- AT&T reported revenue up 5.3% to $32.3 billion against $31.7 billion expected, with adjusted earnings of 65 cents a share against 60 cents forecast, and raised full-year guidance to around $2.40.
- The telling detail is capital spending. The company lowered its long-term capital investment view, which is the opposite of what would be expected from a business preparing to defend against a well-funded new entrant.
- The convergence strategy is working on the numbers. AT&T added more than 1 million customers in both internet and wireless for a second consecutive quarter, its best run in over four years, and nearly 43% of households buying home internet also take its mobile service.
- Competition is visible in the subscriber line. Phone net additions of 379,000 missed the 387,410 expected, after the company raised plan prices twice this year while subsidising new iPhone 18 Pro handsets to limit churn.
What Happened?
Bloomberg Intelligence analyst John Butler said uncertainty about SpaceX could weigh on AT&T’s margins and push it to spend more acquiring and retaining customers. TD Cowen analysts took the other view, arguing the convergence focus could insulate the company from the Starlink threat and make its diversification the ideal defensive play. AT&T shares are down 5.7% this year, while Verizon is up 9.4% and T-Mobile down 22%.
Why It Matters?
Lowering long-term capital spending guidance is the clearest answer management could give to the question investors have been asking since SpaceX bought spectrum. The concern was that defending against satellite competition would require heavier investment, squeezing the cash available for dividends and buybacks that makes these shares attractive. AT&T has instead told the market it expects to spend less over time while raising near-term earnings guidance. That does not prove the threat is immaterial, but it does mean the company is not behaving as though it needs to outspend a new entrant. The convergence data explains why, and it is the strongest part of the bull case. Forty-three percent of AT&T’s home internet customers also buy its mobile service, and bundled customers are substantially harder to displace than standalone mobile subscribers. Satellite can deliver mobile coverage; it cannot easily replicate fibre broadband into a house. A company whose mobile business is tethered to a fixed-line product its competitor cannot offer is defending on different ground than one selling wireless alone. That is what TD Cowen means by the ideal defensive play, and the subscriber figures support it. The dispersion among the three carriers deserves attention and complicates the bond-proxy framing applied to the sector. AT&T down 5.7%, Verizon up 9.4% and T-Mobile down 22% in the same year, facing the same satellite threat and the same rate environment, is 31 percentage points of difference. Whatever is driving those outcomes is company-specific rather than sectoral, which argues against treating telecom as a single exposure. The subscriber miss alongside two price increases and handset subsidies is the real cost of competition showing up now, before SpaceX has sold a single mobile plan.
What Next?
Verizon and T-Mobile report in the coming week and their capital spending guidance is the comparison that matters, since AT&T has now set a marker by lowering its own. Watch whether convergence rates rise further, as that is the mechanism insulating the business. For SpaceX, building a terrestrial network remains the expensive part and no timeline has been published. Income investors should weigh AT&T’s reduced capital plans against Verizon’s 6.4% dividend yield and a 10-year Treasury near 5.09%.
Affected Tickers and Coins: T, VZ, TMUS, SPCX
Source: Bloomberg
