Q3 '25 Earnings - Breaking Down AT&T and T-Mobile’s Results

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the two hundred and sixty seventh episode of

Roger Entner 0m12s

the Week with Roger, the conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me is Roger Entner. How are doing, Roger?

Guest Speaker 0m23s

I'm good. How are you?

Roger Entner 0m25s

I'm good. So it's earnings season. We've got two out of the big three that are reported. I thought we could talk about that. Why don't we start with AT&T?

Roger Entner 0m33s

How'd they do?

Guest Speaker 0m34s

AT&T had a good quarter. 405,000 postpaid phone net adds.

Roger Entner 0m41s

Which was above consensus, right?

Guest Speaker 0m43s

It's above consensus. We'll break it down afterwards. 288,000 fiber net adds, 270,000 Internet air net adds. We are seeing here AT&T Internet air ramping. Their convergence story has improved.

Guest Speaker 1m2s

They're now at 41%. So business has been doing reasonably well. Business Wireline is still A boat anchor? Yeah, it's a little A little bit

Roger Entner 1m16s

of a boat anchor.

Guest Speaker 1m17s

Yeah, and it's still struggling. Business Mobility is also still struggling, but I think it's struggling less than everybody feared. So, you know, overall not bad. Now, when we break down the 405,000, they had 300,000 FirstNet additions. So let's say 100,000 of them were voice, right?

Guest Speaker 1m41s

That's a good number.

Roger Entner 1m42s

That's a good rule of thumb. Think in the past we've seen that roughly one third of those are voice lines, yeah.

Guest Speaker 1m48s

Yeah, so that's that. When you look at their business mobility revenue, you're using like a $40 ARPU, right? That means they lost year over year like 150,000 subs. So that's basically maybe another 5,100,000 that they lost there in the last quarter. So that's 200,000.

Guest Speaker 2m15s

Then they added 200,000 converged customers. And if you assume that they came on the heels of how many of them came from the 288,000 Fiverr net adds, because Fiverr is the lead in for AT&T, right, to get convergence. I don't know, 100, 150, and then the standalone mobility gains look a lot more concerning. Now the strategy is we're gonna run convergence, and they are best in class fiber, right? And that's why they have that tie in where fiber is winning here.

Guest Speaker 2m55s

And so, the strategy is working, right?

Roger Entner 2m58s

Right. You get the most bang for your buck with convergence, right, when you're growing the fiber footprint. Right? So you wanna talk a little bit about, you know, how they have talked about growing that fiber print. You get more opportunity for convergence if you have got more households passed.

Roger Entner 3m12s

Right?

Guest Speaker 3m13s

The problem is the addressable market is like 40,000,000 households. We have 125,000,000 well, it's 40,000,000 locations. We have 125,000,000 households, 143,000,000 dwellings. So depending on what your math is, that's one third to, like, a little bit more than a quarter of locations. So the rest needs to be covered by Internet air.

Roger Entner 3m39s

Right. Although they're working on you know, they've got CenturyLink or they will have CenturyLink fiber folks soon.

Guest Speaker 3m45s

The Lumen stuff, I'm throwing all of that in. That's part of the 40,000,000. So it's going to be really, really interesting because if they're smart, and Dan Schulman is smart, they will play the same playbook in the Verizon, especially with Frontier footprint. And T Mobile will do the same thing in their much, much smaller fiber footprint. And they did really, really well as well when it comes to that.

Guest Speaker 4m10s

It's going to be a little bit like, here's my castle that I defend with convergence, and then you have the cable guys who are defending their castle with convergence, right? And then you have like wireless flying over that, standalone wireless flying over that, and going to pick, depending on who it is, pick out all the juicy targets. Quite interesting on how that will play out. And then T Mobile, well, Mike Sievert's victory lap was truly that. They had best ever postpaid net adds.

Guest Speaker 4m45s

They had the highest Q3 in postpaid net adds in over a decade. The postpaid net account additions 396 was best ever that they best ever had. They added 560,000 broadband, of which 506,000 were FWA, and by using math, 54,000 were Fiverr ads. Service revenue grew by 9%. They had a really, really, really good quarter.

Guest Speaker 5m20s

And Mike left Srini a machine that's running extremely well.

Roger Entner 5m27s

On the AT and C side and on the T Mobile side, a lot of the kind of revenue growth, service revenue growth is built on top of increasing prices for legacy customers and legacy plans. You can't do that every single quarter. But T Mobile has specifically since the timeline from the DOJ around not raising prices for three years, they've done it. And so you see it showing up at that 9% year over year is nothing that's done service revenues is incredible. I would also expect to see some increased churn over time as they've raised prices on most of their customer base by this point.

Guest Speaker 6m1s

But they've also been properly chastised by their customers to the point where they had to do a, oh, x number of years price lock guarantee, right?

Roger Entner 6m13s

Right, Remember their price lock is if they raise it, they just pay off your last bill and then you they still can raise it. It's not like they're actually locking anything. They're just beginning to give you back the last month before you leave, which is fair. Right? But it's not as much of a lock as I think that they would want you to think it is as a consumer.

Guest Speaker 6m30s

Yeah, you know, I did some back of the envelope map and out of the postpaid phone net ads, only like maybe 200,000 free lines that are hiding in that monster million phone net ads, but that's pretty good.

Roger Entner 6m46s

That's pretty incredible because I mean, historically, they've given away more free lines than that.

Guest Speaker 6m51s

Yeah.

Roger Entner 6m52s

And the street doesn't seem to care because everything else is also going up, so it's fine.

Guest Speaker 6m56s

Yeah, exactly. It's like, well, that's why they have ARPA, right?

Roger Entner 7m0s

Right.

Guest Speaker 7m0s

Where you don't care how many lines you have and why they're now touting accounts so heavily because you can't lie with accounts. You can give free accounts away like people does, but

Roger Entner 7m14s

Well, I mean, the marginal cost to serve a line that somebody is not using is zero, right, effectively. ARPA, I think, makes more sense on a lot of ways. If folks are giving away free lines, and I think everybody at some point in time has had some sort of variation on free lines out there, ARPUs, like, ceases to make as much sense as it once did.

Guest Speaker 7m35s

AT&T has not played the free line card in like a decade, fifteen years, at least, at least, if ever. What's also interesting is they upped their guidance, including $500,000,000 more of CapEx. They have a really strong network. And as they say, we won't stop. So they're doubling down on building more.

Guest Speaker 8m3s

With AT&T getting more spectrum, that's really, really important for them.

Roger Entner 8m10s

Well, mean, historically, they've been underpenetrated in rural areas, right? We know that you build out in the most denser areas first, and then there's diminishing returns as you build out further further out. It makes sense for them to be spending more money on CapEx with such a blockbuster quarter, but they also have an advantage in terms of satellite. Right? So the whole Starlink deal right now, like, let's say you build out further and further into rural areas, and then you've got a backstop with satellite coverage as well, which, you know, they announced the ability for certain apps to use satellite connection, things of that nature.

Roger Entner 8m44s

So that's also, I think, a powerful network coverage message.

Guest Speaker 8m47s

Yeah. You know, I was a while back in Hawaii, and in some of these places, like when you're in Maui, like, either Road to Hana or when you do the northern one, there's no coverage. You also have to give it to T Mobile that they continue to also have network leadership when it comes to new technology. They've deployed on all five gs sites L4S, which is the low latency technology, and 70% of their sites are supporting five and six carrier aggregations. The other guys are not even talking about it.

Guest Speaker 9m25s

They should, right? The other thing that's really, really interesting is just before T Mobile had their earnings call, AT&T launched a new ad campaign calling for truth in advertising. They're going now directly after T Mobile and say like, T Mobile has been the most fibbing carrier in Europe. They got caught 13 times by whatever advertising oversight thing, and you know. So this is getting spicy here where you have AT&T not taking it anymore, because I was wondering myself, T Mobile has also been running roughshod over everybody with their claims and language.

Guest Speaker 10m9s

I was surprised that the others let them get away with it so long because some of the things that T Mobile claimed, you could have pushed back and pushed holes through it. So it looks like now AT&T is pushing back at it. With Srini Gopalan coming in as the new CEO, he has to prove himself. Dan Schulman has to prove why they made him CEO. I think this is the last quarter, or no, it's not even the last, third quarter was the last quarter where I think Verizon just took it.

Guest Speaker 10m41s

What was it? October 2, they come out with the new ads and the new program, AT&T and T Mobile customers come with your bill, we can help you. I talked with a financial analyst, David Bodem, who took over from Jonathan Chaplin at New Street. Jonathan is now the Chief Strategy Officer at Comcast Communication and Platform Group. So congratulations to Jonathan, and welcome back to David.

Guest Speaker 11m9s

And I talked with David. And David told me, I hope I'm not breaking confidentiality. David said like, I saw these ads and I called in to Verizon. And he was blown away with how eager Verizon was to make him happy.

Roger Entner 11m26s

Well, think the claims business is interesting. Right? I mean, we've both been involved with that in prior lives. Right? Every carrier has one or two kind of claims partners based on methodology and things like that they can rely on.

Roger Entner 11m38s

I think from a consumer perspective, it's really confusing, right? Because you've got Ookla, OpenSingle, RootMetrics, J. D. Power. What does it all mean?

Roger Entner 11m46s

And there are conflicting claims.

Guest Speaker 11m48s

And the thing is they change around, right?

Roger Entner 11m50s

Right.

Guest Speaker 11m51s

Right now RootMetrics says AT&T is the best, after so long saying Verizon is the best, this and that. As you said, the confusion is real. That's why at Recon, we don't allow anybody to make claims on our data because I think this is very mercenary. Well, it's a business model, right? But I don't want to participate in this business model where somebody uses our data to beat one client beats up another client with our data, and then things change, then the roles reverse and the other person gets beaten bloody from it.

Guest Speaker 12m30s

We have trusted relationships with our clients. We wanna be friends with everybody. We don't allow them to use us to stab each other, right?

Roger Entner 12m38s

Right, right, exactly.

Guest Speaker 12m40s

Because I think it's just bad business. At least always a bad taste in my mouth. Now, when you and I were at Nielsen, I rewrote the Nielsen claims stuff because Nielsen ran into massive problems with the DRIVE test data. It was like, wow, like I came in, A, I saw it happen because I watched this, how Nielsen ran into these problems, and then Nielsen bought me, then I was like brought in to make things good again, and I tried as well as I could, but there was so much of the furniture and the table and the glasses and plates broken in that relationship because of claims. And so I rewrote it when I was at Nielsen to the point where it was like extremely difficult to make a claim on Nielsen data because our boss at the time wanted it to be impossible to have claims.

Guest Speaker 13m34s

But with us, we're not doing claims.

Roger Entner 13m37s

Yeah. You wouldn't see the numbers as they are today if there weren't some differences. Right? You know, when you look at T Mobile's numbers, you look at their churn, you look at their net ads, It's not a second tier network anymore. You can't have that lower churn and have that many net ads and have it not be working for people.

Guest Speaker 13m54s

Yeah. Yeah. No. T Mobile network is really, really good.

Roger Entner 13m58s

Yep. Well, I think all the networks are good in their own way. You know, I think one of the things we've seen in the five g era though is that it's really it's more about price, honestly, now than it used to be. It used to be it was you pay you pay more and you get more. And now it's kinda like, well, you may pay more, but you may or may not get more depending on where you are, right?

Roger Entner 14m17s

Network parity is a thing in a lot of circumstances.

Guest Speaker 14m20s

It depends where. It depends where. T Mobile in the vast majority of places has the fastest network. The question is, do you need to be that fast, right? T Mobile claims that according to Rukla, the fixed home internet median download speed is 50% faster than the next closest peer.

Guest Speaker 14m39s

Now, how many four ks video streams do you need simultaneously? At the same time, you can't argue against faster isn't better.

Roger Entner 14m48s

Yeah. I mean, think not all use cases are four ks video. I do a lot of downloading.

Guest Speaker 14m53s

Yeah. But that's why you have fiber.

Roger Entner 14m55s

That's why I have fiber. Absolutely.

Guest Speaker 14m56s

Fixed wireless is not for people who are heavy downloaders. You know, we just did research and most people on fixed wireless don't know how fast the Internet is and it didn't stop them being deliriously happy.

Roger Entner 15m9s

Right. Well, I mean, it's also half the price of a lot of the other alternatives. Right? So I

Guest Speaker 15m12s

mean Exactly. On fiber, these are speed fetishes. Right?

Roger Entner 15m16s

Or maybe you need speed, right, and reliability. I mean, I think that, from a technological perspective

Guest Speaker 15m20s

mutually exclusive.

Roger Entner 15m21s

From a technological perspective, fiber is a superior technology. From a, you know, best bang for your buck, FWA is a superior technology. And they both are good enough for most people.

Guest Speaker 15m31s

Yeah. Absolutely. You need to pick the right solution for what you're doing. I completely can.

Roger Entner 15m38s

So we still haven't heard from Verizon. We're gonna hear from them next week. But I think we have an idea of how things might be based on the leadership changes over there.

Guest Speaker 15m47s

Well, knew that both AT&T and T Mobile had an increase in gross ads and there's nothing unlimited amount of gross ads around. The churn inched up a little bit. You know, it's like you're hearing the thunder, and I'm looking forward to the lightning on the twenty ninth.

Roger Entner 16m7s

There's only so much water in the pool. Yes. We'll see, but I think we know how it's going to turn out.

Guest Speaker 16m13s

Well, we know that, that they had a crappy third quarter. You don't fire your CEO for happy reasons. Oh, we're so sick and tired of winning. Why don't you go? All right.

Guest Speaker 16m23s

Yeah. Hopefully, we can talk about this, you know, on our next call.

Roger Entner 16m27s

Sounds good. All right. Thank you. We'll talk next week.

Guest Speaker 16m30s

Talk you next week.