Is AT&T growing or Shrinking?
Globally functioning in the telecoms sector, AT&T provides TV, internet, and mobile phone services to its millions of customers both here and abroad. Has this telecom monster just begun to shrink or is it still expanding?
One may determine if AT&T's Internet is expanding or contracting by weighing certain basic factors. To grasp the overall direction of the company's growth, we need to dissect the facts on changes in subscribers, income, expenses, and so on.
Wireless Subscribers
Regarding wireless users, AT&T has seen a modest rise in recent years. Specifically, while AT&T had 163 million overall cellular users in 2018, 171 million were expected in 2021. Still, the increase has slowed down because most Americans have a cellphone service.
With a good second place to Verizon in terms of customers, it also remains one of the leading participants in the US cellular industry. Retaining such a large customer pool is excellent news for the future income prospects of AT&T's mobility sector, even if the increase in the number of customers is not quite significant.
Television Subscribers
If one analyzes AT&T's conventional TV division, however, the present trend seems to be fairly unfavorable. The growing trend of cord-cutting among customers has been driving a slowdown in DirecTV and U-Verse TV services over the last several years. The business has been able to drop nearly 12 million TV viewers since acquiring DirecTV, which cost $49 billion.
With just 15.4 million premium TV subscribers—including DirecTV satellite, U-Verse fiber, and AT&T TV—by the end of 2021 AT&T had Significant subscriber losses resulting from the company's failure to convert the TV consumer base into streaming.
Revenue Trends
As for the total income, AT&T has experienced a slight decrease in annual revenues in recent years, if to compare 2018 and 2021 results and state $170.8 billion and $168.9 billion correspondingly. The declines in the number of subscribers of its traditional television and telephone line services have become revenue challenges.
Much of the revenue declines are due to AT&T and its divestitures of WarnerMedia in 2020 and DirecTV in 2021 into a separate company. If we consider AT&T’s core remaining business segments, then revenues have hovered between $120 billion.
Profit Margins
However, lately, the company's profit margins have expanded while retaining modest sales at the same time. From 12.7% in the year ending December 2018 to more than 22% in the year ending December 2021, its operating income margin has strengthened. These thinner margins point to AT&T's cost-cutting effort and the operational efficiency ingrained by management.
The margins also benefited from lower asset impairment costs and amortization charges after AT&T offloaded some previous acquisitions. In the new streamlined company that concentrates on wireless, fiber broadband, and enterprise services, profits are on an upward trend.
Capital Expenditures
Examining AT&T's capital expenditure and network expansion helps one to get insights into the company's path. From $21.6 billion in 2018 to $18.9 billion in 2021, telecom behemoth AT&T has cut capital spending over the previous four years.
Reduced investment levels fit AT&T's revised corporate strategy, which moves from trying to build all components of a media/entertainment empire. It has thus turned its focus to enhancing its basic connection offerings. AT&T said, however, that capital spending shows that it will start rising in 2022 and 2023.
Debt Burden
Mostly from the big acquisitions it conducted in the past, AT&T is in debt. The corporation owes more than $180 billion, for example, in 2018. This debt load limited AT&T's financial flexibility.
Although AT&T has been able to drastically lower its debt by using strong cash flows and asset spin-offs over the last three years, AT&T lowered its debt to less than $60 billion while having a total of $131.4 billion as of the first quarter of 2021. Less debt also has less impact on the financial statement of the business.
Stock Price Performance
It also shows from share price performance how investors see AT&T's public business future. AT&T's shares saw a modest rise from 2018 and 2019. But the shares dropped by more than 30% in 2020-2021 as growing uncertainty about AT&T's media operations and competitive dynamics surfaced.
To date, AT&T stock has however increased by more than 15% in 2022 to recover the losses. AT&T’s shareholders appear to be quite content with the company’s decision to stick to its wireline and wireless services after the firm decided to come out of the fog of being a technology and media conglomerate.
The Bottom Line
If we look at all of these measures simultaneously – subscribers, revenues, margins, investments, debts, and stock price – it would seem that AT&T’s overall trend is towards contraction, yet there is nascent positive movement in its key strategic pillars.
Getting rid of weak spots like DirecTV and entertainment divisions allows a more streamlined AT&T to concentrate on what it does well – wireless, fiber internet, and business solutions. Despite the decline in revenues, higher margins, lower debts, increased investments, and a positive outlook of the company’s stock indicate that it is on the right track to better long-term performance.
Stated differently, AT&T seems to be now using the "shrink to grow" approach. Through divestment of these non-core activities, AT&T has also maybe positioned itself as a smaller but more targeted telecom company ready for future expansion.
Upgrade to faster, more reliable AT&T Fiber Internet today! Call us at +1 844-905-5002 and get connected with speeds that keep you ahead.