AT&T pushes past 5.72M fiber subs as supply chain challenges persist

AT&T's fiber-based broadband business remained strong in the third quarter as the company tacked on another 289,000 fiber subs, ending the quarter with 5.72 million. Roughly 70% of those subscriber additions are new to AT&T, the company said.

With losses from its non-fiber broadband business (-261,000 subs) and legacy DSL business (-22,000) factored in, AT&T added 6,000 total high-speed Internet connections in the period, ending Q3 with 14.18 million. Fiber subscriber additions and customer upgrades to faster speed tiers helped AT&T's broadband ARPU (average revenue per unit) climb to $55.16, up from $52.43 in the year-ago period.

There's no change to AT&T's current plan to add 2.5 million fiber homes passed in 2021, down from an original plan of 3 million, due to supply chain issues. But execs stressed that the company is getting a handle on the situation and is in position to obtain more command of its supply chain.

Speaking on today's earnings call, AT&T CEO John Stankey said the supply-chain stress partly stems from a fiber supplier that had struggled to get prefabricated and preassembled portions of fiber infrastructure that covers the last mile/distribution part of the network into AT&T's hands. AT&T is also "running a little bit short" on a connector component that ties the optical node to the distribution network, he added.

"We're working through all of those [supply chain issues] in a respectable fashion," Stankey said. He said AT&T is also on a path to ramp up its fiber build to 5 million locations annually. "We feel good about the ramp," he said.

And the company also feels pretty good about how it is generally executing on fiber network deployments.

Jeff McElfresh, CEO of AT&T Communications, noted that, despite the aforementioned supply chain issues, AT&T is actually building out fiber some 30% faster than it did in its prior fiber-to-the-premises (FTTP) buildout.

Some analysts aren't quite as bullish on AT&T's fiber buildout strategy. Even as AT&T's consumer wireline strategy hinges on expanding the fiber footprint, the company faces "falling density as they move to second-tier locations, making costs per home higher," Craig Moffett, analyst with MoffettNathanson, explained in a research note. "Their fiber net adds were solid… but, as so often has been the case, fiber gains were met with faster non-fiber losses, leaving overall broadband growth a bust. And margins in Consumer Wireline keep falling."

Moffet also points out that AT&T's consumer broadband subscriber base is growing by just 0.6% year-over-year, a full percentage point lower than the growth rate last quarter

McElfresh also offered a brief update on AT&T fixed wireless access strategy, reiterating that it's not a core focus. He said most of AT&T's FWA activity is focused on the enterprise market (for 4G and 5G backhaul), along with some experimenting to reach certain pockets of the residential market.

"Honestly, it's not a lead product for us," McElfresh said.

AT&T's FWA strategy stands in contrast to more aggressive moves by T-Mobile and Verizon, which announced yesterday it added 55,000 FWA subs in Q3 for a total of 150,000.

Direct-to-consumer update

Shifting to content and WarnerMedia's direct-to-consumer streaming business, the media giant added 1.88 million HBO and HBO Max subs globally, ending the period with 69.41 million. That gain was primarily driven by strong international growth of 3.73 million HBO and HBO Max subs in the quarter.

By comparison, the domestic HBO and HBO Max business shed 1.84 million subs in the quarter, ending Q3 with 45.18 million. That subscriber hit was largely due to AT&T's decision to shut down distribution of HBO services on the Amazon Channels platform.

HBO Max's direct-to-consumer retail business added 570,000 subs in the quarter, for a total of 12.64 million. HBO Max's wholesale business (fueled by pay-TV and other types of partnerships) lost 2.42 million subs in Q3, for a total of 29.02 million.

Despite the decision to leave Amazon Channels, HBO Max and HBO are nearing the low end of the company's 2021 global subscriber guidance, Stankey said.

WarnerMedia expects its retail subscriber growth to accelerate in Q4, thanks to a strong content slate that includes tomorrow's simultaneous release of Dune at theaters and via the HBO Max streaming service.