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- An ugly day for the stock market was especially rough on AT&T (NYSE:T), which slipped 4.4% on the day to seal its worst month in a year and a half - and reach its lowest point since the Global Financial Crisis, more than a decade ago.
- That came as a presentation from Communications chief Jeff McElfresh raised new concerns about user growth in the wireless industry.
- Speaking at a Wells Fargo conference, McElfresh worked to highlight momentum in mobility, saying over the past five quarters AT&T has delivered its best subscriber results in a decade (including nearly 4 million postpaid phone net additions, and 1.4 million fiber net adds).
- "Total tonnage of EBITDA in the third quarter of '21 was a high-water mark for us," he says, noting Wireless raised its EBITDA by nearly 3.6%.
- He added that the company's "three key elements" - simplified plans and targeted sub-segment approach, improved customer experience and network performance - are leading to lower churn and increased customer lifetime value.
- He reiterated, though, that the outlook for 2022 and beyond doesn't assume a continuation of the outsized trends in net adds that we've seen.
- "There's no doubt that the stimulus programs have put some extra cash in household budgets" this year, he says. "And so we're not expecting that level of activity to continue into 2022 and beyond. In fact, in a three-player market with the integration between Sprint and T-Mobile, we suspect the activity level for postpaid in 2022 is probably going to subside." AT&T does expect to take "more than our fair share," however, and he adds their guidance doesn't depend on outsized postpaid growth.
- Expectations that average revenue per user on postpaid phones will stabilize next year means the company expects higher service revenues from the growing base, he says. Fewer than a quarter of gross adds and upgrades in Q3 traded in newer devices for premium promotional offers, and only about 20% of the company's postpaid smartphones are on Unlimited Elite, its highest-ARPU and fastest growing rate plan.
- McElfresh's comments about dwindling industry user growth ahead did no favors for AT&T's wireless rivals today. T-Mobile (NASDAQ:TMUS) fell 4.1% (again, also amid a marketwide sell-off), and Verizon (NYSE:VZ) fell 2.7%. Dish Network (NASDAQ:DISH), set to become the fourth national player in wireless over time, tumbled 5.7% today.
- AT&T's tumble has brought its forward dividend yield - always an AT&T focus for income-oriented investors - to a hefty 8.7% (check the company's Dividend Scorecard). Earlier today, Seeking Alpha contributor Bluesea Research says the stock decline will make it hard for management to keep its pledge to pursue giving 40-43% of free cash flow to investors post-Warner spin-off.