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AT&T Continues to Post Solid Customer Growth During Q1; Shares Attractive

Analyst Note

| Michael Hodel, CFA |

AT&T’s push to add customers showed during the first quarter, with solid wireless, broadband, and HBO Max gains. The firm also increased network investment plans for the year, though it did so in a way (using vendor financing) that will cause reported capital spending to decline somewhat, allowing management to maintain its $26 billion free cash flow target. AT&T stressed that it is trying to avoid overemphasizing financial metrics to instead make prudent long-term investments. The increased spending appears to be going into the wireless network to ensure that the firm takes full advantage of the C-band spectrum deployment, doing other work at the same time. Our fair value estimate remains $36, and we believe the stock is attractive. 

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Company Profile

Business Description

Wireless is AT&T's largest business, contributing about 40% of revenue. The firm is the third- largest U.S. wireless carrier, connecting 64 million postpaid and 17 million prepaid phone customers. WarnerMedia contributes a bit less than 20% of revenue with media assets that include HBO, the Turner cable networks, and the Warner Brothers studios. Fixed-line business communications services, provided to a wide range of entities, provide about 15% of revenue. The consumer broadband segment (about 7% of revenue) primarily provides broadband service to 15 million households. The firm recently sold a stake in its traditional television business, which serves 17 million customers and generates about 17% of sales. This business will be removed from AT&T's financials going forward.

208 S. Akard Street
Dallas, TX, 75202
T +1 210 821-4105
Sector Communication Services
Industry Telecom Services
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type High Yield
Employees 230,000