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April 21, 2022
AT&T will “continue to rationalize reselling low-margin, third-party products and services” as it seeks to rekindle its decreased business wireline revenues.
Ma Bell announced its first-quarter earnings on Thursday, just two weeks after officially divesting its WarnerMedia media division. AT&T reported an $7.9 billion EBITDA, which marked a 1.8% year-over-year decrease. Leadership touted growth in fiber and wireless. AT&T grew to 67.5 million postpaid phone subscribers and reported business wireless revenue growth of 8.4%. Fiber revenue grew 24.7% year-over-year as net subscribers increased to 6.3 million.
But despite solid fiber growth, business wireline revenues decreased again. They totaled $5.6 billion last quarter, dropping 6.7% year-over-year. Executives cited “lower demand for legacy voice and data services and a strategic decision to de-emphasize non-core services.” Executives said they are rationalizing the business wireline portfolio and putting pressure on near-term revenues as a result.
Analysts asked executives to break down what they meant by “rationalization.” Chief financial officer Pascal Desroches shared several components. One is reducing operational expenses in areas like call centers, which Desroches said will eventually move online. Another is investing more down-market, particularly with SMB customers.
AT&T’s Pascal Desroches
“Our move is to be driving harder owned and operated infrastructure into the lower end of the mid-part of the market. And in order to do that, that’s highly correlated to where we’re deploying new fiber or where we have existing infrastructure deployed,” Desroches said.
In addition, the company has listed “product simplification” as a key goal for 2022.
AT&T’s John Stankey
“The expansion of our fiber footprint is enabling our business portfolio to target significant opportunities in the small and medium business market, allowing us to capture a greater portion of the opportunities in core transport and connectivity,” CEO John Stankey said. “In addition, as we open up relationships with more customers, we’ll have incremental opportunities to continue our growth in business wireless.”
AT&T executives touched on the indirect sales channel when asked to further elaborate on the rationalization.
“In some cases, in order to get that market, we’re shifting our distribution channels. So there is work going on around how we ultimately position to distribute the product both directly through our own sales force, as well as through other third parties,” Desroches told investors. “That’s an execution issue. While we have control over how we progress on that, obviously, any time you scale up new channels and you work through things, there are things that you run into that are unexpected or that allow you to move left to right that you have to adjust to. But that’s nothing new. That’s the kind of thing we work with.”
“As we move through this year, we had planned to accelerate the pace at which we reposition the business, as we focus our energy on growing repeatable core connectivity and transport solutions where we have onerous economics. At the same time, we’ll continue to rationalize reselling low-margin, third-party products and services.”
AT&T in its investor presentation cited “timing of government solutions sector demand” as a factor in business wireline revenues decreasing.
“In the first quarter, we experienced some impacts by the timing of government sector demand due to the delays in passing the federal budget, which caused deeper than expected revenue declines,” Desroches said. “However, we expect demand to rebound later this year.”
AT&T announced the divestiture of WarnerMedia on April 8. Stankey said the sale helped AT&T recoup approximately $40 billion in net debt.
Senior News Editor, Channel Futures
James Anderson is a news editor for Channel Futures. He interned with Informa while working toward his degree in journalism from Arizona State University, then joined the company after graduating. He writes about SD-WAN, telecom and cablecos, technology services distributors and carriers. He has served as a moderator for multiple panels at Channel Partners events.
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