reports to see which one likely took AT&T’s place.
As for free cash flow, AT&T’s stock plummeted after the company’s first-quarter earnings were announced. AT&T reported $1 billion when the company was estimated upwards of $16 billion for 2023. It also reported AT&T’s postpaid phone ARPU was $55.05 for the same quarter.
“What’s important to me is when I look at our overall wireless service revenue, that is expected to grow 4 percent-plus. In fact, for the first half of the year, I would anticipate us delivering around 5 percent. And so overall this is a really healthy share of the dollars coming into the industry,” said Desroches. He went on to say AT&T’s handset insurance was a big help in improving ARPU.
Still, Desroches remains optimistic about the future of AT&T and says the $1 billion first quarter results were “in line with our expectation. We said Q1 was going to be the lowest, and it would gradually improve from there,” estimated by the end of the second quarter AT&T would be seeing free cash flows ranging from $3.5 to $4 billion. He still holds out hope of making the original $16 billion estimated for the entire year.