AT&T sees growth in Fiber business, but challenges remain

(Image: AT&T/Graphic: The Desk)

Telecommunications giant AT&T says it added 316,000 new customers to its AT&T Fiber Internet product in the three months ending June 30, to end the quarter with just over 6.6 million Fiber Internet customers.

The figure was released this week as part of AT&T’s quarterly earnings report that showed the company is serving about one-third of its potential customer base where AT&T Fiber is offered. According to AT&T, around 18 million households and businesses in over 100 metropolitan areas can currently take advantage of AT&T Fiber, but the majority of those customers are still using services offered by competitors, fixed wireless or AT&T’s older Internet offerings.

The company also saw challenges in retaining business customers to its wireline services, with revenue around $5.6 billion in the most-recent quarter, down 7 percent, according to the website Fierce Telecom. While it touted new contracts with various government sectors and a continued buildout of its FirstNet emergency responder service, revenue from government clients was down, Fierce Telecom said.

AT&T also said it was hurt by a practice of customers who have delayed payment on their phone and Internet bills, which caused the company to cut its free cash flow estimates by $2 billion for the year.

That sent AT&T’s stock price down 11 percent, the biggest drop in two decades, according to Bloomberg, with investors worried that the trend could indicate long-term strain for one of the country’s biggest telecom providers.

Financial analysts said they weren’t surprised to hear AT&T customers were delaying their bills, given the rate of inflation and how it has impacted everything from food prices to gas prices in recent months.

“I’m not worried so much for AT&T as I am for the broader consumer economy,” Peter Supino, an analyst with Wolfe Research, told Bloomberg. “You wonder if this is the canary in the coal mine.”

There may be some truth to that: On Friday, AT&T rival Verizon reported bleaker-than-expected earnings of its own, with that telecom also cutting its revenue forecast for the year. Verizon said its wireless service revenue is expected to increase between 8.5 percent and 9.5 percent for the year — down from earlier estimates of 9 percent to 10 percent — and its service and other revenue could be flat this year compared to last year, the financial news channel CNBC reported.

Weighing on Verizon is a struggle to add new wireless customers: The company, which boasts the most-reliable network in the United States, only added 12,000 post-paid wireless subscribers in the three months ending June 30 — far below Wall Street estimates of over 140,000 wireless customers. Last week, Verizon launched a new low-cost post-paid plan called Welcome Unlimited that it is targeting to budget-conscious consumers, but it costs $70 a month for one line of service before taxes and fees — which is more-expensive than comparable plans offered by its competitors (and even its own prepaid wireless service, Visible, which costs just $40 a month for one line of service, with taxes and fees included).

Both AT&T and Verizon have been challenged in recent years by T-Mobile, which has invested in its fifth-generation (5G) wireless data network and has increased perks for consumer and business customers while keeping its service fees relatively unchanged. T-Mobile also recently rolled out a fixed wireless home Internet service that piggybacks off its 5G and 4G LTE networks, with a specific focus on targeting rural customers who are underserved by traditional Internet providers and small business customers who want cheaper options.

T-Mobile is set to report their quarterly earnings next Wednesday.