Q3/2024 Earnings for the "Big 3" - AT&T, Verizon, T-Mobile

Oct 24, 2024

4 min read

Earnings were released for the "Big 3" of AT&T, Verizon, and T-Mobile this week. (EchoStar (DISH/Boost) releases earnings on 11/4/2024)).

Takeaways:

Verizon in Q3 announced a proposed acquisition of Frontier, a sale of their towers to Vertical Bridge, and an acquisition of additional spectrum from US cellular (pending T-Mobile / US cellular transaction completion)
Fiber is attractive, and appears to attract customers that are sticky - Per the VZ earnings call:
"......in some of our big markets where we have fiber, our wireless market share is 500 basis points or 5% better than if we don't have fiber."
"The second is churn. A couple of data points. We see a 50% reduction in mobility churn when we bundle with fiber."
AT&T continues to invest heavily in fiber and already passes 28 million homes and businesses (where Verizon hopes to reach in 2028 with the Frontier Acquisition)
T-Mobile received no qualifying bids for its 800MHZ spectrum that it planned to sell to EchoStar(DISH), as part of the Sprint/TMO merger
"We were required to sell it as an artifact of the merger and the consent decree and to auction it under a set of auction rules. We did that and there wasn't a qualifying bid as defined in the consent decree. And so, we're no longer are required to sell it. That gives us optionality."
T-Mobile's growing adjusted free cash flow and CAPEX levels have consistently impressed investors, leading to a positive market response

Postpaid net adds of 239,000
Target of reaching 90 million homes and businesses covered with fixed wireless access
2025 CAPEX Estimated $17.5B - $18.5B
$14.5B free cash flow YTD
"That strong EBITDA led to free cash flow of $14.5 billion year-to-date, and that's consistent with the prior year. And that includes an increase of $2.5 billion in cash taxes."
Acquisition of US cellular incremental spectrum not believed to occur until 2026 due to dependency of T-Mobile transaction with US cellular
" It's going to take time until that's come into fruition because it's hanging on another acquisition. So I don't think it's going to be cash out until 2026. It's just adding capacity. It's a buy versus build in that region. So we're adding capacity there."
Ultra Wideband 5G deployment is ~70% complete
"I expect that by the end of this year, we'll have a -- we'll have covered 70% of our planned footprint and by the end of next year through acceleration, we will get to 80% to 90% of that planned footprint covered."
In lieu of a layoff, Verizon said last month it expects to lose about 4,800 employees through a buyout program by March 2025, which accounted for $1.7 billion of the $2.3 billion in one-time charges in the Q3.
FORM 8-K

403,000 postpaid phone net adds
YTD free cash flow: $12.8B

"Year-to-date, free cash flow is $12.8 billion. This is up $2.4 billion compared to the same time last year and consistent with our goal of driving higher free cash flow that is more ratable on a quarterly basis"

"Our free cash flow is tracking to the midpoint of our guidance range of $17 billion to $18 billion."

Open Access Model Considered as a way to monetize fiber build out
"And I think it's really important that we think about an industry structure in that regard because as people start talking about the ability to federate product and service across an industry and what footprint looks like over the course of the next decade, if you're not thinking about the likelihood that, that could become an element of how the industry is structured, you're missing the fact that the dynamic of how cable, for example, has federated on nationwide constructs of cooperation that you could have a much broader footprint of how you think about marketing and selling your products and services that have unique capabilities and your brand position in a way over time that can make a very strong difference in terms of profitability and return. So I won't rule it out. I absolutely believe that, over time, there may be an accretive and economic construct around it. I don't know that, that time is right now but it's something that we should be paying attention to when you have plenty of capacity in the ground that you can continue to sell in different ways.
AT&T to host Analyst & Investor Day on December 3
Events & Presentations | AT&T

Postpaid net adds of 865,000
T-Mobile raised its 2024 guidance
CAPEX forecast to remain consistent into next year
"Turning to cash capex. We now expect to be between $8.8 billion and $9 billion, unchanged at the midpoint. Our longer-term expectations continue to be in the $9 billion to $10 billion range annually as we outlined for you at our Capital Markets Day a few weeks ago."
"We were able to indicate that for our planning horizon over the next few years, this $9 billion to $10 billion capex area makes sense."
Free cash flow expectations have increased
"And finally, we now expect adjusted free cash flow, which includes payments for merger-related costs to be in the range of $16.7 billion to $17 billion, up $50 million at the midpoint driven by both margin expansion and capital efficiency, resulting in industry-leading service revenue to free cash flow conversion."
Updates on Lumos, Metronet, and US cellular transactions, expectations to close in 2025
"In terms of Lumos, we expect that to close in the first part of next year. UScellular, which is also in the process, maybe the middle part of next year. And then Metronet, we also expect to close in 2025. So, good progress through the whole regulatory process. There's obviously several different groups that have to review and approve them and feel like those are going really well so far."
" both Lumos and Metronet have cleared the DOJ review process. They're still pending for the FCC, and that will take a little more time, as Mike just indicated, on UScellular."