Unveiling the Secret Behind AT&T's Impressive Q4 Performance
In a triumphant Q4 report, AT&T (T: 0.83%) blitzed expectations, racking up impressive numbers across the board. The telecom titan surpassed its full-year targets, with mobility service revenue spiking 3.5% and broadband revenue skyrocketing 7.2%. Free cash flow reached an impressive $17.6 billion, solidifying AT&T's financial position for the upcoming year.
What truly had investors cheering was AT&T's subscriber growth, a testament to its successful fiber-wireless bundle strategy. In Q4, the company added an impressive 482,000 net postpaid phone subscribers and 307,000 new fiber customers – its best results since the same quarter in the previous year. Moreover, its postpaid churn stayed at a minimal 0.85%, and the average revenue per user for postpaid phones grew marginally y-o-y.
In its fiber business, the company boasted a record-breaking quarter, adding 307,000 new subscribers – its best performance in at least two years. Internet Air, AT&T's 5G-powered home internet offering, saw a surge of 158,000 new subscribers, marking a remarkable accomplishment for the home internet product.
The Bundled Advantage
AT&T's focus on bundling its fiber and wireless services played a significant role in the subscriber growth in both sectors. The company provides a 20% discount for new customers on eligible wireless plans, when they sign up for fiber services, aiming to foster stickier customers more likely to remain loyal. According to AT&T, customers who subscribe to both services typically maintain their relationship with the company even longer than other types of customers.
AT&T ended 2024 with a significant boost in its fiber customer base, reaching 9.3 million subscribers, up from 6 million at the end of 2021. From this customer base, an impressive 3.7 million fiber subscribers also utilize wireless services. The percentage of fiber subscribers who are also wireless customers has increased to 40%, rising from 35.4% in 2021.
AT&T aims to expand its fiber network to serve over 50 million homes and businesses by 2029. This nearly doubling of network reach presents further opportunities to push fiber subscribers to upgrade to wireless plans, while bundle discounts can enhance fiber penetration rates. Currently, only 40% of eligible homes subscribe to AT&T's fiber service, a number that can be greatly influenced by the appeal of the fiber-wireless bundle.
Enhancing Customer Satisfaction
AT&T's recent initiative of offering bill credits for wireless and fiber outages should further strengthen the appeal of the fiber-wireless bundle, particularly for users plagued by subpar home internet services. By combining competitive discounts with customer-friendly approaches, AT&T could encourage even more potential customers to switch to its fiber services.
Gearing Up for 2025
AT&T projects a robust 2025, expecting wireless-service revenue growth of around 3%, accompanied by mid-teens consumer fiber-revenue advancement. Free cash flow is projected to reach at least $16 billion, with the number excluding contributions from DIRECTV. This forecast represents noteworthy free-cash-flow growth compared to 2024's $15.3 billion.
By concentrating on gaining as many customers as possible for both fiber and wireless plans, AT&T is effectively enhancing the stability and predictability of its revenue streams. For fiber-wireless bundle customers, switching providers for either service would mean forfeiting any discounts, thus ensuring decent revenue stability in times of economic uncertainty.
By the end of trading on Monday, AT&T shares had surged approximately 6% in response to the company's optimistic growth narrative. Despite a slowly growing overall revenue rate, AT&T's fiber-wireless bundle strategy is improving the quality and endurance of its revenue, making its offerings more appealing in a competitive telecom market.
In light of AT&T's impressive Q4 results, investors are now considering increasing their investments in the company's finance sector, driven by the telecom giant's promising outlook in the money-making sphere.
The success of AT&T's fiber-wireless bundle strategy has not only boosted its subscriber growth but also has the potential to significantly increase its revenue streams, making it a more attractive option in the competitive finance market.
