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5G Factor Video Research Note: AT&T, T-Mobile, Verizon Q2 Earnings Beat

5G Factor Video Research Note: AT&T, T-Mobile, Verizon Q2 Earnings Beat

In this vignette of The 5G Factor, Ron Westfall and Todd R. Weiss provide their perspective on the Q2 2023 earnings reported by AT&T, T-Mobile, and Verizon and their 5G ecosystem implications.

The discussion spotlighted:

AT&T, T-Mobile, and Verizon Put Up Good Q2 2023 Earnings Numbers. The big three U.S. mobile operators reported their Q2 2023 earnings with positive indicators and outcomes embedded. AT&T Q2 2023 revenues came in at $29.9 billion, up 0.9% year over year (YoY), Verizon reported Q2 2023 revenue of $32.6 billion, yielding a non-GAAP profit of $1.10 per share, and T-Mobile generated service revenues of $15.7 billion, up 3% YoY. We examine how each of the big three U.S. operators fared across key subscriber and financial categories and where we see competitive advantages are generated.

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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: Let’s talk about AT&T and its Q2 2023 earnings. Now, AT&T reported $29.9 billion for its Q2, and that is up 0.9% year over year. And that includes cash from operating activities of $9.9 billion, which is up from 28.2% year over year. And it’s up $1.2 billion in the first half of 2023 compared to the first half of 2022. Now AT&T’s free cash flow of $4.2 billion is up $1 billion in the first half of 2023 compared also, again, to the first half of 2022. And to top it all off, it’s confident that in a full year, free cash flow of $16 billion or better is in the offing. The growth picture looks very promising for AT&T as a result. And why is that? Well, first of all, AT&T delivered 326,000 postpaid phone net ads with continued strong ARPU growth and historically low levels of churn. Plus, its mobility service revenues are up 4.9% and the company achieves its best ever second quarter mobility operating income. And the operating income of $6.4 billion is up 29.3% year over year.

And to top it all off, their full year adjusted EBITDA is a growth of more than 3%. With that, what’s not to like? What is it that AT&T is doing that is also impressing you, Todd, and is keeping your attention on what AT&T has done just in this last quarter?

Todd R. Weiss: My feelings about reading this was that yes, it was not huge growth, but it was not huge loss either. They didn’t lose customers. They gain. Whenever they gain customers, when they ever had … Whenever a company has net ads and service, this is a plus right there, but 326,000 postpaid phone net ads is not a small number. I think that that’s something that would be very pleasing to AT&T, any company.

Ron Westfall: All right on. In fact, not to be outdone, both Verizon and T-Mobile also reported strong Q2 results. And what we see from Verizon, for example, is that they turned in $32.6 billion worth of revenue and including a non-gap profit of $1.10 per share. They too are able to blow their horn. But I would say that the operator that’s being able to blow its horn the most amongst the big three US operators is T-Mobile, once again, as they were able to register breakthrough postpaid account and customer net additions as well as reporting record low postpaid phone churn. While AT&T had progress in this area, quite simply, T-Mobile did even better. And so that is making things, I think, very interesting. And if you look at some of the T-Mobile figures, for example, their postpaid net account additions were 299,000. That again is very impressive. Plus, their postpaid net customer additions were $1.6 million, which is enabling T-Mobile to assert that they’re the best of the industry at this juncture. And also, I think what’s interesting is that their high speed internet customers additions were $509,000. It’s not just about their wireless and mobile additions, it’s also about the fact that their high speed internet customers are beating out AT&T, Verizon, Comcast, and Charter combined. And this is for the fifth consecutive quarter.

Clearly, T-Mobile is putting up great game. And this is yielding results like net income of $2.2 million, and that grew from $2.3 billion year over year. And also, again, their EBITDA of $7.3 billion grew 11% year over year. Basically, T-Mobile is the pacesetter here. They’re really showing that not only are they performing very effectively when it comes to the customer additions, the subscriber additions and so forth, but it’s also yielding these very impressive fiscal results. Looking at the big three, do you have any final thoughts here, Todd, on how you see AT&T, Verizon, and T-Mobile shaping up in the near future?

Todd R. Weiss: I do. I’m particularly impressed with T-Mobile. A number of years ago, I was covering T-Mobile on a regular basis for several years. John Legere was the CEO, a very popular guy. He was very outspoken. He was a character in the IT industry and in the telecom industry. And I thought when he left, I wasn’t sure if T-Mobile was going to have the same play in the market. I wasn’t sure they were going to have the same cachet, but since he did leave, they haven’t lost anything. T-Mobile has grown. T-Mobile has performed. T-Mobile is still making good decisions post John Legere. I’m very impressed by this. He was one of those guys like the Steve Jobs of the telecom industry. He was just a very interesting character. I saw him at these events. And I feel like despite his moving on, this company is still moving on very well.

Ron Westfall: Well, I fully agree. In fact, I take my hat off to the new CEO, Mike Sievert. I think he was very eloquent in how he explained why T-Mobile is successful. And it’s very fundamental. First of all, they have more customers coming to them than any other operator in the US. And secondly, they’re keeping more of these customers.

Todd R. Weiss: It’s a big deal.

Ron Westfall: And third, yep, they’re increasing their bundle effectiveness. So what’s not to like? Kudos to T-Mobile for that continuity. The handoff from John Legere to Mike Sievert has been very successful. You don’t see that all the time.

Todd R. Weiss: And speaking.

Ron Westfall: And so this is something.

Todd R. Weiss: Speaking of bundling, remember how T-Mobile just a few years ago was bundling all kinds of special things for customers in with their T-Mobile service. Verizon has come to do that. You now can get Verizon service with extras, with Paramount Plus, with this, with that. The others have followed what T-Mobile was doing six, seven years ago. I think that’s a really big deal.

Ron Westfall: In fact, it’s kind of a paradox. I think we’re seeing the other players emulate T-Mobile on the consumer side. And T-Mobile, in some ways, is having to emulate Verizon business and AT&T business as they are the large incumbents in that area. However, stay tuned. I think T-Mobile, for example, with their fixed wireless access offerings, making inroads, and will make things more interesting over the next two quarters plus. And hopefully, we’ll see T-Mobile sell…Breaking out their T-Mobile for business revenue streams. And that would be, I think, a validation like, okay, they’re really making headway. They’re really moving the needle in terms of their T-Mobile for business unit. And so this is something to stay tuned for unequivocally.

Todd R. Weiss: Oh, yeah. I agree. And I think that that will be something not too far off in the distance, I believe.

Other insights from The Futurum Group:

T-Mobile Q2 2023: Breakthrough Growth in Customers and Profitability

5G Factor: AI Rising! Qualcomm’s Hybrid AI Vision, Nokia Puts the AI in AirScale, and NVIDIA Softbank Pair Up for Gen AI & 5G Apps

Cisco Live 2023: Cisco and AT&T Join Forces to Elevate Mobile Experience for Hybrid Workforces

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.

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