- CEO John Stankey once again sang the praises of AT&T’s fiber and wireless convergence strategy during the Q1 earnings call
- In the D2D market, he’s looking for a strong wholesale relationship – one that could expand beyond AST SpaceMobile
- But as far as the threat from D2D, he reiterated that satellites don’t work well indoors and AT&T itself has spent a lot of money to improve cellular service inside buildings
At AT&T, it’s all about convergence, which usually refers to the fiber/wireless bundle that the company touts, exemplified in its new OneConnect plan that offers new customers “one flat monthly price” for internet and wireless connectivity.
But there’s also the notion that satellite connectivity will be part of the mix.
“I think we’re naturally positioned to add those capabilities on to the great integration we’ve already done to be a converged access provider,” AT&T CEO John Stankey said during today’s Q1 earnings call.
He went on to talk about the awesomeness of fiber for its superior performance and lower cost per bit. But circling back to satellite, he acknowledged AT&T’s long-time relationship with AST SpaceMobile in the direct-to-device (D2D) space and the work that SpaceX and Amazon Leo are doing.
He suggested that he’s open to working with another low Earth orbit (LEO) player in addition to AST SpaceMobile.
“My goal would be that I have a good, strong wholesale relationship, and it may not just be with one of them,” he said. “It may be with more than one of them, and that we architect this in a way that we can continue to manage the traffic on our network and control packets so that we are able to offer that end-to-end integrated service on a heterogeneous network.”
Satellite D2D as threat
Addressing the question du jour about satellite D2D posing a threat to terrestrial wireless networks, he said there’s a lot to be done in getting LEO constellations up and working for D2D.
“I think it will happen, but I don’t think it’s going to be a straight line from here to there. There’s all kinds of challenges to work through these things,” he said.
One is getting satellites up in the air. Another is keeping them in orbit. He didn’t mention it, but AST SpaceMobile’s BlueBird 7 satellite failed to reach the correct altitude when it was launched last weekend and it had to be de-orbited.
Satellite players also need to get the right spectrum portfolio in place and work through issues related to power and interference, he said.
Then there’s the physics. “Satellite works really good outdoors. It doesn't work very good indoors,” he said, adding that it’s sometimes lost on people that “we have spent literally decades investing in communications infrastructure in this country to raise service levels and performance.”
AT&T spends about $1.5 billion a year to upgrade hospitals, stadiums, hotels and universities to make sure the connectivity works inside buildings, and “you can’t just flip a switch and get that done,” he said.
AT&T’s OneConnect
He also talked about the OneConnect plan, which targets new customers with the bundled wireless/fiber offering. It’s a BYOD plan for consumers with unlocked devices; customers are hanging onto their devices longer and they’re more accustomed to porting them from one carrier to the next, he said.
“We want to tailor this plan to make sure that we can receive those customers and then attach them to a network construct that drives churn down,” he said. “One of the best things we have to drive customer retention and customer lifetime value is by pairing fiber broadband with wireless.”
Analyst’s take on convergence theme
In a report for investors today, MoffettNathanson’s Craig Moffett noted that AT&T has re-segmented its results to highlight the stuff they care about (mobility and fiber, grouped under the moniker “Advanced Connectivity,”) and the stuff they don’t (copper, under the heading “Legacy”).
“While the numbers are new, however, the narrative is by now relatively familiar. All this re-segmentation is in service of selling investors on the notion of convergence,” he said.
Whether investors buy into that is another matter. Moffett pointed out that once AT&T’s fiber expansion is complete, it will still have a converged footprint that covers no more than about a third of the U.S.
In that third of the U.S., “AT&T will compete against a cable operator with a cost (and consumer price) advantage in offering a similar converged bundle, and against price-based stand-alone offerings from FWA and increasingly, LEO satellite,” Moffett said.
“As we’ve warned many times, ‘convergence’ is an elevated name for ‘discounts.’ The product doesn’t work any differently. The costs of providing the two services aren’t any lower together than apart,” Moffett said. “It’s only the prices, and the margins, that are lower.”
By the numbers
AT&T added 294,000 new postpaid phone customers in Q1, which was better than most analysts predicted. But its prepaid phone losses of 72,000 were much worse; analysts were expecting a loss closer to 35,000 in prepaid.
The company added 273,000 consumer fiber customers in the quarter. Internet Air, its fixed wireless access (FWA) offering, totaled 239,000 net additions.
Commenting on what AT&T’s results mean for its stock, New Street Research analyst David Barden summed it up thusly: “The results were okay. Just okay. And okay results should be seen as a slight positive by the investors.”
AT&T shares were trading up a smidge today, to $25.91