AT&T Inc. T added 6.24% more subscribers to its core wireless business last quarter, and the company said it plans to invest further in rolling out 5G infrastructure and the fiber network this year.
The telecom company posted a big loss in the fourth quarter after posting a $25 billion accounting fee, mostly related to its legacy fixed-line businesses. AT&T shares are up about 6% in early trading on Wednesday.
The latest results, excluding the strain, were broadly in line with Wall Street expectations, but executives forecast adjusted earnings for 2023 that came in below analysts’ estimates, hurt by pension accounting.
“I see the economy as relatively stable right now,” Chief Executive John Stankey said on a conference call. “We don’t see anything that would worry us very much, but what happens later in the year – who knows.”
The company is still struggling with some inflationary pressures, including from energy and wages, which are baked into the company’s 2023 guidance, Stankey said.
“I’ve been pretty vocal about how I think inflation is a difficult thing for a healthy economy to do,” said Mr. Stankey. “The good news is that I think the worst is over.”
The Dallas-based company said it added 656,000 postpaid phone lines in the December quarter, a metric investors use to measure the strength of a wireless carrier’s key profit center. Analysts were expecting 644,800 connections for this period.
AT&T overtook competitor Verizon Communications Inc., which said it added 217,000 calls under postpaid billing plans in the December quarter. T-Mobile US Inc. added 927,000 postpaid phone subscribers in the same period, the company said earlier this month when it released preliminary results.
AT&T has refocused on its wireless and broadband Internet services since scrapping plans to create a media conglomerate. The company cut its dividend last year and paid off debt from its acquisitions of DirecTV and Time Warner.
“I think the customer is solid,” Pascal Desroches, AT&T’s chief financial officer, said in an interview. “Last year we have seen the normalization of payment cycles back to pre-pandemic levels in terms of how quickly we move in. It hasn’t gotten any worse.”
Last summer, the company said more of its customers were defaulting on their bills. Mr Desroches said bad debts – receivables that the company doesn’t anticipate at all – are “slightly worse” than before the pandemic.
AT&T generated about $14 billion in cash flow in 2022 and forecasts about $16 billion in 2023. The company forecasts capital spending of about $24 billion in 2023, in line with 2022. Mr. Desroches said capital investment should decline after 2023.
Adjusted earnings per share for the full year are expected to be between $2.35 and $2.45, down from the $2.53 per share expected by analysts polled by FactSet. The company said non-cash pension costs related to higher interest rates and a higher tax rate weighed on its adjusted 2023 earnings guidance.
AT&T lost a total of 43,000 broadband connections last quarter, although it added 280,000 fiber connections as the company continues to build out that network.
The company’s approximately $25 billion goodwill impairment, which reflects writedowns for its fixed-line and Mexico businesses, pushed operating expenses up to $52.4 billion from $26.2 billion a year earlier . AT&T also took a $1.4 billion fee for abandoning assets associated with obsolete wired lines. The company said higher bad debts and higher write-offs also pushed up operating expenses.
Excluding the company’s $25 billion charge and other one-time items, adjusted earnings for the fourth quarter were 61 cents a share, beating Wall Street analysts’ estimate of 57 cents a share.
Quarterly revenue from continuing operations increased 0.8% to $31.34 billion. AT&T’s wireless revenue rose 5.2% last quarter. For 2023, the company expects mobile revenue to increase by at least 4%.
Write to Will Feuer at [email protected]
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