AT&T Inc.

Company Overview

Business Model: AT&T Inc. is a leading global provider of telecommunications and technology services. The Company's core value proposition revolves around delivering connectivity services through its extensive 5G and fiber networks. Primary revenue generation mechanisms include providing wireless and wireline telecom and broadband services to consumers in the United States and businesses globally, as well as wireless services and equipment in Mexico.

Market Position: AT&T Inc. is positioned as a leader in connectivity services, leveraging its 5G and fiber infrastructure. The Company holds a solid spectrum portfolio, strengthened by Federal Communications Commission (FCC) auction acquisitions and 5G deployments. In the United States, its network covers over 336 million people with LTE technology and over 314 million people with 5G technology. In Mexico, AT&T Inc. is one of three facilities-based wireless providers, with its network providing LTE coverage to over 104 million people.

Recent Strategic Developments:

• Open Radio Access Network (Open RAN) Deployment: In 2024, AT&T Inc. collaborated with Ericsson to lead commercial scale Open RAN deployment in the U.S., aiming for approximately 70% of its wireless network traffic to flow across open-capable platforms by late 2026. This initiative is expected to foster lower network costs and improved operational efficiencies.
• Fiber Expansion: AT&T Inc. has prioritized fiber expansion since 2020, growing its fiber consumer wireline broadband customers to over 9.3 million by December 31, 2024, adding 1.0 million during the year. The Company launched multi-gig services for AT&T Fiber customers in select locations in January 2022.
• Spectrum Acquisitions: In November 2024, AT&T Inc. agreed to purchase select spectrum licenses from United States Cellular Corporation for approximately $1.0 billion, subject to closing conditions.
• Divestitures and Joint Ventures:
  • DIRECTV: In September 2024, AT&T Inc. agreed to sell its remaining interest in DIRECTV to TPG Capital for approximately $7.6 billion in cash payments through 2029, with the transaction expected to close in mid-2025. AT&T Inc. had previously separated its U.S. Video business into DIRECTV in July 2021, accounting for its investment under the equity method.
  • WarnerMedia: In April 2022, AT&T Inc. completed the separation of its WarnerMedia business in a Reverse Morris Trust transaction, with WarnerMedia, Vrio, Xandr, and Playdemic Ltd. subsequently reflected as discontinued operations.
  • Gigapower, LLC: In May 2023, AT&T Inc. closed a transaction with BlackRock to form Gigapower, LLC, a joint venture in which AT&T Inc. holds a 50% interest, providing fiber network services to internet service providers and other businesses across the U.S.
  • SKY Mexico: In June 2024, AT&T Inc. sold its 41.3% interest in SKY Mexico.
  • LevelBlue: In the second quarter of 2024, AT&T Inc. contributed its cybersecurity business to a new cybersecurity joint venture, LevelBlue.

Geographic Footprint: AT&T Inc. primarily operates in the United States, which accounted for $116.882 billion of its total revenues in 2024. Its Latin America segment provides wireless service and equipment in Mexico, generating $4.286 billion in revenues in 2024. The Company also has international operations in Asia/Pacific Rim ($0.462 billion in 2024), Europe ($0.441 billion in 2024), and other parts of Latin America ($0.149 billion in 2024) for enterprise services.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 59.8%
• Operating Margin: 15.6%
• Net Margin: 10.0%

Investment in Growth:

• R&D Expenditure: $0.955 billion (0.78% of revenue)
• Capital Expenditures: $20.263 billion
• Strategic Investments: Total capital investment, including capital expenditures and cash paid for vendor financing, was $22.055 billion in 2024. Spectrum acquisitions totaled $0.380 billion in 2024.

Business Segment Analysis

Communications

Financial Performance:

• Revenue: $117.652 billion (-0.3% YoY)
• Operating Income: $27.095 billion (-2.5% YoY)
• Operating Margin: 23.0%
• Key Growth Drivers: Increases in Mobility service revenue and Consumer Wireline business unit, driven by gains in wireless and broadband services. These were partially offset by declines in Business Wireline service revenue and Mobility equipment revenue.

Sub-segment Breakdown:

• Mobility:
  • Revenue: $85.255 billion (+1.5% YoY)
  • Operating Income: $26.314 billion (+1.8% YoY)
  • Operating Margin: 30.9%
  • Key Growth Drivers: Growth from subscriber gains and higher postpaid average revenue per subscriber (ARPU). Postpaid churn (0.92%) and postpaid phone-only churn (0.76%) were lower in 2024.
  • Product Portfolio: Nationwide wireless voice and data services (including FirstNet services), Cricket and AT&T PREPAID brands, a wide variety of handsets, wireless data cards, and wireless computing devices.
  • New Product Launches or Major Updates: Continued 5G deployment, innovative services, plans, and devices that bundle product offerings.
  • Market Dynamics: Rapid growth in data usage, increasing demand for data-centric services, and nearly full penetration of smartphones in the U.S. population.
  • Subscribers: 117.851 million total Mobility subscribers (89.2 million postpaid, 19.0 million prepaid, 9.6 million reseller) as of December 31, 2024.
  • Net Additions: 4.168 million total Mobility net additions, including 1.653 million postpaid phone net additions, in 2024.
• Business Wireline:
  • Revenue: $18.819 billion (-9.9% YoY)
  • Operating Income (Loss): -$0.088 billion (compared to $1.289 billion income in 2023)
  • Operating Margin: -0.5%
  • Key Growth Drivers: Declines driven by lower demand for legacy voice, data, and network services, product simplification, and the absence of revenues from the cybersecurity business (contributed to LevelBlue joint venture). Partially offset by growth in fiber and connectivity services.
  • Product Portfolio: Fiber and advanced connectivity services (AT&T Dedicated Internet, fiber ethernet, broadband), fixed wireless, IP Voice, managed professional services, legacy voice and other transitional services (copper-based voice and data, Virtual Private Networks, wholesale, outsourcing, and IP sales), and customer premises equipment.
  • Market Dynamics: Secular decline in legacy copper-based services, ongoing network reconfiguration to leverage latest technologies (SDN and NFV), and evaluation of opportunities to decommission copper infrastructure.
  • Goodwill Impairment: A noncash goodwill impairment charge of $4.422 billion was recorded in the third quarter of 2024, representing the entirety of the Business Wireline reporting unit goodwill, driven by a faster-than-previously anticipated industry-wide secular decline of legacy services.
• Consumer Wireline:
  • Revenue: $13.578 billion (+3.1% YoY)
  • Operating Income: $0.869 billion (+33.5% YoY)
  • Operating Margin: 6.4%
  • Key Growth Drivers: Increase in fiber customers and higher ARPU, partially offset by declines in copper-based broadband services.
  • Product Portfolio: Broadband services (fiber connections providing multi-gig services, AT&T Internet Air fixed wireless access over 5G network), and legacy telephony voice communication services.
  • New Product Launches or Major Updates: Expansion of fiber footprint and multi-gig offerings.
  • Market Dynamics: Increasing demand for high-speed broadband services due to changes in video viewing preferences and remote learning trends. Focus on migrating customers to fiber and wireless alternatives and decommissioning legacy copper networks.
  • Connections: 14.079 million total broadband and DSL connections, including 9.331 million fiber broadband subscribers, as of December 31, 2024.
  • Net Additions: 1.024 million fiber broadband net additions in 2024.

Latin America

Financial Performance:

• Revenue: $4.232 billion (+7.6% YoY)
• Operating Income (Loss): $0.040 billion (compared to -$0.141 billion loss in 2023)
• Operating Margin: 0.9%
• Key Growth Drivers: Growth in subscribers and ARPU, partially offset by unfavorable foreign exchange impacts.
• Product Portfolio: Postpaid and prepaid wireless services in Mexico under the AT&T and Unefon brands, and a variety of handsets.
• Market Dynamics: AT&T Inc. is one of three facilities-based providers in Mexico.
• Subscribers: 23.576 million total Mexico wireless subscribers (5.837 million postpaid, 17.486 million prepaid) as of December 31, 2024.
• Net Additions: 1.260 million Mexico wireless net additions in 2024.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $0.215 billion (36 thousand shares) in 2024.
• Dividend Payments: $8.208 billion in 2024, with common stock dividends totaling $1.11 per share.
• Future Capital Return Commitments: In December 2024, the Board of Directors approved a new $10.0 billion share repurchase authorization, terminating the previous March 2014 authorization.

Balance Sheet Position:

• Cash and Equivalents: $3.298 billion
• Total Debt: $123.532 billion
• Net Cash Position: -$120.234 billion
• Credit Rating: The Company's Revolving Credit Agreement contains covenants customary for an issuer with an investment grade senior debt credit rating.
• Debt Maturity Profile: $5.089 billion of long-term debt maturing within one year as of December 31, 2024. The weighted-average interest rate of the long-term debt portfolio was approximately 4.2% as of December 31, 2024.

Cash Flow Generation:

• Operating Cash Flow: $38.771 billion
• Free Cash Flow: $18.508 billion (Operating Cash Flow less Capital Expenditures)
• Cash Conversion Metrics: The supplier financing program improved cash from operating activities by $0.661 billion in 2024.

Operational Excellence

Production & Service Model: AT&T Inc. operates an integrated telecommunications network that leverages different technological platforms to provide instant connectivity at higher speeds, driven by fiber network expansion and wireless network enhancements, including 5G. The Company is focused on aggregating traffic on a large, low marginal cost, converged network through efficient spectrum deployment and construction of high-capacity broadband solutions. A strategic initiative involves actively decommissioning its legacy copper network, migrating customers to fiber and wireless alternatives.

Supply Chain Architecture: The Company relies on various suppliers for critical items such as network equipment, customer premises equipment, and wireless-related equipment (e.g., mobile hotspots, handsets). In some cases, AT&T Inc. depends on key single-source suppliers. The Company utilizes supplier financing programs to optimize cash use, with payment terms of 90 days or greater.

Key Suppliers & Partners:

• Network Infrastructure: Ericsson (for Open RAN deployment).
• Device Manufacturers: Various suppliers for handsets, wireless data cards, and wireless computing devices.
• Financial Institutions: For supplier financing programs.

Facility Network:

• Manufacturing: Central office equipment represents 29% of total property, plant and equipment; outside plant (cable, wiring, other non-central office network equipment) represents 27%; and other equipment (primarily wireless network equipment attached to towers) represents 25%.
• Research & Development: AT&T Inc. scientists and engineers conduct research in areas including IP networking, advanced network design and architecture, network and cybersecurity, network operations support systems, and data analytics.
• Distribution: Products and services are sold online, through company-owned stores, agents, and third-party retail stores.

Operational Metrics: AT&T Inc. plans for approximately 70% of its wireless network traffic to flow across open-capable platforms by late 2026 as part of its Open RAN deployment. The Company is actively working to exit legacy copper network operations.

Market Access & Customer Relationships

Go-to-Market Strategy: AT&T Inc.'s strategy involves integrated product offerings that span product lines and utilize shared assets. The Company employs a simplified go-to-market approach for 5G in underpenetrated markets and focuses on expanding its fiber footprint and multi-gig offerings to drive demand for broadband services. Distribution channels include direct sales through enterprise sales forces and direct customer relationships, as well as channel partners and digital platforms for online sales.

Customer Portfolio:

• Enterprise Customers: Services are provided to multinational corporations, small and mid-sized businesses, governmental, and wholesale customers through the Business Wireline segment. FirstNet services are dedicated to public safety.
• Consumer Customers: Residential customers are served through the Consumer Wireline segment, while wireless consumers are served by the Mobility business unit.
• Customer Concentration: No single customer accounted for 10% or more of AT&T Inc.'s consolidated revenues in 2024, 2023, or 2022, indicating a diversified customer base.

Geographic Revenue Distribution:

• United States: 95.5% of total revenue ($116.882 billion)
• Mexico: 3.5% of total revenue ($4.286 billion)
• Asia/Pacific Rim: 0.4% of total revenue ($0.462 billion)
• Europe: 0.4% of total revenue ($0.441 billion)
• Latin America (excluding Mexico): 0.1% of total revenue ($0.149 billion)
• Other: 0.1% of total revenue ($0.116 billion)

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The communications and digital services industry is characterized by increasing competition from both traditional and nontraditional players. Technological advancements continue to expand the types and uses of available services and products. Market saturation in the wireless sector is leading to increased competition for customers, including from strategic alliances in converged connectivity. There is a continuing desire for high-speed data on demand, including video, streaming, augmented reality, "smart" technologies, user-generated content, and artificial intelligence (AI), which drives demand for broadband.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Wireless: Two national wireless providers, a larger number of regional providers and resellers, and certain cable companies in the U.S. In Mexico, América Móvil is the most significant market share holder.
• Broadband: Large cable companies and wireless broadband providers for high-speed internet and voice services in most U.S. markets.
• Legacy Voice and Data: Wireless, cable, and VoIP providers, and other smaller telecommunications companies.

Emerging Competitive Threats: Providers offering voice, text messaging, and other services as applications on data networks; new entrants; disruptive technologies; and alternative solutions. The use of artificial intelligence and machine learning by cybercriminals also poses an emerging threat.

Competitive Response Strategy: AT&T Inc. aims to maintain its competitive advantage through continuous investment in network capacity and spectrum (5G and fiber), offering innovative services, plans, and devices that bundle product offerings, and focusing on network quality, coverage, and customer service. The Company is also deploying Open RAN to build a more robust ecosystem of network infrastructure providers and suppliers, fostering lower network costs and improved operational efficiencies.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Macroeconomic Factors: Adverse changes in U.S. securities markets, increasing interest rates, rising inflation, and medical costs could materially increase benefit plan costs and future funding requirements. Global growth rate uncertainty and volatility in credit, currency, and equity markets could limit access to capital or increase its cost.
• Technology Disruption: Rapid and significant technological changes in wireless and broadband services, coupled with dramatic increases in usage (e.g., streaming, augmented reality, AI), require continuous and significant capital deployment and ongoing access to spectrum. Customer adoption of new software-based technologies may require higher-quality services, potentially creating supply chain issues and increasing capital costs.
• Customer Concentration: No single customer accounts for 10% or more of consolidated revenues, mitigating concentration risk.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Dependence on various suppliers for network equipment, customer premises equipment, and wireless-related equipment. Risks include failure to provide equipment on a timely or cost-effective basis, inability to meet performance expectations due to factors like export license difficulties, inflationary pressures, component shortages, general business disruption, natural disasters, and geopolitical instability.
• Geographic Concentration: International operations, particularly in Mexico, increase exposure to political instability, changes in the international economy, currency fluctuations, war or other hostilities, and compliance with the Foreign Corrupt Practices Act.
• Capacity Constraints: Growing demand for high-speed video and data services is expected to place constraints on network capacity.

Financial & Regulatory Risks

Market & Financial Risks:

• Credit & Liquidity: Adverse changes in global financial markets could limit AT&T Inc.'s ability to access capital or increase the cost of capital. Downgrades of credit ratings could increase borrowing costs and impact collateral requirements under derivative agreements. Increases in debt levels to fund spectrum purchases or other strategic decisions could adversely affect future financing at attractive rates.
• Demand Volatility: Ongoing pressure on pricing is expected in 2025 due to the geopolitical and macroeconomic environment and competitive marketplace, especially in wireless services.
• Foreign Exchange: Exposure to fluctuations in currency values through international operations and foreign-denominated debt.

Regulatory & Compliance Risks:

• Industry Regulation: Changes to federal, state, and foreign government regulations (e.g., FCC, state/local agencies) and decisions in regulatory proceedings could increase operating costs or alter customer perceptions. This includes issues related to broadband classification (net neutrality), digital discrimination, spectrum availability, and the impact of C-Band spectrum on radio altimeter equipment.
• Data Privacy: Increased public focus on privacy issues and new privacy laws/regulations could result in additional compliance costs or litigation.
• Legal Proceedings: Subject to numerous lawsuits and regulatory proceedings, including claims related to antitrust, patent infringement, wage and hour, personal injury, environmental, customer data and privacy violations, cyberattacks, breach of contract, and alleged adverse health effects of wireless technologies. Litigation and government inquiries regarding lead-clad telecommunications cables are ongoing.

Geopolitical & External Risks

Geopolitical Exposure:

• Geographic Dependencies: International operations, particularly in Mexico, expose the Company to evolving political environments and changes in relationships between the U.S. and foreign governments.
• Trade Relations: Impact of trade tensions and policy changes.
• Sanctions & Export Controls: Compliance requirements and business limitations related to trade restrictions.
• Natural Disasters & Hostile Acts: Extreme weather events, terrorist acts, or other hostile acts could cause damage to infrastructure and result in significant disruptions to operations.
• Public Health Crises: Past public health crises have negatively affected operating results (e.g., retail store closures, customer payment ability, roaming revenue, staffing levels, increased expenses) and may do so in the future.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: AT&T Inc. scientists and engineers conduct research in IP networking, advanced network design and architecture, network and cybersecurity, network operations support systems, and data analytics. Innovation Pipeline: The Company's development activities are focused on creating new services and inventing tools and systems to manage secure and reliable networks. Key innovation areas include 5G deployment, fiber network expansion, multi-gig services, and AI-driven efficiencies in network design, operations, software development, sales, marketing, customer support, and general administration. The Company is also scaling Open RAN environment throughout its wireless network.

Intellectual Property Portfolio: AT&T Inc. owns or licenses various patents, copyrights, trademarks, and other intellectual property necessary to conduct its business. It actively pursues patents, trademarks, and service marks globally to protect its intellectual property and maintains a significant global portfolio. The Company has entered into licensing agreements with software developers as it transitions to an IP, software-based network.

Technology Partnerships: AT&T Inc. collaborated with Ericsson to lead the U.S. in commercial scale Open RAN deployment.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Executive officers are not appointed to a fixed term of office. Board Composition: The Board of Directors has delegated to the Audit Committee the oversight responsibility for privacy and data security, including cybersecurity. The Audit Committee members include Messrs. Luczo and McCallister, and Mses. Mayer and Taylor.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 140,990 persons as of December 31, 2024.
• Skill Mix: The Company offers training and elective courses to enhance employee skills and cultivate future talent. Talent Management:
• Acquisition & Retention: AT&T Inc. offers training and elective courses to enhance employee skills and cultivate the next generation of talent.
• Employee Value Proposition: The Company provides competitive benefit programs, including 401(k) plans, pension benefits, and health and welfare benefits. It is committed to fair and inclusive pay practices and pay equity. Diversity & Development: AT&T Inc. is committed to championing inclusion, attracting and hiring talented people from diverse backgrounds and experiences. It supports employee affinity groups that provide opportunities for professional enrichment, leadership, community engagement, market development, and networking. Culture & Engagement: The Company prioritizes self-care, wellness, and provides flexible scheduling or time-off options to ensure employees feel included, valued, and engaged.

Environmental & Social Impact

Environmental Commitments: AT&T Inc. is subject to judicial and administrative proceedings under federal, state, or local environmental laws. The Company acknowledges the potential physical effects of extreme weather events and other climate change impacts, such as increased frequency and severity of storms, floods, fires, and sea-level rise, which could damage its networks and disrupt services. Social Impact Initiatives: AT&T Inc.'s purpose, "to connect people to greater possibilities," is rooted in its commitment to ensuring employees feel included and have opportunities for advancement, training, and development.

Business Cyclicality & Seasonality

Demand Patterns: AT&T Inc. expects ongoing pressure on pricing during 2025 due to the geopolitical and macroeconomic environment and the competitive marketplace, particularly in wireless services. Demand for high-speed broadband services is increasing due to changes in video viewing preferences and remote learning trends. Economic Sensitivity: The Company's benefit plan costs and future funding requirements are subject to increases due to rising medical and prescription drug costs, inflation, and lower returns on plan assets. Industry Cycles: The wireless industry is experiencing market saturation, which may moderate customer growth rates and intensify competition.

Regulatory Environment & Compliance

Regulatory Framework: AT&T Inc.'s U.S. operations are subject to federal (FCC) and state government regulations, while its international subsidiaries are subject to national and supranational regulatory authorities in their respective markets. The Company supports measures to minimize regulatory burdens that inhibit competition and facilitate the transition to IP-based networks, while opposing the extension of legacy regulations to broadband or wireless services.

Industry-Specific Regulations:

• Internet: The FCC reclassified fixed and mobile consumer broadband internet access services as telecommunications services in April 2024, but this order was stayed and subsequently set aside by the U.S. Court of Appeals for the Sixth Circuit in January 2025, which held broadband internet access service to be an information service. New York's Affordable Broadband Act, requiring discounted plans for low-income customers, began enforcement in January 2025, leading AT&T Inc. to cease offering its AT&T Internet Air fixed wireless service in New York. The FCC also adopted rules to prevent digital discrimination, which are being challenged in the Eighth Circuit.
• Wireless: Wireless communications providers must be licensed by the FCC. The FCC's statutory authority to conduct spectrum auctions lapsed in 2023, creating uncertainty regarding future spectrum availability. AT&T Inc. voluntarily committed to temporary precautionary measures near certain airports through January 1, 2028, due to Federal Aviation Administration concerns about C-Band spectrum impacting radio altimeter equipment. FCC orders streamlining wireless structure review processes have largely been sustained by the Ninth Circuit Court of Appeals.

Trade & Export Controls: International operations expose AT&T Inc. to compliance with the Foreign Corrupt Practices Act.

Legal Proceedings: AT&T Inc. is a party to numerous lawsuits and regulatory proceedings, including claims related to antitrust, patent infringement, wage and hour, personal injury, environmental, customer data and privacy violations, cyberattacks, breach of contract, and selling and collection practices. The Company is also subject to litigation and government inquiries regarding alleged public-health hazards or environmental risks from lead-clad telecommunications cables.

Tax Strategy & Considerations

Tax Profile: AT&T Inc.'s effective tax rate was 26.6% in 2024, compared to 21.3% in 2023. Income tax expense on continuing operations was $4.445 billion in 2024. Goodwill impairments, which are not deductible for tax purposes, can impact the effective tax rate. Geographic Tax Planning: The Company considers certain unremitted foreign earnings to be indefinitely reinvested, and U.S. income and foreign withholding taxes have not been recorded on related temporary differences. Tax Reform Impact: Tax laws are dynamic and subject to change, with new laws (e.g., U.S. Tax Cuts and Jobs Act of 2017, Inflation Reduction Act of 2022) and interpretations potentially impacting the Company's tax rate, liabilities, and deferred tax assets/liabilities.

Insurance & Risk Transfer

Risk Management Framework: AT&T Inc. maintains a Chief Security Office (CSO), led by its Chief Information Security Officer (CISO), responsible for network and information security. The Company's network and information security program is designed to assess, identify, and manage risks from cybersecurity threats, including third-party risks. It includes continuous security monitoring and a Cybersecurity Incident Response Plan and Data Privacy Incident Response Plan. Insurance Coverage: The amount and scope of insurance maintained against losses from cyberattacks or security breaches may not be sufficient to cover all potential losses or business disruptions. Risk Transfer Mechanisms: AT&T Inc. employs derivatives, including interest rate swaps, interest rate locks, foreign currency exchange contracts, and cross-currency swaps, to manage interest rate risk and foreign currency exchange risk. The Company does not use derivatives for trading or speculative purposes.