AT&T subscriber additions beat expectations, free cash flow swells to $4.6B

Shares of AT&T (NYSE:T) are gaining ground in Wednesday’s premarket as the telecommunications company added more wireless subscribers in the second quarter than expected and continued to hold onto their “industry-leading” postpaid phone churn of just 0.70%.

The company added 419K postpaid phone net adds in Q2, beating the Bloomberg estimate of 279,929, while total wireless net adds declined slightly as a result of a significant drop in prepaid phone additions.

Wireless service revenue increased 3.4% to $16.3B, a slight beat on the Street’s estimates, while equipment revenue was down 8% to $4.2B. Business wireline revenue dropped 9.9% year-over-year to $4.76B but Consumer wireline sales were up 3.0% to $3.35B. Revenue for the company’s Latin America and Mexico segment improved more than 14% to $1.1B, led by gains in both subscriber growth and an increase in equipment revenue.

“Today, nearly four of every 10 AT&T Fiber households also choose AT&T wireless service,” CEO John Stankey said, adding that, “As the nation’s largest consumer fiber builder, we see this as an opportunity to continue to grow subscribers and revenues, while deepening customer relationships.”

Premarket gains were curbed by a slight miss on Q2 revenue, which was down 0.4% and missed the consensus estimate by $180M. This was a result of the drop in business wireline revenue and lower mobility equipment revenue. The company also earned a lower adjusted profit from a year ago, declining to $0.57 per share from $0.63 in the same quarter last year, and in-line with expectations. Adjusted EBITDA of $11.3B also met expectations.

Free cash flow – instrumental in dividend disbursement – increased to $4.6B from $4.2B in the year ago quarter, $480 million more than the street expected.

For 2024, AT&T (T) reiterated its earlier guidance to include wireless service revenue to increase in the 3% range, while broadband sales are expected to rise more than 7%. Capital investment is targeted for $21B to $22B, above the $18.93B estimate. Adjusted earnings are expected to be within the range of $2.15 to $2.25 per share, straddling the $2.21 Street estimate, while free cash flow is targeted for $17B to $18B versus estimates of $17.51B.

Shares are up 3% in premarket trading, putting the stock on track to break a four-day losing streak.