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AT&T Inc. (NYSE:T) Oppenheimer 5G Summit December 11, 2023 11:00 AM ET
Company Participants
Pascal Desroches - CFO
Conference Call Participants
Timothy Horan - Oppenheimer
Timothy Horan
Good morning, everyone. It's Tim Horan, the Cloud and Communications Analyst here at Oppenheimer. My pleasure to be hosting the AT&T CFO in a very, very exciting time in AT&T's history. And Pascal and I are going to have just a plain fireside chat. But Pascal, I'm not sure if you have to hit any of the safe harbor statements before we do so.
Pascal Desroches
Yes, Tim. Good morning, and good morning, everybody. It's a pleasure to be with you. For all those out there, Happy Holidays. Before we get started, I'd like to reference you to our safe harbor statement, which is up on the slide here. The statements that I'm going to make are forward-looking and are subject to risk and uncertainties, and therefore may change in the future. And we have no obligation to update them. Refer to the Investor Relations website for more information.
Question-and-Answer Session
Q - Timothy Horan
Great. And we're going to get into this in a lot more detail. But I did want to congratulate Pascal on massively improving AT&T's free cash flow generation. And we're really on the cusp of some very serious leveraging, all very, very positive occurrences. And before we get into that in a lot more detail, what he's going to do with all that great free cash flow, he had a big announcement last week on Open RAN. Or we saw it as a very big announcement. Maybe it's a little bit more long-term focus. But can you talk about the high-level benefits and why you went with Ericsson on the Open RAN strategy?
Pascal Desroches
Sure, Tim. Here is when we take a step back. As an industry, we've tried to drive an Open RAN architecture for some time. We thought this was a great moment in time. In the last several years, the equipment manufacturers have enjoyed significant business as a result of the mid-band deployment. And things are about to slow down right now for them. And this was a great time to use the position that we were in to try to really accelerate the Open RAN architecture that we've been talking about for so many years.
And what this will do is, while we are going with Ericsson, they have committed to open up the architecture. And over time, we would expect that to drive efficiencies by, first and foremost, standardizing some of the basic equipment and architecture in our industry. And also over time, through an open architecture, allow others to come in and drive further innovation, further efficiencies in the space.
And I would expect that this move over time, in the near term, probably not a big impact to our capital investment profile, but over time will generate more efficiencies and candidly drive further innovation.
What I would tell you is this, when I look at AT&T overall, the last couple of years, 2022 and 2023, have been years that we expect to be at peak capital investment. Next year, as John Stankey alluded to last week, we expect to have a step down in capital. We expect overall capital investment to be in the $21 billion to $22 billion range, inclusive of our commitment to Ericsson. So overall, feel really good about the deal. We think it really - not only benefits us, but benefits the entire industry and will drive long-term innovation and efficiencies.
Timothy Horan
Well, I think your point, having a much more open supply chain, historically, if you look at technology, you've seen like innovation come out of left field, right? And an incredible acceleration of innovation, as long as people can kind of use standardized equipment and come up with their own software. And it's really, really hard, I'm sure, to think about what that means over the next two years, but you guys have obviously thought about it, what it means over the next decade. And any more color you can kind of share in terms of the innovation that we can expect or lower capital intensity as a result of this or how the whole food chain might evolve?
Pascal Desroches
Yes, what we've said long-term is that we expect to operate at mid-teens capital intensity. I don't know that this announcement changes that at all. We just right now, think that this creates enormous optionality for the overall industry, and hopefully it creates much more innovation in an area that, candidly, I don't think we have innovated fast enough.
Timothy Horan
For sure, and I am sure it will, but these things are always organic and a little hard to predict exactly right now. So just stepping back into the wireless front, obviously the largest business you have, can you talk about how the competitive environment this holiday season, how it compares to last year and last few years?
Pascal Desroches
As you would expect, I mean, during the holiday quarter, each of the major carriers are competing, are competing for the new gross ads that are typically elevated during that season. And I would characterize this season no different than what we saw last year. I think we are continuing to run our play. We're trying to be financially disciplined, and it all starts for us by making sure we are taking care of our customer.
We are providing our customers with a great value proposition, the same offers that we would provide a new customer, we provide to our existing customers. So that has resulted in record low churn. You add on top of that, the fact that we are competing effectively for the gross ads that are in the market, but doing so in a disciplined way. And we would expect relative to Q3 to see an uptick due to holiday sales. And overall, that should put you in about the $500,000 net subscribers for the fourth quarter. And we feel really good about how we're executing. Our network is great. We continue to move customers up the ARPU stack and couldn't be more pleased with how the team is executing.
Timothy Horan
AT&T Inc. (NYSE:T) Oppenheimer 5G Summit December 11, 2023 11:00 AM ET
Company Participants
Pascal Desroches - CFO Pascal Desroches -首席财务官
Conference Call Participants
Timothy Horan 欧本海默
Timothy Horan
大家早上好。我是Tim Horan，Oppenheimer公司的云计算和通信分析师。很荣幸能够在AT&T历史上一个非常激动人心的时刻主持AT&T首席财务官的访谈。Pascal和我将进行一场简单的讨论。不过，Pascal，在我们开始之前，我不确定你是否需要提到任何免责声明。
Pascal Desroches
是的，蒂姆。早上好，大家早上好。很高兴能和大家在一起。对所有人来说，节日快乐。在我们开始之前，我想引用我们的免责声明，你可以在幻灯片上看到。我将要发表的言论是前瞻性的，可能会受到风险和不确定性的影响，因此可能会在未来发生变化。我们没有义务更新它们。请参考投资者关系网站获取更多信息。
Question-and-Answer Session
Q - Timothy Horan
好的。我们将会详细讨论这个问题。但我想要祝贺Pascal大幅改善了AT&T的自由现金流生成。我们真的处在一个非常严肃的杠杆化阶段，一切都非常积极。但在我们深入讨论更多细节前，关于他会如何管理这些可观的自由现金流，他上周在Open RAN上有一个重大声明。我们认为这是一个非常重大的声明。也许这更多是长期目标。你能否讨论一下高层次的好处以及AT&T在Open RAN战略上选择爱立信的原因？
Pascal Desroches
当然，Tim。这是我们退后一步的时候。作为一个行业，我们试图推动开放式RAN架构已经有一段时间了。我们认为这是一个绝佳的时机。在过去的几年里，由于中频段部署的结果，设备制造商一直在享受相当可观的业务。而现在他们的业务即将开始变缓。这是一个绝佳的时机，利用我们所处的位置，真正加速我们多年来一直在谈论的开放式RAN架构。
这将会有助于在我们与爱立信合作的时候，他们已经承诺开放架构。随着时间的推移，我们预计这将通过首先标准化行业中一些基本设备和架构来推动效率。还有通过开放架构，随着时间的推移，允许其他公司进入并推动进一步创新和效率的提升。
我预计这一举措在短期内可能不会对我们的资本投资格局产生重大影响，但长期来看将带来更多的效益，并坦率地推动进一步创新。
我要告诉你的是，当我整体看待AT&T时，在过去的几年里，2022年和2023年预计是我们资本投资的巅峰时期。明年，正如John Stankey在上周所暗示的，我们预计资本投资将有所下降。我们预计整体资本投资金额将在210亿至220亿美元左右，包括我们对爱立信的承诺。总的来说，我们对这项交易感到非常满意。我们认为它不仅有利于我们，还有利于整个行业，将推动长期创新和效率提升。
Timothy Horan
嗯，我觉得你的观点有道理，有着更加开放的供应链。从历史上看，如果你观察科技领域，你会发现创新常常出人意料。只要人们能够使用标准化设备并开发自己的软件，就会迅速加速创新。我想想看，对未来两年意味着什么肯定非常困难，但是你们显然已经考虑过未来十年的情况。你能否分享更多关于我们可以期待的创新，或者由此带来的资本需求减少，或者整个供应链可能如何发展的更多细节呢？
Pascal Desroches
是的，我们长期以来的说法是，我们期望资本密集度保持在中等水平。我不知道这一声明是否会改变这一点。我们目前只是认为，这为整个行业创造了巨大的选择性，希望这能够在一个领域中带来更多创新，坦率地说，我认为我们的创新速度不够快。
Timothy Horan
当然，我确信它会，但这些事情总是有机的，现在很难准确预测。因此，回到无线前端，显然这是您最大的业务，您能谈谈今年假期销售的竞争环境，与去年和前几年相比如何吗？
Pascal Desroches
正如您所期望的那样，在假期季节，每个主要运营商都在竞争，都在竞争通常在这个季节升高的新客户。我认为这个季节与去年所见没有什么不同。我认为我们仍在继续我们的策略。我们试图在财务上遵循纪律，而对我们来说，一切都始于确保我们照顾好我们的客户。
我们为我们的客户提供了很有价值的方案，我们向现有客户提供与我们向新客户提供的相同优惠。这导致我们的客户流失率创下历史新低。除此之外，我们有效地竞争市场上的毛增长广告，并且以纪律方式进行竞争。相对于第三季度，我们预计由于节假日销售会有增长。大体上来说，这应该让我们在第四季度达到大约50万名净订阅用户。我们对我们的执行手段感到非常满意。我们的网络表现非常出色。我们继续推动客户提升ARPU水平，并对团队的执行力感到非常满意。
Timothy Horan
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