In this episode of The 5G Factor, our series that focuses on all things 5G, the IoT, and the ecosystem as a whole, I’m joined by my colleague and fellow analyst, Todd R. Weiss, for a look at the top 5G developments and what’s going on that caught our eye.
Our conversation focused on:
AT&T Delivers Solid Q3 2023. AT&T delivered strong results in the third quarter of 2023 with solid 5G and fiber subscriber growth. The company also posted healthy year-over-year (YoY) increases in service and broadband revenues, driving higher profitability. Key highlights include AT&T reporting revenues of $30.4 billion, up 1% YoY. This increase primarily reflects higher Mobility, Mexico, and Consumer Wireline revenues, partly offset by lower Business Wireline revenues. Notably, AT&T’s mid-band 5G spectrum now covers more than 190 million people, on track to reach 200 million people or more with mid-band 5G by year-end. We analyze why we see AT&T establishing the foundation for durable, long-term growth due to key factors such as delivering 468,000 postpaid phone net adds with continued strong ARPU growth and historically low levels of churn. Plus, AT&T’s mobility service revenues were up 3.7%, achieving the company’s best-ever Mobility operating income.
Vodafone and Snam Expand Collaboration. Vodafone, specifically Vodafone Italia, is expanding its collaboration with Snam, Europe’s leader in natural gas. The duo is working to develop the first hybrid 5G mobile private network (MPN) in the natural gas sector, bringing more reliable and secure connectivity to 23 of Snam’s plants. According to Vodafone, the hybrid infrastructure will improve 4G and 5G coverage within the facilities, but also for the local population via the surrounding public network. We examine how the alliance is combining the benefits of public 5G and private 5G that seek to guarantee high levels of performance, availability and reliability and shows that Vodafone’s 5G network infrastructure is essential to delivering the ultra-broadband, low latency, security, and the ability to collect an exceptional amount of data across the Snam energy network footprint.
T-Mobile Sustains 5G Pacesetting in Q3 2023. T-Mobile reported third quarter (Q3) 2023 results, raising 2023 guidance again. Service revenue of $15.9 billion grew 4% year-over-year (YoY), including Postpaid service revenue of $12.3 billion, which grew 6% YoY. In Q3 2023, T-Mobile delivered breakthrough postpaid account and customer net additions as well as record low postpaid phone churn, which provided the basis for the company to claim industry-leading service revenue and postpaid service revenue. We discuss how we expect T-Mobile to attain its latest raise in 2023 guidance as the company is consistently outperforming its key rivals across the topmost mobile network service categories, consisting of financial, technical, and customer attraction and retention milestones, and why it is the 5G service provider pacesetter by executing relentlessly on its portfolio development objectives and market vision.
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Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Transcript:
Ron Westfall: Hello and welcome everyone to The 5G Factor. I’m Ron Westfall, Research Director here at The Futurum Group, and I’m joined here today by my distinguished colleague, Todd R. Weiss, our team analyst focused on key areas such as telecommunications, and naturally, 5G. Today, we will be honing in on the major 5G ecosystem developments that have caught our eye over the last week or so. With that, Todd, welcome back to The 5G Factor, and many thanks for joining today. How have you been bearing up between episodes?
Todd R. Weiss: Well, thanks for having me again, Ron. No, I’m good. I’m glad to be here with you for this episode.
Ron Westfall: Right on. Well, sounds like a good vibe, and with that many thanks Todd as well. Let’s jump right in. As we saw, AT&T recently announced its Q3 results, and I believe they were strong. In fact, the third quarter for them was based on solid 5G and fiber subscriber growth. And also, I think it’s important to note, that AT&T posted pretty much robust year over year increases in mobility service and broadband revenues, and that drove higher profitability. Always important.
I think other important key highlights include the fact that AT&T reported revenues of $30.4 billion, and that’s up 1% year over year, and this increase is attributed primarily to higher mobility, Mexico, and consumer wire line revenues, which was partly offset by business wire line revenues. So the revenue increases also are reflecting favorable impacts of foreign exchange rates in Mexico.
Exactly, yes. And so with that, I think that is part of the reason why we’re seeing the cash from operating activities of $10.3 billion, and that is up of $0.2 billion or 2.4% year over year. And that also means year to date cash from operating activities is up $1.5 billion versus the same period a year ago. So clearly, these are positive, and I think what’s also linked to this is that it’s notable, AT&T’s mid-band 5G spectrum now covers more than 190 million people nationwide, and it’s on track to reach 200 million people or more with mid-band 5G by the end of this year, 2023.
Also, innovation-wise, AT&T supported AST space mobile, and what could be characterized as the world’s first direct 5G voice call between two unmodified smartphones through a low earth orbit satellite and earth, also known as LEOS. Plus, and this shows you the momentum here, AT&T reported 296,000 fiber net adds. So taken together, from my view, the results reinforce AT&T’s ability to drive network convergence, and I think this is something that we’re going to see more of. In fact, this is especially important in relation to 5G and fiber bundling, which was once marketed as fixed mobile convergence from a prior epoch. But what I think we’re seeing is true progress in terms of the technical capabilities as well as is business case, where fiber and 5G are going to be increasingly merged, both in terms of, say, bundled services, but also how the technologies are co-deployed, co-developed, and so forth.
As a result, with the improved bundled service outcomes, AT&T’s also improving its churn outcomes, i.e., lower churns are always helpful, and it can also lower per unit economic costs by having more traction with the bundled services. Plus, I believe it’s important to note that AT&T isn’t changing its overall CapEx guidance for the remainder of 2023, and this is suggesting spending will rise in the final months of the year, although AT&T is positioning itself to slow spending after the heavy investments in 5G during the 2022 and 2023 timeframe. In fact, AT&T is looking to have more level and consistent CapEx into the foreseeable future, little less variance in terms of how their CapEx trends look on a year by year chart, for instance. To round it out, it’s important to observe that AT&T ended the quarter covering 195 million people. I already noted that, but it’s in relation to Verizon, it’s trailing somewhat, as Verizon is up to 250 million targeted by the end of this year, and T-Mobile plans to have 300 million by the end of this year.
So it’s a little tonic, but it’s demonstrating the AT&T in itself is definitely delivering the results that investors are clearly pleased with, but also, it’s demonstrating that this is helping the competitive mix, that it’s driving more competitive pressure, certainly on the big two rivals of Verizon and T-Mobile, but also we’re seeing specific areas where AT&T can claim tangible progress. And I’ll stop there for now, and naturally, Todd, I’ll turn it over to you. What impressed you most about AT&T’s Q3 results?
Todd R. Weiss: AT&T is establishing the foundation for durable long-term growth. It delivered, get this, 468,000 postpaid phone net adds, with continued strong ARPU growth and historically low levels of churn. That’s a really great thing for AT&T. It’s always a huge thing to worry about. Mobility service revenue, there up 3.7%. That’s achieving the company’s best ever mobility operating income. That’s a pretty substantial thing with all the competition out there. And plus, consumer broadband revenues, they’re up 9.8%. That’s a lot.
Driven by AT&T fiber revenue growth of 26.9%, which surpassed 8 million AT&T fiber subscribers, that doubles their customer base run in less than four years. I understand AT&T’s position opposing the FCC’s new net neutrality push as customers are not indicating any broad support for a return of net neutrality, given the ongoing spectrum challenges and adjustments to the management of the Universal Services Fund could attain somewhat similar outcomes.
Ron Westfall: Yeah, those are excellent insights on AT&T results, Todd, and I agree that, for example, the push to return to net neutrality is probably not the highest priority that the FCC should be focused on. I think we’ve covered AT&T pretty thoroughly in terms of its Q3 results, so let’s turn our view across the ocean and start talking about other CSP strategic initiatives.
And I think Vodafone definitely comes to mind as we saw that came out with an announcement really recently that is specifically Vodafone Italia is expanding its collaboration with Snam, Europe’s leader in natural gas. And hopefully I’m doing justice to pronouncing Snam, as it’s not a household term in the United States. But this is an important announcement, and we will outline exactly why. What they’re doing is they’re looking to create the first hybrid 5G mobile private network or MPN in the national energy sector, which can then bring more reliable and secure connectivity to at least 23 of Snam’s plants. And what Snam is-
Todd R. Weiss: That’s actually interesting.
Ron Westfall: Absolutely. In fact, I think it’s important to note more about Snam’s capabilities. What they’re looking to do is, of course, bringing heating and lighting to millions of houses across Italy, and they want to do it on a stable, sustainable energy basis. That is why they’re working with Vodafone to innovate in this key regard. And according to Vodafone, the hybrid infrastructure will improve 4G and 5G coverage. As we know, 4G is pretty much important to private wireless implementations today, and will be into the foreseeable future, but the long-term game is 5G, of course.
And that is across the Snam facilities, but also for the local population through the surrounding public network. This is what I think is important, is we’re going to see more of this blending. You definitely need, for example, a dedicated private network for the facilities, but you also need the resources of a public network when you’re talking about anything that’s wide coverage, we’re talking about transportation applications, logistics, and so forth, public safety, which Wi-Fi, for example, cannot address by itself. Also, the network is configured so that a Vodafone MPN SIM is enabled for the use of private and public data services in one of the 23 sites covered by the 5G network infrastructure, and will work even when a mobile network is covered only by public Vodafone and therefore in the absence of private MP and coverage, reinforcing my observation about the increasing importance of private-public convergence.
Energy, naturally is a key growing vertical for CSPs such as Vodafone. I think it’s important to note this, because for one, it lines with their key objective of attaining profitable scaling with edge computing. This is something that I think in talking with the CSPs is a clear top priority. Plus, according to the GSM, 85% of telcos consider sustainability clearly an energy priority and imperative as their number one priority. I see improving the energy metrics, for example, of base stations, is key to advancing 5G standalone deployments. So this is all tying in together. It’s not just, okay, here’s a vertical that the operators need to emphasize, but also it’s key to their own operations, key to fulfilling their own sustainability goals. The more energy partnerships they have, I think the more long-term the outcomes will be positive for them to improve their own energy efficiencies.
And I know we’ll talk about this more how, for example, they can get into supercapacitator technology to, for example, get into the energy arbitrage arena where it’s, I think, well-suited for them because as we know, both operator networks and energy networks tend to overlap, significantly. And so I think we’re going to see more partnerships in this key way. And so with that, Todd, what is your take on this alliance between Vodafone and Snam expanding?
Todd R. Weiss: Yeah, I think this is pretty interesting too. I had looked up a little bit more about Snam. It’s an Italian energy infrastructure company. From my view, it’s important to understand that the hybrid private network will support devices like field sensors, which monitor things like pressure, vibration, other meters capable of collecting large quantities of data locally. This is all huge stuff for enterprises, for industry, for manufacturing, for infrastructure for public utilities, everything.
This data then can be sent to a control panel, and monitored and changed and do whatever the controllers need to do. Other anticipated applications include remote diagnostics, which is always huge, and monitoring of systems, augmented reality, and virtual reality solutions for technician training and several for security. All those things. Again, the promise of these brilliant breakthroughs with 5G are all going to make a difference on all of these things, plus many more. That’s where these things come from. So yeah, it’s quite an interesting stuff to watch. And as such, this alliance is combining, like I said, the benefits of public 5G and private 5G that can guarantee high levels of performance, availability, and reliability that will enable advanced solutions like drones, IOT, augmented reality, and AI. Again, all things will be gained by enterprises and industrial plants, et cetera.
So to me, the alliance shows that Vodafone’s 5G network infrastructure is essential to delivering the ultra broadband low latency security and the ability to collect an extraordinary amount of data across the Snam energy network footprint, and that’s only going to become more and more important in the future. I really think that this is going to be another one of those things where it starts out small, and it becomes something that we cannot even imagine right now how important it will be.
Ron Westfall: It’s a hot topic, definitely. And we touched on it. For example, it’s like, okay, the operators are a bit slow in jumping in on the private wireless market opportunity. Well, this is showing that this is less of a perception issue, that clearly the operators do have the capabilities and the resources to play more directly in a specific vertical such as energy, where, again, we think there are going to be increasing synergies and this will help drive the innovation.
Plus, we still hear debates about, well, why private 5G when LTE and Wi-Fi can address many of these issues? Well, I think this use case, this specific example, drives through why you need private 5G specifically, because it’s the only technology that can meet those ultra low-latency demands, the consistent bandwidth performance, et cetera. I mean these are all built into only 5G, and this is something that I think will help spur more consideration of 5G by the enterprises out there, certainly in the energy sector.
And on that positive note in terms of okay, why private 5G and what are the verticals that operators can play more in, let’s return back to Q3 results, and where we started off with AT&T.
We know that T-Mobile came out with its Q3 results for 2023, and like its two major competitors, AT&T, and naturally Verizon, they posted mostly better than expected results, including a raise in guidance for the remainder of this year. And as such, I see that T-Mobile results are indicating improving market position across the big three US operators, at least certainly from a financial perspective, but other key metrics that we’ll touch on. This I think correlates directly to the fact that T-Mobile shares did go up 2% after reporting these results. It’s following again on the AT&T’s results that yielded a vote of investor confidence as well as Verizon, its most recent results getting that same outcome.
A couple of important highlights is that for T-Mobile, the core adjusted EBITDA, which is adjusted EBITDA less lease revenue, is expected to be between now 29 billion and 29.2 billion. That’s an increase from the prior guides of 28.9 billion to 29.2 billion. So, surely, this is something that is demonstrating tangible improvement, and again is defeating the expectations that something like that would not actually occur in the Q3 results. Also notably is the fact that T-Mobile is demonstrating that the major synergies from this Sprint acquisition, it’s now expected to be approximately $7.5 billion. So that I think is something that all of us are interested in seeing, how the outcome from the acquisition is improving the synergy outcomes.
One final observation, I’ll turn it over to you Todd, of course, what you see coming out of these results, is that T-Mobile is continuing to deliver on its plan to return value to its stockholders by buying back $2.7 billion of common stock throughout the quarter, and it’s also basically looking to, again, demonstrate substantial capital return program results and introducing a dividend for the first time in company history. So that definitely leaped out, introducing the dividend. That I think is clearly a tangible progress outcome.
And finally, and this we will segue into more conversations we’ll have, but the company announced its ultra capacity 5G network now covers, again, 300 million people or certainly by the end of this year. We touched on that in the AT&T conversation, and that’s again due to the fact that they’re using dedicated mid-band spectrum. This is actually ahead of schedule, so let me amend that. That T-Mobile reached its end-of-year goal in advance. That, I think, is something that deserves kudos and extra spotlighting. So Todd, what is your take on the T-Mobile Q3 results?
Todd R. Weiss: Well, I’m pretty impressed. Again, T-Mobile reported 557,000 new fixed wireless access or FWA customers, which beat analyst expectations. That’s significant. That means T-Mobile now has a total FWA, fixed wireless access customer base of 4.2 million, which is most impressive as it races toward increasing its total to over 7 million by 2025. That’s a lot. That’s going to almost double it in a little more than a year. Hot on the heels, Verizon gained 384,000 new FWA customers.
So the wars are continuing between these two companies for these fixed wireless access customers, which are important to them. T-Mobile added, according to their numbers, 850,000 new postpaid phone customers to its network during the quarter, which, again, that’s almost a billion. That’s a lot of new customers, again leading the industry in that statistic, and also exceeding, again, most analyst expectations. You got to wonder where those are coming from.
So somebody’s losing them, because I don’t know if there’s just more and more people doing this, buying phones and gaining service. So somebody’s probably losing some of this.
The company also said it now expects to gain a total of between 5.7 million and 5.9 million postpaid net customer additions during the whole of 2023, which is amazingly an upgrade from its prior guidance of 5.6 million to 5.9 million. So it’s a little bit of a gain in their expectations, based on their guidance. The company also raised its expectations for earnings for the year, so that’s a positive for them. AT&T said it now expects to gain a total of between 5.7 million and 5.9 million postpaid net customer additions during the whole of 2020. I’m sorry, this graph is repeated, so we’ll just cut that.
Ron Westfall: Not a problem. Yes, and those I think are very important takeaways, Todd. I think that definitely, definitely sharpens the fact that not only is T-Mobile showing improved results but also maintaining a great deal of momentum. And that, I think, has come out with also the AT&T Q3 results. So this is running against some of the gloom and doom that’s out there, because of the CapEx issues that we touched on, the fact that the major US operators, but also in other parts of the world, are dialing back or are at least not looking to expand CapEx significantly in 2024.
But in the meantime, I think this is going to provide runway for them to make better use case examples to better understand their assets and make progress in terms of, say, 5G SA implementations and so forth. So as a whole, at least we’re seeing the big three US operators demonstrating to the street that, hey, we are definitely making tangible 5G progress, and it’s linked directly to our other initiatives such as fiber builds, fiber partnerships, and so forth. And so this is something that I think we can basically wrap up on a somewhat positive note, that this is demonstrating that the 5G game is very much in play, and there’s a great deal of progress ahead of us.
Todd R. Weiss: What I see, and this is where we really can see the evidence, the extra expenses, the extra CapEx expenses that these companies have to spend, I think I’m seeing it’s worth it to them, when customers can see the benefits, customers can see the new services that will transform the use of 5G for their businesses, for their people, for everyone. If there’s advancements that can make a substantial improvement and change to business and consumers, then I think these operators are going to find it is worth those investments to stand alone, to stand in front of competitors, and to bring in that extra business, because you don’t make money unless you spend money. It’s always been the way it is. So I think that’s a substantial thing. As long as they can show results and show how people, users, enterprises will gain features and performance, that will be the key. They’ve got to do that.
Ron Westfall: Right on. Yeah, and I think that aligns with our observations about progress with 5G standalone implementations, and also, again, creating more compelling bundles and so forth. I agree wholeheartedly. We’ll anticipate that they can maintain this focus and this ongoing ability to diversify their revenue streams and demonstrate value, and thus warrant some of the positive indicators embedded in their financial results. With that, that’s a wrap for today’s 5G Factor. Thank you everyone for joining us, and thank you, Todd, again, for sharing your insights and thoughts on what’s going on in the 5G world.
Todd R. Weiss: Thanks for having me, Ron. I always appreciate being with you here.
Ron Westfall: You bet. I am looking forward to our next conversation on The 5G Factor. And with that, everyone, have a great 5G day. Don’t forget to tune in. Good day.
Other insights from The Futurum Group:
T-Mobile Q3 2023: Industry Pacesetter for Revenue and Customer Growth
5G Factor VRN: Vodafone 5G is Testing GenAI Waters
5G Factor: CapEx Trends, Q2 2023 for T-Mobile, AT&T, Verizon & T-Mobile Moves
Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
He is a recognized authority at tracking the evolution of and identifying the key disruptive trends within the service enablement ecosystem, including a wide range of topics across software and services, infrastructure, 5G communications, Internet of Things (IoT), Artificial Intelligence (AI), analytics, security, cloud computing, revenue management, and regulatory issues.
Prior to his work with The Futurum Group, Ron worked with GlobalData Technology creating syndicated and custom research across a wide variety of technical fields. His work with Current Analysis focused on the broadband and service provider infrastructure markets.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
