AT&T has the largest fiber network in the US, but risks falling behind if it doesn’t continue to expand at a rapid clip.
AT&T’s current fiber optic coverage reaches 21 states including California, Texas, Florida and more. According to the FCC’s national broadband map, AT&T has the largest fiber to premise coverage at 11.49% and already serves over 8.8 million fiber customers. Their network currently covers more than 28 million consumer and business fiber locations and is on track to surpass 30 million by early 2025.
[Map of AT&T fiber expansion coverage]
AT&T’s continued expansion in fiber internet has helped it make steady progress in its convergence efforts, but there is not enough coverage nationwide to create a large impact on its revenue. AT&T’s lead on fiber network has allowed it to stay ahead of the game, but the high costs of fiber and the wait on returns has led it to slow down its expansion rate.
“It’s simply not a credible strategy to try to bundle services when your wired footprint covers such a small fraction of the United States and you’re trying to pair it with a national wireless operator.” said Craig Moffet an analyst at MoffettNathanson research.
Fiber optic internet refers to a broadband connection that delivers internet though tiny glass fibers via light waves compared to the traditional copper wires. The advantage is that fiber optic internet provides service at faster and more reliable speeds than cable or DSL. AT&T offers customers the option to bundle its phone, internet and television services altogether.
AT&T’s fiber expansion allows it to bring reliable and fast internet to remote areas via fiber optic cables, but it does not pay off until a customer signs up and sticks to it.
AT&T’s expanded fiber network led to savings for Kathleen Monagle of Spartanburg, South Carolina. She’s been an AT&T customer since the 1960s – before the company was even known as AT&T- but didn’t have any services bundled until this spring.
When a salesperson knocked on her door to offer bundling, she wasn’t sold because she assumed that it would mean adding a satellite dish to her house.
“I told him, ‘I don’t want an ugly [satellite] dish on my house!’ Monagle said. But when the salesperson explained that because of fiber, there was no dish necessary, and that it could save her money, she agreed. Now Monagle has phone, internet and cable bundled.
AT&T introduced its bundling services back in 2006 through the AT&T U-verse program that included internet, phone and television services. In the fall of 2013 AT&T began bundling fiber internet services with U-verse TV, calling it “U-verse with Gigapower”, primarily in Austin, Texas and has since grown. Fast forward to present day AT&T continues to bundle its wireless and fiber services at a discount.
“Mobility and broadband together, has a greater lifetime value, it’s a strategy that seems to be working ok, there is some traction there,” says Joseph Bonner, senior securities analyst at Argus Research Corp.
AT&T has seen a 500 basis point advantage in terms of wireless penetration rates in markets where fiber internet is offered as well. AT&T’s bundling services have successfully helped improve churn rates to a record 0.78%. However, analysts say that AT&T simply does not have the reach necessary to create a significant impact yet.
“AT&T has a wire footprint that covers little less than 40% of the country and is still less than half upgraded to fiber so bundle offering can only be done in less than 20% of US,” says Moffett.
According to the latest 2024 Q3 earnings report AT&T’s fiber network has shown a steady demand with 226,000 fiber net adds. The latest figure marked the 19th consecutive quarter of more than 200,000 fiber net adds.
The consumer wireline revenues were also up 2.6% year-over-year, driven by the growth in broadband revenues.
AT&T’s consumer broadband revenues were $2.83 billion, up 6.4% year-over-year largely attributable to fiber internet revenues, which grew 16.7%.
There is definitely a need for fiber in the country, but there is still a long road of expansion ahead.
AT&T has positioned itself as the leading provider of fiber internet. Still, its stock price - up 1.62% in the last three months- trails competitor T-Mobile, up more than 22% in the same period. It is ahead of Verizon shares, however, up only 2.1% in the last three months.
AT&T has strengthened its business plan and in 2023 its net income rose to $15.6 billion, up from last years $7.06 billion.
The better-than-expected returns on the fiber investments have encouraged AT&T to potentially go beyond the initial 30 million target by roughly 10 million to 15 million additional locations.
Expansion along with the November 10th raise in the fiber internet prices will likely boost ARPU (average revenue per unit) prices, and its impact on revenue.
AT&T’s main competitors Verizon and T-mobile, both of whom have announced their decisions to acquire fiber-optic network providers Frontier communications and Metronet, respectively, are continuing to catch up.
Analysts' average estimate for AT&T’s 2024 revenue is at $122.13 billion, down 0.24%, but they expect 2025’s revenue to be $123.77 billion. Likewise analysts estimate that AT&T’s EPS for 2024 will rise to $2.20 up from 2023’s $1.97.