AT&T CFO says its fiber build is pricier than expected

Fiber has a notoriously high upfront deployment cost, but it seems the bills are coming in a bit higher than expected for AT&T. CFO Pascal Desroches said, though, there’s no reason to panic since those higher costs are being offset by faster than expected penetration rates and revenue.

AT&T is working to reach 30 million homes with fiber by the end of 2025 and closed 2022 with a total of 24 million passings. CEO John Stankey said during Q4 2022 earnings it is looking to pass another 2 million to 2.5 million locations annually until it hits its goal.

That figure is significantly slower than the 5 million-location run rate AT&T was originally aiming for and Desroches offered a potential hint as to why during an investor conference on Monday.

“I think it’s fair to say that it’s probably costing us more than we thought when we started,” Desroches said, without providing specifics.

AT&T isn’t the only one dealing with higher costs. Frontier Communications CFO Scott Beasley said during its recent earnings call that inflationary pressure was expected to push its cost per passing toward the high end of its $900-$1,000 range. Shenandoah Telecommunications COO Ed McKay similarly said inflationary factors plus its expansion into less densely populated territory were expected to push its costs per location to the high end of its $1,000 to $1,400 range.

But Desroches said while costs have gone up, “we’re also penetrating much faster than we thought, nearly twice the level of penetration in the first year that we have seen historically. So, we’re really pleased with how we’re driving perpetration on the build.”

In addition to the penetration perks, Desroches said average revenue per user for fiber customers is “at a higher rate” than initially expected. Taken together, he said, these mean it is actually delivering better returns than expected despite the costs.

Cutting copper costs

While fiber is taking off, Desroches noted AT&T’s cost base is still weighed down by a “significant legacy copper footprint.” Those copper assets operate on a different billing system, require more dispatches for repairs and are more vulnerable to be taken out by weather events than fiber, he said.

Thus, the operator is looking to slash copper footprint by 50% by 2025, he added, and in doing so lower costs to drive better margins.