“‘We feel really good about the pace of business.’”
AT&T Inc. continues to see a healthy wireless market, and a key executive remains upbeat about the company’s place in it.
Chief Financial Officer Pascal Desroches acknowledged at an investor conference Tuesday that the wireless company could see a few negative effects on subscriber growth this quarter, but he expressed optimism about the rest of the year.
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expects the level of postpaid phone net additions to be in the low 300,000s for the second quarter, as the company opted to exit a government contract that wasn’t profitable and has seen “slightly elevated churn” as rivals tweaked their pricing strategies. Chief Executive John Stankey also discussed these effects at a conference earlier in the cycle.
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That said, Desroches noted, “the second half of the year is typically seasonally higher because of holiday sales.” Speaking at a Bank of America conference Tuesday, he also cheered “the quality of the overall subscriber mix” at AT&T, according to a transcript provided by AlphaSense/Sentieo.
“When you have [average revenue per user] growing, and we’re already at really attractive ARPU, and you have profits growing off of record levels, we feel really good about the overall space,” he said. “And I think the industry construct is incredibly healthy.”
Moves by rivals to raise prices mark “another sign of the confidence in the industry,” he added.
Desroches also addressed free cash flow, a hot issue coming out of last quarter’s report, when AT&T fell far short of consensus expectations even as management said the performance matched its own internal view and continued to set the company up to meet full-year targets.
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“Device payments are always seasonally the lowest in [the third and fourth quarters] versus the first half … and let’s not forget that we are growing earnings in this business and cash,” he said Tuesday. “So all those things combined give us really good confidence that we will be at $16 billion or better” for the full year.
In looking at the second quarter, Desroches expects $3.5 billion to $4 billion in free cash flow, while the FactSet consensus was for $3.6 billion. BofA Securities analyst David Barden asked if that expectation reflected capital expenditures falling at a “weirdly low level,” but Desroches said that wasn’t the case.
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