AT&T Earnings: The Network Outage Didn’t Stop Solid Growth or Cash Flow

We saw a lot of things to like in AT&T’s first-quarter results. The firm delivered near-record low wireless customer churn (the pace of customer defections) and increased revenue per wireless customer despite the network outage and resulting bill credits that hit in February. Cost-cutting and the slow pace of phone upgrades have buoyed margins, while network investment has moderated, yielding solid free cash flow. The fixed-line business services segment remains the primary weak spot for AT&T, with revenue and margins again contracting sharply. Our fair value estimate remains $23, and we believe the market is underestimating the stability of the US wireless industry.