Chart of The Week: AT&T Enters New Era with 5G Growth

April 22, 2022

It was a big week for AT&T Inc (NYSE: T) as the company reported its first financial results since the 8 April closing of its WarnerMedia spin-off into Warner Bros Discovery Inc (NASDAQ: WBD).

All eyes were on the mobility and broadband business to gauge the outlook for AT&T and the numbers were impressive.

For the first quarter of 2022 (1Q FY2022), AT&T earned 77 US cents a share on US$38.1 billion in revenue. This easily beats analysts’ average estimates of 71 US cents a share.

When we look at the continuing operations alone, the company posted an increase of 2.5% in its net income to 65 cents a share on the back of US$29.7 billion of revenue.

Strong mobile growth

AT&T’s wireless revenue grew 5.5% to US$20.1 billion as it added 691,000 subscribers, its highest in a decade.

Operating income for the business segment, however, was down by 3.2% to US$5.9 billion, mainly due to increases in expenses of 9.5% as the company shut down its 3G network, incurred higher equipment costs and higher spending on the bundling of HBO Max and other expenses.

As some of these expenses are not recurring, this should help AT&T benefit from the recurring revenue going forward with higher numbers of subscribers.

On the wired line, AT&T’s Fibre also added a net 289,000 subscribers with penetration up about 2 percentage points to 37%.

In a statement, AT&T’s CEO, John Stankey, said that AT&T “has entered a new era” with the growth of its 5G and fibre internet customer base as well as its enhanced customer service.

The simpler story of AT&T following the spin-off of its media arm will also attract more institutional investors.

Investors, however, should take note that downside risks remain as investment into 5G networks and the shutdown of its 3G network could lead to higher expenditure.

I think it is too early to call AT&T a good buy but the shift towards a 5G network will definitely boost its revenue in the near term.

As a result, investors should definitely keep AT&T on their watchlist as we see how management executes some of their initiatives going forward.

Source: AT&T’s 1Q FY2022 Quarter Earnings Presentation

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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