Covid-19 takes a $2.8 billion bite out of AT&T's second quarter

The Covid-19 pandemic was a $2.8 billion anchor on AT&T's Q2 results due a lack of live sporting events and the cost to protect its employees, among other factors.

AT&T CEO John Stankey, who took over as CEO on July 1, said on the Thursday morning's earnings call that AT&T would operate on the assumption that the Covid-19 disruptions would continue into next year.

In the second quarter, AT&T posted revenue of $41 billion, which was down from $45 billion in the same quarter a year ago. Out of that $4 billion difference, the Covid-19 pandemic accounted for about $2.8 billion.

AT&T estimated that it spent about $320 million to protect its frontline workers while losing about $510 million due to the lack of live sporting events and theater closures.

On the flip side, Stankey touted the "flawless" launch of HBO Max in the second quarter, and the nationwide deployment of its 5G services.

In the second quarter, AT&T lost 102,000 broadband subscribers. AT&T didn't count 159,000 subscribers that were part of the FCC's Keep America Connected campaign, which ended on June 30. AT&T CFO John Stephens said AT&T was keeping those subscribers connected as it works to add them as paying customers.

Among Stankey's list of AT&T's top-five priorities, he listed broadband, both wired and wireless, first.

"Broadband customers continue to look for faster speeds," Stephens said. "We added more than 220,000 fiber subscribers and the number of customers opting for gigabit speeds increased by more than 750,000 in the quarter. We now have 4.3 million AT&T Fiber customers with nearly two million of them on 1-gigabit speeds."

On the earnings call, Stankey said AT&T's roadmap includes more fiber, but the additional fiber needs to benefit more than just residential fiber-to-the-home deployments.

"I have an appetite to build fiber that serves a combination of our needs in the consumer space, what we need to do to deploy 5G, and what can help our business segment," Stankey said. "We have lines of business in all those areas and that should give us leverage in fiber deployments that I think others—that are either only a fixed line provider and reselling wireless services, or those that are only wireless providers trying to deploy more fiber intensive 5G networks—don't enjoy.

AT&T cuts jobs in July

AT&T started to reduce its headcount in July as part of its plan to reduce operational costs by $6 billion. AT&T cut its workforce by 4,040 jobs in the fourth quarter, according to a press release by the Communications Workers of America (CWA.)

On AT&T's fourth quarter earnings call, Stankey said AT&T was targeting a 4% reduction in labor-related costs including benefits and contract employees in 2020.

RELATED: Communications Workers of America: AT&T culls over 4,000 jobs in Q4

In June, the Communications Workers of America, which represents about 100,000 AT&T's employees, said AT&T was eliminating 3,400 technical and clerical jobs.

"Though most employees won’t be affected, the reductions will be targeted and sizable," an AT&T spokesperson said in an email Thursday morning to FierceTelecom. "The cuts will impact executives, managers, union-represented employees and non-payroll workers. In fact, we’ll be eliminating more non-payroll workers — the vast majority of which are outside the United States—than we are managers or union-represented employees."

AT&T checks box on virtualization goal

During the second quarter, AT&T achieved its goal of virtualizing 75% of its core network functions. AT&T first outlined its virtualization project back in 2013 as part of its Domain 2.0 initiative. The plan included using its internally developed ECOMP, which is now part of ONAP, and software-defined networking (SDN) to virtualize and put into production critical network functions.

RELATED: AT&T on the homestretch of virtualization goal

Along the way, AT&T came up with the stated goal of having 75% of its core network functions virtualized by 2020. AT&T stood at 30% of its goal at the end of 2016 and then spent the next two years scaling out and globalizing its virtualization efforts. AT&T finished up last year with 65.5% of its network virtualized, which hit last year's goal.