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AT&T thinks it can prove out its Gigapower fiber model in 18 months


AT&T hinted it could chase even more out-of-footprint fiber builds than the 1.5 million it is initially targeting with its new Gigapower joint venture (JV), with CEO John Stankey stating it is hoping to bring proof points to investors within 18 months. The comment came as AT&T posted Q4 2022 results in which fiber net additions came up short and left it with a loss of 43,000 broadband subscribers.


During an earnings call, Stankey faced questions about why AT&T decided to pursue what appears to be a relatively small number of locations with its JV. He explained that the wholesale model it is using for Gigapower is likely one that is unfamiliar to U.S. investors and thus AT&T and BlackRock are hoping to use the smaller cohort to demonstrate successful returns before potentially tackling an even higher target. “We will be in the market very, very soon,” he said. “I intend to have 12 months of penetration information that I can bring back to you. And you can bet that when we’re successful doing this and we demonstrate to you that we have the numbers to back it up that it won’t necessarily be a million and a half.”

The CEO added that depending on the level of success it is able to achieve through the JV, AT&T may decide to chase some out of footprint builds under its own banner.

Stankey said the operator also expects its fiber build numbers – which stand at 31.5 million when you factor in its in-house goal of reaching 30 million locations by 2025 – will be boosted by government funding from the $42.5 billion Broadband Equity, Access and Deployment (BEAD) Program. While it is not yet clear how much funding each state will receive, Stankey said he expects larger states will begin making project awards in Q3 of this year.

“I don’t think you’re going to see any substantial shovels in the ground and certainly customers being served in any substantial way this year. But I do think you’re going to see projects and monies awarded before we exit this year and you will see those volumes start to come online as we move into periods of 2024,” he said.


Even as its JV and BEAD projects ramp up, Stankey indicated AT&T will continue building toward its 30 million location goal at a rate of 2 million to 2.5 million passings per year.


Analysts from New Street Research pointed out the new annual passings target is lower than the 5 million locations per year AT&T was originally aiming for. They also noted AT&T has not raised its in-house fiber build target as many expected it would.


“We aren’t sure whether their ambitions have dimmed, or if this is part of the credibility recovery process (set achievable near-term targets; deliver on them; then take them up). It will certainly feed the controversy around whether fiber is pulling back,” they concluded.

Metrics

AT&T added 280,000 consumer fiber subscribers in Q4. However, that figure was handily outpaced by DSL and non-fiber broadband losses, leaving the operator with an overall loss of 43,000 broadband subscribers.


Despite the slide, consumer broadband revenues increased 7.2% to $2.5 billion while overall consumer wireline revenue rose 2.2% to $3.2 billion.


Consolidated revenue of $31.3 billion was roughly flat, while net income swung from a $5.2 billion profit in the year-ago quarter to a loss of $23.1 billion thanks in large part asset impairment and abandonment charges totaling $26.8 billion in the quarter. These related primarily to impairments in its Business Wireline and Consumer Wireline divisions and abandonment of “certain wireline conduits no longer required to support our copper and fiber networks," the operator said in a press release.


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