AT&T CEO warns more DeepSeek shocks will hit U.S. tech markets

CEO John Stankey commented, “We…expect to lead the industry in postpaid phone churn for the 14th time in the last 16 quarters and to lead the industry on an annual basis for the fourth straight year. This is an impressive winning run in wireless.”

The company also detailed plans to phase out copper network operations by 2029 and continue to invest in long-term growth through increased fiber penetration.

When asked about the new presidential administration’s impact on the business, Stankey said he’s “hopeful and optimistic” that Republicans’ tax plans will be beneficial to AT&T’s growth strategy.

And of course the conversation touched on this week’s major tech shakeup with the news that ChatGPT competitor DeepSeek can reportedly outperform more established players for a fraction of the cost. 

“I would expect for a nascent technology like this that we’re going to have [shakeup] moments because necessity is the mother of invention. And there’s… an awful lot of money and a lot of creative minds working on this. And people are going to come up with better ways to apply it,” Stankey said.

“We’re all going to have to stay on our game to make sure we use it effectively.”

See highlights from the conversation below, followed by the full earnings transcript.

• CEO John Stankey thanked his team for keeping customers connected during the ongoing wildfires in Southern California, saying, “In these moments, the importance of connection becomes increasingly apparent.”
• Q4 revenues increased by nearly 1%, fueled by gains in wireless service, equipment, and broadband sectors.
• Adjusted EPS for Q4 remained steady at $0.54, matching the previous year’s figure despite facing $0.04 of unforeseen net headwinds.
• AT&T Inc. plans to uphold its dividend per share and initiate share buybacks in H2 2025, targeting a net debt to adjusted EBITDA ratio of 2.5x.
• AT&T expects adjusted EPS to grow at a double-digit CAGR from 2027.
• Set a $3 billion+ cost savings target through end of 2027.
• Adjusted EPS guidance for 2025: $1.97 to $2.07, with higher depreciation from 5G investments.
• Guidance for $16 billion+ free cash flow in 2025, with lower cash interest and working capital impacts.
• $3.3 billion expected cash taxes in 2025, up $1.5 billion from 2024.

Operator: Good morning, and welcome to AT&T’s Fourth Quarter 2024 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference call over to your host, Brett Feldman, Senior Vice President, Finance and Investor Relations. Please go ahead.

Brett Joseph Feldman: Thank you, and good morning. Welcome to our fourth quarter call. I’m Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our CEO; and Pascal Desroches, our CFO.

Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in AT&T’s SEC filings. Results may differ materially. Additional information as well as our earnings materials are available on the Investor Relations website.

With that, I’ll turn the call over to John Stankey. John?

John Stankey: Thanks, Brett. I appreciate you joining us. I hope you’ll find there aren’t going to be any surprises on today’s call. We finished 2024 strong, like we said we would at our Analyst and Investor Day in December. We achieved full year results that are in line or better than all the consolidated financial guidance we provided at the beginning of the year.

Before I cover our accomplishments, I’d like to extend my heartfelt sympathies to everyone in Southern California. Our thoughts and prayers with all those people whose lives, homes and families have been deeply impacted by the most destructive wildfires in modern U.S. history. In these moments, the importance of connection becomes increasingly apparent. And I’d like to thank our teams for their commitment to keeping customers, communities and first responders connected in the face of this historic devastation.

Now turning to our 2024 performance, our team delivered another solid year as they again drove durable 5G and fiber subscriber growth. In Mobility, our consistent go-to-market strategy continues to resonate as more customers are choosing and staying with AT&T. Last year, we had about 1.7 million postpaid phone net additions with service revenue growth of 3.5%.

We also expect to lead the industry in postpaid phone churn for the 14th time in the last 16 quarters and to lead the industry on an annual basis for the fourth straight year. This is an impressive winning run in wireless. And as you’ve heard me say before, where we have fiber, we won as well. We’ve now added 1 million or more AT&T Fiber subscribers for a remarkable 7 straight years.

It’s clear that fiber is the best broadband alternative technology available. And this was validated by Ookla just last week when they named AT&T Fiber America’s fastest Internet with the most reliable speeds.

Following another strong quarter for both AT&T Fiber and AT&T Internet Air, we’ve now achieved 6 consecutive quarters of positive broadband net adds. Once again, we demonstrated our ability to grow in a healthy and sustainable manner by adding valuable subscribers while simultaneously simplifying experiences and processes for our customers and employees.

You see the results of these efforts and the margin expansion and free cash flow growth we delivered in 2024 as we outlined at our Analyst and Investors Day. We expect these trends will continue.

Our investment in 5G and fiber is fueling this sustained growth. This is why we’re so focused on building a durable franchise for the long term. Our deliberate and balanced approach to capital allocation is putting us on a strong foundation to deliver attractive returns for years to come. With about $22 billion in capital investment last year, we again invested at the top of the industry as we continue to focus on building the largest, highest capacity, lowest marginal cost converged broadband network in the country.

Investing to build a truly differentiated network will provide long-term benefits to AT&T and the many customers, businesses and communities we serve. And if the new Trump administration is successful in extending expiring tax incentives this year, we feel there’s ample opportunity for even more investment in U.S. communications infrastructure.

Ultimately, we did what we said we would last year. And as a result, we exited 2024 in a stronger competitive position.

We still have a few things to accomplish. In 2025, we’ll focus on executing against the priorities we laid out at our Analyst and Investor Day. This starts with our customers. We plan to grow 5G and fiber subscribers by offering an elevated customer experience with a compelling opportunity to enjoy both of these connectivity services from one provider.

We remain focused on growing our business the right way, which we expect to achieve by once again gaining profitable customers and operating our business more efficiently. In December, we established a new $3 billion plus run rate cost savings target that runs through the end of 2027. In 2025, we’ll make progress on this goal by further integrating AI throughout our operations. We also expect to realize cost savings as we evolve our technology stacks and work to exit our legacy copper network operations across the large majority of our wireline footprint by the end of 2029.

Last month, we received FCC approval to begin the process to stop selling, transition and discontinue legacy voice services and a small number of wire centers, utilizing our AT&T phone advanced service as a replacement. This was an important first step to establish a template that supports a deliberate and planned transition to a more capable and modern communications infrastructure.

Within the next few weeks, we will make detailed filings with the FCC to stop selling legacy products in about 1,300 wire centers, which is about 1/4 of the wire centers across our footprint. We look forward to working with the FCC to accelerate and advance policies and actions that stimulate investment in modernization of the U.S. communications infrastructure.

On the investment front, we anticipate capital investment in the $22 billion range again this year as we invest in modernizing our wireless network, expanding where we’re able to offer fiber. We also expect to achieve our target of net debt to adjusted EBITDA in the 2.5x range in the first half of this year.

This keeps us on pace to commence common stock repurchases using our initial Board-approved tranche of approximately $10 billion during the second half of 2025. This is part of a broader $40 billion-plus shareholder return plan that we expect to deliver over the next 3 years, which includes more than $20 billion in total dividend payments and an overall capacity for about $20 billion in share repurchases. Under this plan, we also have an additional $10 billion in incremental financial flexibility to pursue strategic opportunities, improve our balance sheet or deliver further capital returns to shareholders.

Now before I wrap, I’d like to finish where I started, with the customer and briefly share how the AT&T guarantee builds on the vision we shared with you in December. Over the past several years, we’ve pivoted the AT&T brand by using our deep knowledge and insights to orient our services around putting our customers and what they want first.

This has led to improvements in how customers feel about AT&T as evidenced by our broadband customer satisfaction leadership, our improving wireless Net Promoter Scores and our overall continued low churn. After over a year of research and preparation, we are taking the important step to establish a platform to differentiate our brand in the marketplace with the AT&T guarantee.

AT&T is the first and only telecommunications company to offer a guarantee for both its wireless and fiber network. AT&T guarantee is a bold promise to our customers that we’ll deliver connectivity that they can depend on, deals they want and the prompt, friendly service they deserve or we’ll make things right if we fall short.

With the AT&T guarantee, customers have peace of mind that the company stands behind our products and services in a way that no one else in our industry is doing. Our guarantee is a truly converged full company effort. It spans across both wireless and fiber, covering both consumers and small businesses. And with enterprise customers, we remain committed to providing high-quality service and our contractual agreements as we always have.

We were able to offer this unique promise to our customers because we own and operate scaled 5G and fiber networks, where we control the network architecture, operations and end-to-end customer experience. This allows us to provide a proactive and compelling customer guarantee that’s tough to beat and an internal operating posture that focuses all of AT&T’s employees on getting it right for our customers. We feel confident that our customers will repay us with loyalty, and we can attract new customers as well.

So in summary, we have a clear strategy in place to advance the plan we shared at our Analyst and Investor Day. We have the right people, capabilities and differentiated assets to achieve our goals in 2025 and beyond.

With that, I’ll turn it over to Pascal. Pascal?

Pascal Desroches: Thank you, John, and good morning, everyone. Let’s start by reviewing our fourth quarter financial summary on Slide 8. Overall, we’re really pleased with how our team closed out the year as we continue to grow subscribers profitably. Fourth quarter revenues were up nearly 1% largely driven by wireless service and equipment revenues as well as broadband revenues. This was partly offset by a decline in Business Wireline.

Adjusted EBITDA for the quarter was up 2.2% as growth, primarily in Mobility and Consumer Wireline, were partially offset by declines in Business Wireline. Adjusted EPS was $0.54 in the quarter, in line with the prior year despite $0.04 of below-the-line net headwinds that we outlined at the beginning of the year.

Fourth quarter free cash flow was $4.8 billion, which included about $1.1 billion in pretax DIRECTV distributions. Fourth quarter cash from operating activities came at $11.9 billion, up about $500 million year-over-year.

Beginning with the fourth quarter, all cash distributions from DIRECTV are now reported within cash from operating activities. However, as a reminder, starting with our first quarter of 2025 results, we will exclude all cash received from DIRECTV from reported free cash flow.

Fourth quarter capital expenditures were $6.8 billion with capital investment of $7.1 billion. We delivered a strong financial performance during the quarter while absorbing strong impacts that were slightly higher than the estimate we provided on our third quarter call.

Now let’s take a look at the results we delivered against our 2024 financial guidance on Slide 9. For the full year, we achieved all our consolidated financial guidance. We expect the Mobility service revenue growth in the 3% range and achieve growth in the 3.5% range primarily by growing profitable customer relationships.

In Consumer Wireline, we met our target of 7%-plus growth in broadband revenues driven by fiber revenue growth of nearly 18%. Consolidated EBITDA grew 3.1% for the full year compared to our expectation of growth in the 3% range.

Adjusted EPS for the full year came in at $2.26, which is slightly better than the high end of the $2.20 to $2.25 range we provided at our Analyst and Investor Day. As we shared previously, in 2025, we plan to report adjusted EPS excluding DIRECTV. When excluding approximately $0.31 related to equity in net income of DIRECTV, full year adjusted EPS in 2024 was $1.95.

Capital investment for the full year was approximately $22 billion, consistent with our guidance at the high end of the $21 billion to $22 billion range. On free cash flow, we delivered slightly better than the midpoint of our guidance in the $17 billion to $18 billion range, with full year free cash flow coming in at $17.6 billion.

In 2025, we also plan to report free cash flow excluding DIRECTV. For comparison, 2024 free cash flow was $15.3 billion, excluding approximately $2.3 billion of after-tax cash distributions from DIRECTV.

Now let’s look at our Mobility operating results on Slide 10. Our Mobility business continues to deliver strong results, growing both revenues and EBITDA for the seventh consecutive year.

We posted 482,000 postpaid phone net adds in the quarter as we continued to successfully add high-value subscribers. Mobility revenues were up 3.3% for the quarter with service revenues also up 3.3%.

Fourth quarter Mobility EBITDA was up about $500 million or by 6.1% driven by growth in service revenues. Similar to recent quarters, about 100% of the year-over-year growth in our Mobility service revenues flow through to EBITDA. This is the result of sustained low churn and our focus on driving operating efficiencies.

For the full year, Mobility EBITDA grew 6.3%. This is consistent with our guidance for growth in the high end of the middle single-digit range. Mobility postpaid phone ARPU was $56.72 in the fourth quarter, up nearly 1% year-over-year. ARPU growth continues to be largely driven by our targeted pricing actions and from plan mix.

Postpaid phone churn for the quarter was 0.85%, up 1 basis point versus the prior year, while the upgrade rate declined 10 basis points to 4.6%. Customers reaching the end of their device promotions return to a more normalized level on a seasonal basis in the fourth quarter, and we expect this to continue during 2025.

In prepaid, our phone churn was less than 3% with Cricket phone churn substantially lower. Similar to last year, our 2025 guidance anticipates a healthy wireless market with further normalization of net adds and overall activity levels. We’re confident that our Mobility business will deliver solid performance again in 2025. And we continue to expect full year growth in service revenues in the higher end of the 2% to 3% range and EBITDA in the higher end of the 3% to 4% range.

Now let’s move to Consumer Wireline results, which are on Slide 11. Our Consumer Wireline business again delivered strong performance with 307,000 AT&T Fiber net adds, our highest ever during the fourth quarter. This solid subscriber growth reflects durable demand for AT&T Fiber as a result of its superior experience as well as the increased pace at which we’ve been expanding customer locations served by our fiber network. We also believe we benefited from some pent-up demand following a 1-month work stoppage in the Southeast during the third quarter.

AT&T Internet Air continues to perform well in the marketplace. We added 158,000 AT&T Internet Air consumer subscribers in the quarter and totaled more than 0.5 million net adds for the full year. Our combined success with AT&T Fiber and AT&T Internet Air continues to more than offset declines in our legacy copper subscriber base, which help us achieve 123,000 total broadband net adds in the quarter.

Fiber ARPU was $71.71, up $1.35 sequentially and 4.7% year-over-year. The improved trend in fiber ARPU growth in 4Q was driven by pricing actions and favorable plan mix.

Fourth quarter broadband revenues grew 7.8% driven by fiber revenue growth of 17.8%. In 2025, we expect fiber revenue growth in the mid-teens, which is consistent with the multiyear guidance we provided at our Analyst and Investor Day.

Consumer Wireline EBITDA grew 9.8% for the quarter and 10% for the full year, which exceeded our guidance for full year growth in the mid- to high single-digit range. This was driven by growth in high-margin fiber revenues and by our ongoing transition away from providing service over our legacy copper network. We expect these dynamics to continue in 2025 and to drive Consumer Wireline EBITDA growth in the high single to low double-digit range.

And while our fiber investment is delivering strong returns on a standalone basis, it’s also benefiting our Mobility business as we add more converged customers. Our AT&T Fiber penetration is 40% today with 4 out of every 10 AT&T Fiber households also choosing AT&T as their wireless provider. Both these metrics improved by about 100 basis points versus the prior year, reflecting strong demand for our fiber and 5G services together.

As we discussed at our Analyst and Investor Day, over the long term, we expect to grow our fiber penetration and our penetration of converged services within our fiber footprint.

Now let’s turn to Business Wireline on Slide 12. In the quarter, Business Wireline revenues declined 10%, and EBITDA was down 22% primarily due to continued industry-wide secular declines in legacy services.

For the full year, Business Wireline EBITDA declined 18%. This is in line with the latest guidance we provided for declines in the high teens range. For full year 2025, we expect Business Wireline EBITDA to decline in the mid-teens range.

In the fourth quarter, our Business Solutions wireless service revenues grew 3.5%, which is faster than our overall growth in Mobility service revenues. FirstNet continues to be a consistent growth category for us with wireless connections up about 300,000 sequentially, and we ended the year with more than 6.7 million total connections.

Now let’s move to Slide 13 for an update on our capital allocation strategy. In 2024, we were able to strengthen our balance sheet while maintaining industry-leading capital investment.

For the full year, we reduced net debt by $8.8 billion. And during the fourth quarter, we reduced net debt by $5.7 billion sequentially. Fourth quarter net debt included a $2.4 billion noncash FX benefit related to our foreign-denominated debt. However, there was no net balance sheet impact as there was an offsetting FX loss related to associated hedges.

Another item that contributed to the reduction of net debt in the fourth quarter was the completion of a distribution of about $1.5 billion in cash from previously restricted assets. This is reflected in cash from investing and therefore, did not impact our reported free cash flow.

As a result of our adjusted EBITDA growth and strong cash generation, we ended 2024 with net debt to adjusted EBITDA below 2.7x. Additionally, we lowered vendor and direct supplier financing, which more than offset securitization facilities for a net reduction of $400 million year-over-year. Over the past 2 years, we’ve reduced our vendor financing balance by about $4.7 billion. Our efforts to reduce vendor and direct supplier financing have helped us to lower our interest expense and to improve the quality and ratability of our cash flows.

Given these efforts, we feel good about our combined vendor and direct supplier financing levels and do not expect to materially reduce them on a year-over-year basis in 2025.

We continue to expect to close the sale of our 70% stake in DIRECTV to TPG in the middle of this year. Since signing this agreement, we have received $1.7 billion in pretax cash distributions from DIRECTV and expect to receive an additional $5.9 billion in after-tax cash payments related to this transaction through 2029. This includes $5.4 billion that we continue to expect this year.

The strength of our operating trends, growth in our free cash flow and improvement in our balance sheet have positioned us to increase our capital returns to shareholders. As discussed at our Analyst and Investor Day, we expect to maintain our dividend per share and to begin share buybacks in the second half of 2025 once we’re in the 2.5x range for net debt to adjusted EBITDA.

Our operating momentum and capital allocation framework positions AT&T to drive shareholder value through a combination of capital appreciation and capital returns in 2025 and beyond.

Now let’s cover our 2025 financial guidance. Our outlook for the year is unchanged from the guidance we shared at our Analyst and Investor Day. But I’d like to highlight a few key drivers of our guidance for adjusted EPS and free cash flow in order to help you with your modeling.

As mentioned earlier, beginning in the first quarter, we plan to report adjusted EPS and free cash flow excluding DIRECTV due to the pending 2025 disposition of our equity investment. On this basis, our guidance anticipates growth in both of these metrics this year driven primarily by our outlook for growth in consolidated adjusted EBITDA of 3% or better.

Our adjusted EPS guidance for 2025 of $1.97 to $2.07 also assumes depreciation and amortization expense in 2025 to be slightly higher than 2024 from continued investment in our 5G and fiber networks, lower interest expense from lower debt balances and an effective tax rate around 23%.

Our planned share repurchases starting later this year are not expected to materially benefit our adjusted EPS in 2025. Looking a little further ahead, we continue to expect adjusted EPS to grow at a double-digit CAGR from 2027 as outlined at our Analyst and Investor Day. This is driven by our outlook for annual adjusted EBITDA growth of 3% or better as well as accumulating benefits of reducing our share count through planned share repurchases. It also assumes lower depreciation expense beyond 2025 as we complete our wireless network modernization and take legacy assets out of service.

Our guidance for $16 billion plus of free cash flow this year assumes lower cash interest from lower debt balances, the absence of network termination fee payments in 2025 and lower working capital impacts in 2025 compared to 2024. Collectively, these items as well as our anticipated adjusted EBITDA growth are expected to more than offset an increase in cash taxes.

Excluding DIRECTV, we expect 2025 cash taxes to be $3.3 billion, which is up about $1.5 billion from 2024 on a comparable basis. This expectation is based on current tax law, including the continued phaseout of bonus depreciation.

We also expect that our free cash flow will continue to have a more ratable profile over the course of the year. As a reminder, we typically see seasonally lower free cash flow in 1Q primarily driven by the timing of device payments and annual incentive compensation payout. Also keep in mind that DIRECTV contributed $500 million to last year’s first quarter free cash flow.

We’re excited about our outlook for the year and beyond. We’re reiterating all the long-term financial and operational guidance we shared at our Analyst and Investor Day in December.

Brett, that’s our presentation. We’re now ready for the Q&A.

Feldman: Thank you, Pascal. Operator, we’re ready to take the first question.

Question and Answer

Operator: Today’s first question comes from John Hodulik with UBS.

John Hodulik, UBS Investment Bank, Research Division: Great. John, maybe a couple of quick regulatory questions for you. First of all, on the regulatory filing about the legacy products, are there any direct cost savings that would come with this that you could potentially see in ’25 if that’s successful?

And I think this is probably the first step in terms of heading towards a decommissioning of that copper infrastructure. How would you expect the sort of steps to proceed if you’re successful with that filing? So that’s number one.

And then number two, on tax reform. One, just what’s your view on the chance of getting that through? And you mentioned that you could go a little faster with some of the CapEx. Would that be a ’25 issue or ’26? And what are some of the areas do you think that you could do more spending and accelerate the plan?

Stankey: So the legacy filings, first of all, what you should understand is as we laid out our new cost savings objectives for you over the next 3 years as we discussed in the Analyst Day, as we gave you that detail, you can see that we are expecting that we’re going to make progress in taking those costs out of the business. And that’s a key foundational element to those estimates.

So what you would expect here in this filing is we’ve kind of factored all those into the guidance we’ve given you and the timing of those things. I’m not going to break out on a per central office basis exactly how long it takes us to recognize that. But these are processes that take some time is what you should think about. We have to go through notice cycles with customers. We then have to ultimately transition them. We grandfather them. So these are not things like you file, and 90 days later, you’re starting to see a dramatic shift or a step function shift in costs. These are what gets us to our objectives by ’29 and ultimately, reshaping the footprint in the cost structure of the business.

How those steps proceed, as I said in my comments, the first step is we now have a framework. We’re now going to put the first scale test of that framework in with about 1,300 wire centers. We expect that when we do that, the commission is going to say, what do I do with 1,300 wire centers? And we’re going to work collaboratively with them to build a process to move through that as quickly and expeditiously as possible.

My expectations are from the dialogue that’s occurring right now, the new administration is interested in finding approaches to scale these more rapidly and have an appropriate way to clear them through faster because they believe if the right policies are in place, it will, in fact, stimulate investment in the right kind of going-forward technologies.

And we intend to embrace that and work with them and figure out how we take 1,300 successfully through the commission and then move through another tranche as we move through that. So that’s all part of the process. And it’s kind of how we expected this back 2 years ago when we started moving down this path and putting this framework in place and building the technologies to enable it. This is kind of what we expected would be the case. And I feel good, as I mentioned I think at the Analyst Day, I think with the administration change, we kind of moved to a little bit of a tailwind in terms of the receptivity of the approach as we go through that.

On the tax reform side, look, I’m hopeful and I’m optimistic that a Washington that has one party in control can figure out how to set priorities for themselves. My indications would be that from an economic growth perspective that the Republicans believe this is a key driver of what will get the economy moving in the right direction.

I would certainly say from my little part of the economy, those policies would drive accelerated and stimulated investment as they did the first time we were in place. I’ve used this comparison, we were peaking in about $24 billion of investment a couple of years ago. It’s not an accident.

Our tax bill is up about the same amount that we’re down in capital investment right now. I don’t expect to ever get back to $24 billion at this juncture, given how far along we are in our reinvestment strategies. But do I think that the first place I would go if I had a little bit of latitude might be to accelerate some of the fiber build, the answer to that is, yes, I probably would look at tweaking that. And some of that might go into investment and completing the fiber plan earlier. Some of that may be returned to shareholders.

We can’t turn on a dime to answer your question, when you think about what occurs with the fiber build as I shared with you at the analyst conference, if you want to think about increments of $1 million a year. So if we’re building $3 million right now, and we wanted to move to $4 million, that’s probably a 12-month best case, 18-month worst case scenario to ramp to that level.

And when you start thinking about how you gracefully do these things, increments of $1 million are kind of the graceful way to go about doing it. We’re not whipsawing vendor communities, supply chains, doing things that are inappropriate. So I think about that within the course of the year. Can you scale yourself up to get to another $1 million, that’s a decision that we’d have to make after we saw some tangibility that the tax cuts are, in fact, going to go into place.

Operator: And our next question today comes from David Barden of Bank of America.

David Barden, BofA Securities, Research Division: I guess my first one for you, John, just returning to a topic that we discussed on the Analyst Day, which was this notion of home games and away games and the benefits the fiber brings to the mobile business. I’m noticing in the fourth quarter that the gains in mobile net adds among fiber customers was equal to the total net adds for the quarter and about probably 22%, 23% of gross adds. Is that something—is there some information value in examining how those pieces fit together?

And then the second question I could—Pascal. This [ rain ] real estate deal and the $850 million it’s contributing, I guess the question is going to be was that—was knowing that, that’s coming part of the $16 billion? Or is it part of the plus? And how do we think about maybe as we decommission the copper plant, especially future real estate deals contributing to this cash flow picture?

Stankey: So Dave, I don’t know that I would overrotate on the information value if I understand your question correctly. I think typically, when you look at what our strategies are for how we actually penetrate within the base, there isn’t necessarily perfectly a timing to what I would call the net add dynamics that occur in broadband, whether or not we’re successful at penetrating.

There is some activity we get on installation, which is helpful to us. But when you start thinking about what we want to do to drive up that penetration number, the base of unaddressed individuals is much larger than the base of new customers going in.

And so I would tell you that we’re not necessarily looking at that as a leading indicator of success. We’re looking at the overall penetration number and how that’s moving. And as I shared with you, we’re seeing nice progress on that. We’re up about 100 basis points year-over-year. And that’s really the key metric that we’re looking at.

And I would tell you that we’re pleased with what we’re seeing in terms of our ability to penetrate. We’re pleased with what we’re seeing in terms of our ability to drive convergence. And we think that’s the right way to look at it.

Desroches: Dave, on your question regarding the real estate transaction, look, we’ve been very transparent that we expect to monetize nonstrategic assets. And so this is part of that. And it’s part of our overall free cash flow guidance. So it’s not incremental to the $16 billion plus.

And as we think about future real estate transactions, look, we’re going to continue to look for opportunities to monetize nonstrategic assets. But I wouldn’t necessarily tie it to copper decommissioning. That’s going to be a multiyear process. And we’ll look for opportunities as they present themselves.

Operator: And our next question today comes from Simon Flannery with Morgan Stanley.

Simon Flannery: Great. John, I wonder if you could just update us on the fiber build. You talked about potentially accelerating that. But where are you today? And what’s the outlook for 2025? And any color on the mix between greenfield and brownfield would be great.

And then Pascal, on the free cash flow, you talked about the $16 billion plus. Is there any way you could help us think about the cadence through the year? I know Q1 is typically lower. But any color on how we should think about the quarterly progression would be great.

Stankey: So Simon, on the fiber build, we’re at about 26 million passings right now. We expect to do about 2 million to 2.5 million this year. We’re not changing our guidance on that. We’re comfortable with where we are.

I would tell you that we’re pleased with the mix of what we’re seeing in terms of greenfield and brownfield. We’re probably running about 60-40 right now in terms of brownfield to greenfield. And we think that’s a good mix. We think that gives us a good opportunity to continue to drive penetration in our existing markets while also expanding into new markets.

And I would tell you that we’re seeing good success in both of those areas. We’re seeing good success in terms of our ability to penetrate in our existing markets. And we’re seeing good success in terms of our ability to expand into new markets.

Desroches: Simon, on free cash flow, look, we’re not going to give quarterly guidance. But I would say this. Historically, Q1 has been our lowest quarter. And we expect that to continue to be the case. But we do expect a more ratable profile throughout the year.

And I would just remind you that Q1 of last year included about $500 million from DIRECTV. So that’s not going to recur this year. So that’s something to keep in mind as you think about Q1.

Operator: And our next question today comes from Phil Cusick with JPMorgan.

Philip Cusick: Two, if I can. First, John, can you dig into the wireless competitive environment? It seems like things have been pretty stable. But we’ve seen some more aggressive offers lately. How do you think about balancing growth versus profitability?

And then second, Pascal, can you dig into the Business Wireline trends? It looks like revenue declines accelerated a bit in the fourth quarter. How do you think about that business going forward?

Stankey: So Phil, on the wireless competitive environment, I would tell you that we continue to see a pretty rational market. We’re seeing good discipline in terms of pricing. We’re seeing good discipline in terms of promotional activity.

I would tell you that we’re comfortable with where we are in terms of our competitive position. We think we’ve got the right mix of offers in the market. We think we’ve got the right mix of devices in the market. And we think we’ve got the right mix of plans in the market.

And I would tell you that we’re seeing good success in terms of our ability to drive growth. We’re seeing good success in terms of our ability to drive profitability. And we think we’ve got the right balance there.

Desroches: Phil, on Business Wireline, look, we continue to see secular pressure in that business. We’ve been very transparent about that. We expect that to continue.

I would say this. We’re focused on managing that business for cash. We’re focused on driving efficiencies. We’re focused on driving productivity. And we’re focused on driving growth in areas where we can drive growth.

And I would tell you that we’re seeing good success in terms of our ability to drive growth in areas like FirstNet. We’re seeing good success in terms of our ability to drive growth in areas like SD-WAN. And we’re seeing good success in terms of our ability to drive growth in areas like security.

So we’re going to continue to focus on those areas where we can drive growth. And we’re going to continue to focus on managing the legacy parts of that business for cash.

Operator: And our next question today comes from Brett Feldman with Goldman Sachs.

Brett Feldman: Great. Two questions. First, John, you mentioned that you’re seeing some normalization in terms of upgrade rates. I was hoping you could elaborate on that a little bit. What are you seeing in terms of device life cycles? And how do you think about the potential for that to impact your equipment revenues as we move through the year?

And then second, Pascal, you mentioned that you expect to close the DIRECTV transaction in the middle of the year. Can you just remind us what the accounting treatment is going to be for that? And how we should think about the impact on your financials?

Stankey: So Sebastiano, I would tell you the biggest driver, I think, of our success in business over time is how well we do in improving our distribution, our effectiveness in the mid and low end of the market. And that’s, I think, the biggest driver and that—we all like the fact that if there’s investment in the country and the economy grows, businesses grow, and they consume more in communication services. That’s a good thing, and it’s an important thing for our industry, and we tend to be highly correlated to that.

But in terms of us doing better as a company and where I think the operating leverage is, is in us getting better in our distribution structure in that segment of the market. And as I shared with you, that’s our intent when we went through the Analyst Day.

Those don’t change in 30 days. These are things that require some work and partnerships. And they require you to work with those partners in ways that you give them the right kind of tools to be more effective in prospecting and converting.

And we’re midstream on doing that. And our expectations on ramp, back to what I shared to Jim’s question or part of what’s into our forecast that we’ve given you an improvement segment and what we’re going to ultimately be able to do.

So that’s how I think about for AT&T, what we need to do to be more effective in business and where there’s opportunity. And it really gets down to how effectively we distribute.

And I don’t know that there’s—if you want to call that tailwind, I just think that’s hard to pick and [indiscernible] work that we kind of have to do as our business, and that’s the kind of thing that we do.

Operator: And our final question today will come from Tim Horan at Oppenheimer.

Timothy Horan: You’ve been pretty early in migrating your operations and networks to the cloud and open source. I’m sure you’ve seen DeepSeek has created a much lower cost, large language model out there. Can you maybe just give us your thoughts on using cloud and AI to both improve relationships with customers, improve your product and lowering your overall expenses? And then maybe just the same thing on your infrastructure, just any updated thoughts how you can use your infrastructure to support AI?

Stankey: We’ve actually—I think this is a place we’ve already done a lot of work and picked up a lot of benefit in terms of how you operate internally. We’ve—if you kind of look at our cost of service dynamics, what we’ve been able to do in our call centers and how we operate within our customer base, a lot of that has been driven by AI tool application.

And it’s not that we’re necessarily exclusively replacing individuals with the technology, but we’re making them a lot more effective, efficient and how they handle customer needs and then complementing that with customer supported AI. And when you look at things like our call volumes despite the fact that we’re growing, our customer base dropping 30% year-over-year, that’s driven by the application of that technology and what we’re able to do with it.

We’ve used it a lot internally in our operations. We’re seeing demonstrative improvements in our code effectiveness. And I shared this on a previous call, we’re spending less right now to develop new code internally and getting more. And it’s through the application of AI and the technology and what we’re able to do with generative AI.

I fully expect, as I mentioned earlier in kind of my comments on CNBC, we’re very early in this technology cycle right now. And this is a [indiscernible] technology cycle. It’s going to be every bit as big as the founding of the internet when it’s all said and done.

And because we’re very early in it, we should expect there’s going to be days we wake up like this one when somebody comes in and says they figured out a way to get as much benefit out of the model by consuming less power or using less processing capability or they fine-tune the models to work in a particular domain area more effectively or they can run locally as opposed to in the cloud, which is going to open up and facilitate new applications and business models.

I would expect for a nascent technology like this that we’re going to have those moments because necessity is the mother of invention. And there’s a lot of money, an awful lot of money and a lot of creative minds working on this. And people are going to come up with better ways to apply it.

And we’re all going to have to stay on our game to make sure we use it effectively so none of us are in a disadvantaged position relative to our competitors on cost structure effectiveness. I think there are places where I would like to see our business get better at doing this, which is using the data that we have to start doing things that are unique to us, which handling particular customers and segments of the base and those that we don’t have as customers and understanding how we price and attack those things and using the unique data sets that we have around our infrastructure, how that lines up to particular customer segments, in particular, industries to get more effective in the market.

If I were to say I had a goal for 2025, I would like to this time next year be talking about good momentum we’ve received in business as a result of executing on some of those things moving forward.

And finally, I’d just say we continue to [indiscernible] innovative ways to use it in our business today. And maybe I’m not being as effective at talking about all the great things we’ve done to effectively use that, but we’re tuning our RF capabilities dynamically in our wireless network today based on traffic flows and customer movement using machine learning capabilities and AI. And those things always help us on the margin, and we’re going to continue to do them moving forward. Appreciate the question, Tim.

Let me go ahead and close this out for all of you. And I would just say one thing. We outlined for you what we intended to do in 2024 in January of the year. And when you kind of look at what we delivered, we did exactly what we said we were going to do, if not a little bit more.

And I think what we’ve hopefully demonstrated to you over the course of ’24 and the previous years, our execution is getting very consistent. And that’s not a surprise as we refocused the business, and we put our energy towards being a great communications company.

We’re on that learning curve, and we’re getting more consistent and better at what we do. And we still have opportunities to improve upon the progress we’ve made.

This is going to be an important year for us as we hit the midpoint of this year, and we have an opportunity to recalibrate on our capital allocation. And that’s been the [indiscernible] plan to do that. We look forward to that moment, and we think we’re in a great position to continue to invest in this business and drive the same level of consistency and improvement that you’ve seen over the last couple of years.

So thank you very much for your interest in us. And I hope everybody has a good rest of the year.

Feldman: Operator, you can go ahead and end the call.