AT&T, a major player in the telecommunications industry, is set to enhance its revenue streams through a planned increase in fiber internet pricing. Aiming to capitalize on its existing infrastructure, the company is strategically positioning itself to boost its fiber business, which is pivotal for its growth trajectory.
While AT&T has established a robust wireless service portfolio, it is now concentrating on expanding its fiber internet division. Currently, AT&T has reached around 8.8 million connections across 27.8 million potential customer locations, with a fiber penetration rate of about 40%. This shows significant progress, yet a vast opportunity remains to entice more households and businesses to opt in for their fiber services.
To drive the growth of its fiber segment, AT&T has identified three key strategies. First, it plans to extend its network reach, with aspirations to connect up to 45 million locations by enhancing its coverage. Second, the company is focused on increasing sign-ups, having seen a 3 percentage point increase in customer penetration over the past two years. Lastly, AT&T is implementing a price adjustment for its services—set to launch on November 10, 2024—raising the monthly cost by $5 across all internet plans, including both fiber and non-fiber offerings. This price adjustment represents a 7.2% increase from the average revenue per user recorded in the second quarter of 2024.
This ambitious pricing strategy aligns with AT&T’s goal to maintain a double-digit growth rate in fiber revenue, which saw an impressive 18% year-over-year increase in the latest financial quarter. Despite the anticipated rise in capital expenditures—estimated at around $21 to $22 billion for the year—free cash flow is projected to rise to between $17 billion and $18 billion, indicating a robust financial health post-expansion.
As the fiber segment expands, AT&T’s revenue run rate is estimated to reach $7.2 billion annually, and analysts are optimistic about continued double-digit growth as the company moves closer to completing its fiber network. Building a fiber network, while capital-intensive initially, positions AT&T to reap long-term financial benefits, given the durability and low maintenance requirements of fiber infrastructure.
The unfolding situation has led to a surge in AT&T’s stock price, which has risen over 50% within the past year. Investors are increasingly optimistic about the telecom giant’s strategy, with shares now trading at an attractive valuation of less than nine times the midpoint of its free cash flow guidance.
For those contemplating an investment in AT&T, it’s worth noting that financial experts have recently identified ten lucrative stocks worth considering. While AT&T is not featured on this list, its upward trajectory in fiber connectivity and cash flow generation presents an engaging opportunity for savvy investors looking to diversify their portfolio with telecommunications assets.
With a carefully crafted approach that balances market expansion, strategic pricing, and robust infrastructure, AT&T is gearing up for a promising future in the fiber internet domain, positioning itself strongly for ongoing success in a highly competitive market.