AT&T’s CEO John Stankey likes the telco’s chances in small- to medium-sized businesses. The telco noted it has relationships with nearly 2.5 million business customers today and has an opportunity to win more small- to medium-sized business customers.
Stankey noted that businesses are transitioning to mobile and cloud-based services at an accelerated rate as post-pandemic workplace restructuring takes hold. In the business segment, wireless service revenues grew by 4.6% in the first quarter, outpacing the overall growth of mobility services revenue.
“We have relationships with nearly 2.5 million business customers today and an opportunity to win with more small- to medium-sized businesses,” Stankey said.
He added that AT&T is looking for opportunities to sell its 5G wireless and fiber to broader business customers. Like its ILEC counterparts Verizon and Lumen, AT&T also focused much of its energy on selling services to prominent multinational businesses.
“We're shifting to build a company that is good at selling 5G and fiber into business, not just at the top end of the market for the Fortune 1000 but across the market continuum,” Stankey said. “And that's a bit of a transition for AT&T.”
However, AT&T has to craft a new selling strategy to pursue the mid-sized business market. “As we shift and generate more revenues and more share out of the mid-portion of the market, we're having to rebuild some muscle, some distribution, and the right product mix to attack that,” Stankey said.
Fixed wireless security resonates
AT&T is finding that new services like its fixed wireless service, AT&T Internet Air for Business, are resonating with this segment as it pursues more medium business opportunities.
In particular, the Internet Air service could be a good fit for remote businesses that can’t get fiber or business sites that don’t have ample bandwidth requirements.
“One way we intend to meet small and medium businesses connectivity needs is with our new fixed wireless service, AT&T Internet Air for Business,” Stankey said. “We believe this is a durable national play with business because it can serve as a reliable 5G-powered primary Internet connection where fiber is unavailable in remote locations when temporary access is needed or with small and medium businesses that don't require always-on video streaming.”
He added, "While it's still early, we've been very pleased with the solid demand from businesses.”
Besides providing wireless connectivity, AT&T sees potential in enhancing its cybersecurity offerings. The service provider offers its Dynamic Defense service, a self-service tool that AT&T Business does not manage.
“Security is at the top of the list. That's why we introduced AT&T Dynamic Defense, which provides built-in security controls on top of world-class access,” Stankey said. The takeaway is that we're well positioned to capitalize on urging connectivity opportunities with businesses, thanks to our strong relationships with almost all of the Fortune 1000, our leading position in fiber, and the fact we operate the largest wireless network in the U.S.”
Business product transition
As AT&T looks for opportunities in the mid-market, the telco is aware that it must transition to match the evolution of its business customer base. Its customers' ongoing transition off of traditional legacy voice and data services has dragged on its Business Wireline results.
In the first quarter, Business Wireline revenues declined 7.8% year over year to $4.9 billion, primarily due to lower demand for legacy voice and data services as well as product simplification, partially offset by growth in connectivity services and non-recurring equipment revenues.
Pascal Desroches, CFO of AT&T, said the drop in legacy voice service revenue was critical to AT&T Business Wireline's first-quarter results.
“Business Wireline EBITDA was down 16.5% due to faster-than-anticipated rate of decline for our legacy voice services,” he said. “At the start of the year, we shared that we expected Business Wireline EBITDA trends to improve full-yearly. However, due to the faster-than-expected decline of legacy voice services, we now expect full-year Business Wireline EBITDA declines in the mid-teens range versus our prior outlook of a decline of 10%, plus or minus.”
AT&T is implementing several cost-saving and productivity initiatives within its business segment, which it said will benefit results in the second half of the year.
Stankey noted that “businesses are transitioning to mobile and cloud-based services at an accelerated rate as post-pandemic workplace restructuring takes hold.”
“We see the benefits from this connectivity transition in Business Solutions, where wireless service revenues grew 4.6% in the first quarter, outpacing our overall Mobility services revenue growth,” he said. “While we continue to actively work our legacy transition strategies to end-of-life products, reduce our operating footprint, and eliminate fixed costs, we're advancing several cost savings and productivity initiatives to align with this reality, such as vendor and management workforce rationalization.”
AT&T sees its 5G wireless and fiber expansion will provide new business service growth opportunities.
Desroches pointed to FirstNet and AT&T Internet Air for Business. “A great example is FirstNet, where wireless connections grew about 320,000 sequentially,” Desroches said. “We're also pleased with early demand for AT&T Internet Air for Business, which we expect to benefit results in the year's second half.”
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