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T AT&T

Participants
Michael J. Viola AT&T, Inc.
John J. Stephens AT&T, Inc.
John C. Hodulik UBS Securities LLC
Amir Rozwadowski Barclays Capital, Inc.
Simon Flannery Morgan Stanley & Co. LLC
Mike McCormack Guggenheim Securities LLC
Brett Feldman Goldman Sachs & Co. LLC
Philip A. Cusick JPMorgan Securities LLC
David Barden Bank of America Merrill Lynch
Amy Yong Macquarie Capital (NYSE:USA), Inc.
Frank Garreth Louthan Raymond James & Associates, Inc.
Call transcript
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Operator

Ladies and gentlemen, thank you for your patients and standing by, and welcome to the AT&T first quarter 2018 earnings call. At this time, all of your participant phone lines are in a listen-only mode. And later, there'll be an opportunity here for your questions. Instructions will be given at that time. I would now like to turn the conference over to our host, Michael Viola, Senior Vice President of Investor Relations. sir. ahead, go Please

Michael J. Viola

joining Chief Justin. call. Stephens, everyone. is Like Q&A of AT&T. updates, cover follow business Officer. I'm John's you, will call first Mike to that then quarter session. we'll include progress up today our AT&T's Head And for going and Relations a results conference Justin Investor on is Good thank Financial the John Welcome afternoon, and with our provide Viola. me which Okay, said, to on this FirstNet,

As Investor variety always, release, AT&T includes on our earnings a materials news associated of are website. Relations available the investor our and the page X-K schedules. briefing, of That

some begin, your may to call today I Safe be attention forward-looking. we Harbor want our says of comments our Before that to statement. That

they're in quiet subject that available is information results we I want today. you and And and questions auction uncertainties, to Relations Also, can't risks the always materially. differ so address to about website. the and any remind may period we're As for those FCC additional CAF-II on Investor the such, that

so I'd And the John Stephens. to call now, turn AT&T's to over like CFO,

John J. Stephens

and on us Thanks, for the today. call thanks Mike, joining

slide begin financial which me X. summary, Let is our on with

changes not income receivables. adopting our recognition, some and cash and revenue installment income with in a receipts the by other quarter. not they with with on quarter, items These it record million $XXX this And issues on As new have now required deal revenues last more to reported connection but how for standard new around mentioned accounting the regulatory reduce taxes. These fees operating in consistent or pass-through have instruments, our pension net adopt standards quarter will we reporting and on revenue little month, last net standards costs, than – statements noted accounting both a will will several recognition, the flows. change filed financial impact will sales on new X-K specific other AT&T Universal traditionally was This we income this basis, and year. expenses impact like Service company and cash

In addition providing the recognition. to financials understand from impact on you results GAAP, help better we're revenue historical comparable to

will these results this call. and as video, quarter net reform adds, we our transition broadband years significant our We and comparisons our opportunity in in customer X be postpaid us in business. to drove year-over-year base. to in investments referring historical second-highest the These during grow Tax TV growth gave improvement invest a the solid phone

of in quarter adjusted year quarter of from year $X.XX basis, a recognition, reform pressure up in instrument down the reported small but EPS was revenue costs with tax the investing reporting benefits on margins Our the for were operating amount customer base offsetting the consolidated and about rules. a new growing $X.XX, a our and Adjusted up financial on over comparable basis. from

time, did we video wireline quarter Our international. drove to over-the-top same margin from business at But transition in of activities services. pressure linear continued and did as this we saw, increased sales of the the see improvements much

impact to Next, results equipment legacy accounting strategic low-margin and let's $XX.X and flow cash Cash receivables, billion, so standard cover the revenue, show down revenues businesses. have decision installment the some flow comparable. to partially with pursue year offset statements new impact longer no recast the from our declines which ago. of are been Higher year-over-year service services, a was ongoing transition wireless the in video of

holiday employee upgrade impacted The the bonus including from handset traditionally season continuing different. than first and payment the gross fourth the free our flow larger no cash lowest year a items quarter. strong flow, first very light free annual into quarter add quarter quarter program, our usual is this the in is and cash and performance Several during

the on change. still a guidance pressure pressure the of year. you unreimbursed cash this free the had flow act we $X.X in free in some late tax quarter. of tax in range That plans was reform flow included Offsetting the which passage expenditures also December quarter. guidance receivables spending to the of of this meet We $XX FirstNet billion January. in received We're gave refund we cash the in last billion generated the from quarter, accounting in was was by the first Capital

Let's operations, between X. the operations, Mobility, segments. slide Those starting know, with and growth. Business in details domestic the customer now take are our you at Mobility Consumer Solutions as a AT&T's solid on look where team divided turned are Wireless

essentially first its purposes, a improvement than XXX,XXX, throughout by the phones smartphone strong expect customers. on grow. than we're XXX,XXX sequentially. for customer sales, in Postpaid revenues positive our now more that quarter, service a are for runs turnaround X% the activity team were full thanks prepaid increased the we'll churn management Prepaid had also more will strong, our we information our compared in its in year Congrats than year basis. our up losses year year-over-year Altogether, end improvement domestic total showed connected about base providing Churn revenues There in flat continued base both comparison resellers. than a while is confident in to postpaid total that's of the a that to new service two with reasons smartphone XXX,XXX were topping last ago today, the wireless to than we helped phone and over in more sequentially. sales million devices, came Strong the quarters. our still first improving that phone And and another We're XX is quarter, helped Cricket keeps X.X offsetting subscribers, year Revenues for year more comparable Cricket. by record branded with million X of be quarter supplemental usually that's that. new nearly X.XX%, had And gains drive and phone million quarter. postpaid, postpaid adds. U.S. phone several more adds the and which quiet We operations. subscribers, in low improve quarter subscribers, net XXX,XXX net improving. For

compare the First, year toughest adding We're rapid we're and devices, unlimited that year-over-year the introduction of ago. a we stabilizing. new the now Recent prepaid came will connected through lap product and rates, also reseller plans pressure quarter as help. the is subscribers offerings at out in first from postpaid,

X%, impact than service last about year. of a over basis. margins comparable in XXX,XXX activity at was year, an Our increased strong by XX.X% on and That's sales which came upgrades higher margins. still smartphone year upgrade also rate X. adds had gross Postpaid on an

bundled confidence most to than smartphones base. increased very with than to the services. strategy carefully are bundling increased continue a a the number services of base existing overall to solid single-service broadband Postpaid customers invest significantly years. time, encouraging long-term in have and customer video smartphone are These with results X.X customers. same growing lower That's smartphones have their the at five our clip, churn the our to same continues the our are At our wireless improve million These gives valuable and us million phone domestic churn and Mobility customers branded almost Our growth base. with pay in also growing in by two X by Prepaid million off. build our more last in timeframe.

NOW Group Now solid of seen helped broadband Total subscriber take impact X.X slide bundles us growth XXX,XXX TV look DIRECTV its video linear Group results. in in to in can a and to of manage NOW were quarter, the subs Entertainment This Entertainment grew. customers let's over-the-top at positive service. on X. services. and DTV our our us the nearly industry-wide has of results be first ability over-the-top subscribers More our run The continued added broadband than TV and growth. services customers, connections video giving promotions transition bundle million all

help time Looking beta increasing DVR Later when and capabilities significantly at more pressure especially of year, cutting margin years product we're did this because subs, have This subscriber cost a this of time are expect new we more The the also and total DIRECTV customers are cord. at about capital DIRECTV video per interface ago success to options revenue new that our time video pay-per-view with through Transitions we're expect We a out We right new we over-the-top and will This such revenue the never today and stream NOW. industry year, the video be this be this, or important we're testing low supports that and now expect experience from revenue to with. manage lower our services. robust an the some soon. especially wireless cloud-based excited add services less additional we account. different. expect able as and don't pressure two These as has be to is is it'd streams new seeing to NOW's broadband subscribers with any roll investment. user and whether touch, released. is have we than and actually of we easy, or do shown we dealing and improvement model again, acquisition VOD counter but pressure but voice do this margin

DSL momentum we to ago, are legacy That drive This transition adds so XX,XXX the residential We customers broadband are to four As DSL. DSL on X.X are broadband million broadband net managing about we our favorably IP XXX,XXX and has compares adds. of transition, net this we broadband. manage for the transition. helped us. completing total from growing legacy broadband quarter XXX,XXX just high-speed our years through customers had in very over-the-top About broadband still

the our That's for than In lot and rate build been non-fiber its you X where and higher in fiber room consumer, fiber Our to over they two bit broadband the areas passes have has see leaves a all years. quite us locations, numbers. more terrific. marketed our penetration customer Customer our markets impact nearly a XX%. million next nearly last of on now response couple run is than years,

Solutions look at let's slide X. Now Business results on

down activity from X% in service that revenues were over we recent trend we comes tax saw year flat. is with services. an wireline buy wireless encouraging, revenues in fourth Wireless and been who as a reminder, plan from financials down Mobility. legacy moved specifically were As been subscribers strategic declines were have to Historical gains nearly helped revenues up slightly, Solutions revenues were similar what to that wireless reform. year, see Business any and subscribers essentially company improvement expected bump while services up quarters X%. Equipment Business before wireless have quarter. over change. business and Consumer sales, Wireline a the this increased improving revenues and in Solutions business reflect with This might off offset were to about in recast individual

in over Another positive expense improvement were year a or EBITDA functions margins our continues where on XXXX, to end a than by XX% XX% were virtualized virtualized and basis. move team a initiatives. also to see virtualized More up well by cost is the job software-defined we our grew significant XXXX. to of points network of at meet goal year of expect wireline year, business great do in have the management to operating this The virtualized to driving the exceed our comparative our from network. XX% and on end basis margins, savings We're way beginning XXX of

in strength Subscriber subscribers up to revenues Mexico. profitable of operations million Without be to and more cash And now Latin in satellite reported Our positive in first slide gains the new in up continue thanks have a We strong another Nextel. more growth inherited continues quarter results service These improvements to strong quarter, down the our than Latin were thanks in roughly wholesale million X. flow. to slightly solid America turned generate down in bottom that was and be were were XXX,XXX at Mexico. revenue international are than $XX customers than X from year and total. business decision million due in shut past Mexico. also X%. EBITDA Revenues up and significantly, in year revenues in revenues, our added the America more reduction to free Reported to that year. service we XX.X quarter business over

for market just cash Latin and ways trade, rates, our increasing to to explored the and market few ended free foreign properties, properties for quarters, all played and flow. conditions our a last was part. it America our both profitability volatility steady value for issuing withdrawing interest a been optionality. time exchange possibility video us, We their to Latin Over of offer. contributing but the played IPO America continue DIRECTV Current investors unlock an We'll we look those of performer has right believe up DIRECTV didn't obviously while for transact. the role, the

also provide on here's much ongoing networks. I our closing you like with on our on premier but Based close. our can of wrapping need after in the network. we their I'd to After to Both and mandatory not stand special April world's more not sure Time at to we our ready add Those improve Now, we for on Warner, the to up for updates status settle gigabit sides XX. on determination, build to the to arguments our are Funding like details now this bid cases ruling. the to I'm latest. on Time you we'll are the and redemption wait efforts court's place, Warner the are that, I'd anyone There's update update acquisition is court's slide merge bonds. goal point. preparing X. even

the nervous and support Band LTE ruthless strong FirstNet always-on traffic FirstNet-ready of These innovation its month. on selection commercial separate only core brains cores pre-emption. priority like match. XX This is ongoing for and FirstNet commercial continues move We through network core Only and capabilities and will requirements. meet FirstNet bands This the system acts springboard FirstNet-capable This also as launched open FirstNet and this FirstNet is will network the and serve and FirstNet a for advanced start. network delivering hardware. band includes and that AT&T benefits last dedicated access The priority devices physically core. first functionality, nationwide devices. all technical value-added can't to and

across lifting on also agencies XX heavy XXX subscribing We've opportunity. Band our real We of nearly the towers. states as already a and see far, services. territories to So this XX are growth started putting FirstNet

sites years, to of third new plan thousands X next and alone. putting nationwide. XX Band the Over this a sites touch about cell be our existing we'll of tens on We of year

will will XG deploy we speed network more deal FirstNet hard Castle as our We're Crown build simplifies leasing infrastructure. expands great something this responders. working agreement and for give new for help as as The to us wireless Our us flexibility agreement technologies. process. first long-term This well

they deserve. have responders asking With finally have the network introduction that core, FirstNet for the of and first the been they that

the Access now speeds are by transition [LTE-Licence substantially XG XG Assist more the than we blocks Assisted LTE-LAA. faster XG several These Evolution end efforts XXX speeds XXX next different LTE-Local our to deliver to XXX-QAM addition In or XXX and and quality has to the reach with Evolution markets will towards pave and continues Access] that made work aggregation, its with the in XG year. customers. accelerated FirstNet, to to along development areas XG up building of expanded Evolution and will markets, way technologies, the carrier LTE. is higher expect and generation than for MIMO of of (sic)

Our we in low seen extensive on as anticipated commitment The or latency deal low as walls rain, our Granted, in residential customer This conditions of are and to this the speeds where the We and weather and more conditions, end overall far. valuable XX fiber discernible experiences network to even fiber our my part up our locations milliseconds. XG any able XX.X by at with businesses to faster millimeter-wave fiber. backbone FirstNet short both development in year. seeing penetrate and million track and snow for gigabit-plus addition extremely foliage, to locations. about and back pace. we're I'll X,XXX customers. for with DIRECTV build as more XXX and very million now our X million some under spectrum to We're miles trials X million turn to it network moved X to wireless our the today hit XG We're X will fixed of to excited you glass and early is our due fiber making These we with route we in be line-of-sight the never trials of as fiber than million Q&A. to the fiber shown about network and a than time. pass also distances network presentation. That's excited feet move issues. real-world impacts Mike, in providing growing. to million a feet about network and performance these fiber to are XG locations with XX plan are more it millimeter-wave over is within better network for even no build, With is XG. trial backbone that These is reached signal has of or business are our what so the results other than excited but locations have rates, to surpass We're progress

Michael J. Viola

Thanks. Okay.

to we're questions. take ready Justin,

Operator

Certainly. Thank you.

of the John UBS. First, line we Hodulik have of

Your line open. is

John C. Hodulik

Okay. method. Entertainment really I'm is on that just it, can just I'm Thanks, slide correctly in John, I you first that? want if left Maybe terms accounting Yeah. of sure guys. you way reading That here. And the this that's everything true make historical put reading to starting Group on line the vertical of confirm X, exhibit

John J. Stephens

Yeah.

effectively is publishing quarter. So the first you've under got comparability XXXX historical year's last first so old accounting the quarter results method with rules,

John C. Hodulik

platform. You subs expect on of evolve if that, to to basis. from some guess, put we Should maybe of you're and the on Entertainment should that talked and about new so, if range and I that, losses the is just through stand can drivers apples-to-apples satellite they're year-over-year level? it just about year? basis. the like then And up the of on further pressure? going the continue new that what's you DIRECTV and an expenditures those margins in course talk seem declining the that you we satellite those expect NOW guess, then, confirm XX.X% driving up How are over XX%, the and move then pressure, marketing a I And picking doing to EBITDA Okay. down would The that DIRECTV to about could

John J. Stephens

Yes.

couple a things, John. So of

year-over-year less. of all, a are our on think I losses actually linear video First basis,

some (XX:XX) so that's seen going As you there, rate. chart middle And they're can for churn see the as the on We've in in improving. our down, actually improvement

John C. Hodulik

I thinking evolving – traditional's the it Like of – got the looking think you number. was but XX a at – versus I months? satellite do better, your over little a I the guess, XXX,XXX was stuff I you think ago. satellite-over-satellite next was did outlook the just year is guess, the the I see zero how I

John J. Stephens

streams that and we for I replacement cloud year, an real what margins revenues, low growth of continue DVR seeing a in have frankly, both DTV platform a and grow expenditure beta things to opportunities come challenges of see about. pay-per-view shift satellite with the additional advertising in basis. extremely out insights. some model we going would data in pay-TV start think see see the the you'll margins talked opportunities continue end as along those like and quite of to hope And the continue sports we're We'll movies, and NOW. revenues some as in on eventually, to then this we our then, capital for the is, by and and revenues, where see over-the-top the to will We'll to to new to that's we've linear then, updates

do. what John? to what That's expectations we'll Am through So question, I your that. answering on our That's that. trying I'm transition

John C. Hodulik

Yes.

John J. Stephens

it year. total work. That's significant time, be be about challenging. hard expect we're year-over-year in the we over total counts video, through. going improvement. take completed some to growing this It'll video and But optimistic not improvement XXX,XXX XXX,XXX process almost It'll are us the It's

John C. Hodulik

move this right. here given Or I'm it and expect Should at out the we to on through from accounting to we from XX.X%. new to trying we as as you new methodology, what margin look stabilize the All year, I would similar just all guess, is the get year? puts John, expect trajectory level the takes? a trajectory

John J. Stephens

Yes.

think the the year, year. I throughout end some we'll the see starting pressure of stabilize but at to

John C. Hodulik

great. Thanks. Okay,

John J. Stephens

see we'll believe through do pressure ongoing some I year. the

John C. Hodulik

Okay.

John J. Stephens

John. Thanks,

Michael J. Viola

Take our next question, Justin.

Operator

Sure.

the line of We Rozwadowski of have Amir Barclays.

open. line Your is

Amir Rozwadowski

And much. very afternoon, and you Thank John Mike.

John J. Stephens

Hi, Amir.

Amir Rozwadowski

the the at John's point, Wanted segment. if on this on margin your touch how trade-off Hi. we about base landscape subscriber about we basis forward or it for like-for-like versus we we Mobility, just pressure the competitive competitive to should on to the and think Mobility trying the question, about acquisition To think for and that look should to If a of approach think think we improving landscape structure. did about And margins? at prior going how puts the against some year-over-year there. a takes historical basis see prospects the

John J. Stephens

Amir, we're from, a What you if base customer it's good thinking investments question. the we're making the is Yes, basis. in about initial will,

now like and things the for opposed XXX is that or on would to equipment. retain service every in on as that would BOGOs and Getting a month. revenues customers tool what towards to getting months So then moving recruiting based be occur that ability that offers them having

we're reliability it improving certainly, churn wireless. other and that how it the broadband, So basis investment we this knowing viewing have That's be where whether and video, to pressure whether whether that can add through it. identify it it, we this services, but ability be margin that upfront then be an on taking then taking we're

in last on year, first on kind over the speak, we've fourth quarter year and so year's prior had quarter So of quarters in off growth. our two that to opportunity two and to this then turn but think quarters. an customer ability got our over you've turned the XXX,XXX smartphone I and seen investment We've, improvement last it

to it on in over with to a the environment the and changes with around over but own that it some knowing customer frankly, these only is moving From very for and next in over customer base continues very month the XX the seen then investments stays everything of total to we today us, getting revolve years getting upfront, the the this take months. quarter tell we environment, responsibility and or competitive going There have and get the that some some start that. sure growth if be But competitive temporary So that see, benefits churn the we've that are different can we moderating get see benefits overall, and then cost as – and what – trying that forward. the in the next prepaid growth environment. well last offers our about few that we quite the best the moderation some we from not investment we're or had we're it that behind you. the do they when we'll never pretty really, have, work improved work really in you performed if that's thinking And really, we've That's trends. investment postpaid the and how them we're go about postpaid or it. can, phone permanent, exchanging with not appropriately, will but continue low you really in we things we you, we're how I see really as data-informed be focused and to seen offers

Amir Rozwadowski

of the drive of the point John. to you're decline expectation able lower course some helpful, seeing through then, to the your landscape. that to we mentioned, Is you expectation on course the year-over-year on through churn are the very churn, a year? continue And What changes to basis. see in the continue year? As we your is competitive That's a

John J. Stephens

let We this. striving basis. specific to me haven't on improve churn to given to guidance We're continue year-over-year but a churn, say

able broadband, video, three we those Our strategy get it see or we've churn. service, better together, seen bundle another any when a wireless, two with really though what a to of to we're is

And viewpoint so capability differentiating that uniquely that's don't. we and a that others have we that have also or differentiating

year do optimism these sequentially some both quarter, so improvement levels but this we can do ability churn did likely year. some see and even we the great only to further And when about not have we over that, maintain

Amir Rozwadowski

for incremental much you very Thank color. the

John J. Stephens

Yeah. Thanks.

Operator

Next, line Flannery we the of Morgan have of Stanley. Simon

line Your is open.

Simon Flannery

you. Good Thank afternoon, Great. John.

John J. Stephens

Hey, Simon.

Simon Flannery

wireless. had around back give programming, $XX made their just with in around to I watch On this coming bundled the color could rate video start X.X% us and noted Randall upgrade little ticked that? to reportedly normalize think timing AT&T then low we time. I the upgrade a a was introducing comment offering wireless, about what of from you that X.X%. have for – would through I and bit more going very you'd, past, then period the And talked to And rate it up over think about Maybe

So was the more a right other you X.X% to getting handsets it'd and or are to great back be around renewing just you're rate people now think understand keeping long do any Thanks. normal color how them.

John J. Stephens

questions. Good Simon. Thanks, Okay.

and the and So, rate gross the the and rates upgrade in first adds. of in gross upgrade first devices both quite so about the adds all, our upgrade frankly, the quarter number, we had X.X more million

step a we had big up. So

of a I out. that the to that to put offers enthusiasm our think due was great lot due team

upgrade. I caused people driver older fact have pent-up some I to And been there think thing. may devices. was that this was some think some our demand for that's That's But to biggest Two, gotten the quarter wanted innovative devices have really comparable offers. the pressure another basis. there and new with in regard change expenses one on

have the particularly with there. offers, to use fallen the line bottom you pressure some of those BOGO-type caused comparable a then If lot may to basis, regard expenses, and

and, new frankly, to that's upgrade much. if has that investment long-term I short-term reality. get the that pay some the BOGOs I quarter, revenues. don't customers than will, in the rate So upgrade the in know using devices of On the and that And do rate. fourth believe to of came quite buy the have a they the the that, those in some our lateness the that of you limitation changed age immediate offers of the it our and drove additional driven make we're willing first. increase more because because in, those, itself iPhones to may

to back I view historic to how I watch the we're We'll believe continue that. it. that's go to don't So upgrade rates. going

And those big upgrade to of we're think being being regard a me just upgrade though this. programming, increase talk normal fact talking you say matter rate used the history. are that to about we the a of about in X.X% the sense higher video the clearly let lot With percentages. rates I even gives a

offers through we'll year As innovate, in and have we are of and forward able this wireless a to video. broadband and continue to move lot in

would come to Randall willing you're program. could. I important than details we referring one with job it watch-type they're be think I But the know on that out my to DTV those a do better more of leave One to is the going I marketing team message We'll lot innovate. that a the to sales that to are mentioned, that. and

some overall to willing right to are and to able the way different things the to in continue basis. grow be base a business the grow We customer try on bundled

Simon Flannery

you. thank Fair,

John J. Stephens

you. Thank

Operator

McCormack have Guggenheim. Next we Mike of

Your open. line is

Mike McCormack

what Hey, that look of wireline And that voice and as old. guys. maybe it I circling legacy as about think I quoted fixed the business And argument it segment, of cost sub John, tremendous on variable, is the you But linear goes under think that is Thanks. some getting the power with on back unit think of at for there, much recently programmers counts comparing I just or DIRECTV much versus about don't within the of the far guys then goes Group how you I parts you – parts the there's product? benefits are to Entertainment that, just or the Randall thinking pressures was was pressure. as is the negotiating which you costs? mostly with the And more side, as presume as structural cost variable? cost NOW piece content reduce which can

John J. Stephens

the good the on made offers, going we've there's differentiated different point regard to offers packages. think I forward have sorry, on Mike, a guess view of variable I entertainment we question, I of the this, some variable with and a be think couple Again, packages sell. it, And I'd side, cost where the with things. But the video video content to piece to reference within we that getting regard possibly to is also some packages. opportunity possibly to

some that. do We today continuing have to

there but the buy, that. of on So what want some, based we'll also I the not look think volume customers to customers and just is continue on to only based for

we high-speed the X lot fiber, suggest quite what you building is to we've that something On I broadband side would have frankly, Internet still selling side, or million of do to into. a into the been

has capital that of capacity that so there. serving And to been it. this is spent process IP just We're growing base and and in broadband this already serve out

been or us So through that for we've the I be a provide would has conversions, particularly really could the new few which to years. last change gotten you DSL legacy absorbing suggest as direction,

the have to voice Those legacy those there. managed to be and continue data, or continue challenges On managed been out. out costs be either

the But in about to the services, bundling it whether Group, the here efforts a video it. on while also look doing DVRs, bundling that think as makes at success that side, insights, but the worth you two all it. So what alternative the going strength with those these continuing be the in we how it's so of that's then things together, cloud at to broadband through all this. Entertainment level we're real data and advertising, going is we've transition of that and real growth growing that's those That's wireless, pay-per-views, high-speed had. kinds And

but this one collection it's that very So of it's pieces attractive. not make just the individual piece, those

Mike McCormack

John. Great. Thanks,

John J. Stephens

Thank you.

Operator

Feldman have Brett Goldman Sachs. of we Next,

line Your open. is

Brett Feldman

taking for the thanks Hi, question.

it this just flat. noted customer perhaps was to the I you first Can insight customers is more some remarkably could you in Entertainment Is to the might think fiber couple The product little a directly EBITDA? a we're seeing I income. maybe that residential question. provide then segment, a satellite that clarify? The accounting, as a added also one quick to help base to has housekeeping coming been video operating new And neutral quarter. I it's the that And what more your hoping back U-verse is – of just USF neutral that you you trends? comparability. think tied the why adoption Particularly, to than is. Thanks.

John J. Stephens

the change clear, both net be revenues. the service calculations, won't have expenses USF are I prior any revenue on of to Brett, years so USF revenue in you, One, to tell in to was will though, they zero. yes, in couple EBITDA. A things. that EBITDA, EBITDA and It will

this it versus margins, margins. a had a behalf believe give customers will service so we we better much EBITDA EBITDA previously what on picture collect but not from collect what the And impacted as counted behalf, which revenues. number, service We itself our we of never as actually government's the on sales like taxes,

though, does an The EBITDA, on service EBITDA. operating starting would would It not point, revenues. income, So affect have it be, you're impact or right.

Brett Feldman

it. Got

John J. Stephens

in generally One, a make I capabilities the actually we telephone we is when broadband have very couple capabilities, wireless have had Two, results in build where essentially good. and the distribution, historic good very think have bundle things. U-verse, and bundling company aspects U-verse the better to natural all fiber capabilities, that different fiber legacy that. footprint, our

the greatly Brett, merged take So tell or content we U-verse reduced ebbing would differentiating I advantage migrate the need it satellite that's DIRECTV. first another was point. in with to costs is of when you to possibly is than

are things probably with consideration. U-verse people those are of important process. is satisfaction the quite the part All most customer And product the frankly, The happy. of

those all aspect. contribute that So to that are things

Brett Feldman

follow-up quick a question. Just

product much landline had Is sold Or think satellite bundle in that DIRECTV more region, U-verse the previously when that bundle still I out? being with natural could was you product a you broadband you broadband. still your the there results seeing that playing offer? your better were is finding you with because video are indicated

John J. Stephens

experiences we churn and churn satellite, satellite but to cannot stats video, I both satellite, comparison in U-verse do say bundle have believe tell better we won't two have and by will better you results the and that I we better can when we to definition, better U-verse. compared U-verse but that do customer all another service. point, our for quality what opportunity the regard bundle presents satellite to wireless much better to, IP reason provide fiber that just our And and to the well broadband. will FirstNet quite as we with build can when potential the frankly, customer as that it with for

that plays of kind all So together. of

Brett Feldman

Thanks for questions. the taking

John J. Stephens

Sure.

Operator

Next, Cusick JPMorgan. of Phil have of line we the

Philip A. Cusick

guys. Hi Thanks.

John J. Stephens

Hi, Phil.

Philip A. Cusick

Hi, John.

a First, follow-up.

just the first a new aggressive seems there's fell targeted seasonality? year AT&T of the in be the strategy build fairly impact to under were this to level a trade then, giving in content seem to the fire up quarters, quarter and of but your lot the for revenue opportunity? be drive do online you question, the promotions you You thinking subscribers John, and wireless advertising of about increased the preference changing the How away transition lately as to for advertising an full OTT investor we aggression And Thanks. and a previous April. Should these first businesses. bigger a lot compared think or on the fronts online in effort are and around accruing business subscription headlines subscription some to of making of in up addressable

John J. Stephens

I regard So, first that. the aggressiveness, suggest Phil, different to quarter. capabilities We to aggressive you be things. in have tried with the would We did we

As the you can tell, we fourth did that too. in quarter,

attract Chicago, regard where using the and We're our where you attract and the recently we're we're not pointed was with getting focus difference. that using make wanted. to see trying three video New was to we've, What them we've results to in if Los using guess, trying we're as an we the make on I'd us you continue customers; And we through will, something to like suggest should market-informed In decisions in gone we're or in in market-directed, results, doing As results you to out put wireless. I working out light. a to to York, is that'll, we as marketplace. only offers be the but put changed were that we Angeles, out, broadband customers; opportunity offers continuing to data-informed sure just where what capabilities

things. change see try might BOGO XX% to a a You continue things, BOGO. opposed then expect do a some a We is second and one us can to might as we fee full some to do

we with recently that think did wireless I offering.

will, regard we've to go customer be to, if April. at been We've you in So will, of levels opportunities if to the customers' put data, ones willing business at – if you'll the I long-term to through simply unlisted expect pushed headline it, year, go on with and make consumer will, business. the for to business a the through that the the issues earlier recent don't were customer, investment to regard the have regular a numbers that will, for customer respect this who with call and and in we'll continue you if to Bill and see But of, how legislative with as long deal continue a have short-term became years. story customers. as base changes suggest will XXX things and same our pushed that a make and invest Rights this make of before We level opportunity doing even this rights first process understand privacy and the quarter. long-term. decisions the recent With we been for the in for I'll datas they look the basis We're want continue here right for do We're been the year the We'll on to grow the we're we that you the to trying the guys regard our, in data that. month. regular to you basis. that the to, sure us I

customers as and believe space. space who data us a clearly adviser and continue a data for if we And and respecting continue we practices trusted privacy will for place appropriate. them said, the advertisers and, customers' will, the in being we the for long-term for processes looking player insights in a is being our a that in trusted have we With space to continue and way to are right So your that trusted results. treating the there the believe, provide believe you privacy that in and partner as to

Philip A. Cusick

Thanks, John.

John J. Stephens

you. Thank

Operator

Next, we America. of David have of line the Bank of Barden

is open. line Your

David Barden

questions. taking Thanks the for John. Hey,

John J. Stephens

Sure.

David Barden

year net can we continue kind Is So of when are thin you prepaid could a explain to a can on the postpaid – BYOD? thought process? the more that's add couple net add phenomenon I it transitory to first year. first year, the And on whether have you was and you look of stood guesses kind then kind the have of there about maybe little this quarter, educated think T-Mobile to Have quarter, are few where feather Is you kind What market what the this Xx quarter. be, year we think is to and look kind market you starting market question second And up make to and if gross economy? is, If Comcast assume was sales rest of phone Is over Thanks. elaborate do Verizon just year of the this your be XX% at where up kind share I'd net seems it ago, last we for they driving of selling postpaid add what over your hundred Sprint, it that share opportunity actually if would year here a it's you we who? of at Xx going into postpaid add force, and go-to-market of in the And if going a then, have, about the migration? love exactly air? phone out to whether the of a bit to and is done your market growing kind market? theories it. effect? phones. and thousand it FirstNet And maybe share or

John J. Stephens

think it I doubt. David. depends, So I don't

it say this Let me way.

had we're it we postpaid us, phone, XXX,XXX improved about XXX,XXX but – still For improved almost think adds. while I prepaid both net growing that almost XXX,XXX, XXX,XXX, was

good the continued in good performance we're good for really performance So, prepaid, seeing really in us, but smartphone. –

what So we're we're phones. a those seeing. growth total That's seeing in

quarters decision are marketplace. we both some – I growth are the happens customers' question. forth. a I in seeing to prepaid. wait last piece your the if of on total postpaid. over continuing the in think performance and now total solid that so at anybody that postpaid may the improvement of you marketplace some a for opportunities in think or, plans in what saw announced And view don't in I seeing marketplace, wouldn't does continued don't because from and I company will, our, be good you based of have conversion with XXX,XXX But smartphones row prepaid the see because haven't I out pricing there. a about will, two us. we'll us quarters just But performance, others you understand two and if that do are

LTE net that very to adds, guys generate spent these of if doing things – getting we're nine month well quality tablets we We added in with there's our to so us. and year. aspects are that that of over and our last there as the the the staff if regard and the FirstNet, you about regard core provide to for that not Sambar An need. how the had last runs that We in really other year, first time getting the to individual over responders are name We're guess, FirstNet excited value, plans would believe and and part to longer, postpaid of able But pretty count provide the of clients, months, to generate potential FirstNet's phones, exclusive to believe and other that we we're churn deserve at to marketing Chris to after, know the up service I'll going, leave the share the set those about the and we team by almost I a and We've going month. will, people. sales being money, With least so, really that, low. because actually a effort a that's services to revenues feel last this watches mentioned regard XX network once had last will, know, we've devices. up that, and So states into something core, excited FirstNet over FirstNet known do the long-term from only existing XXX can game. us. which be And we be evaluate. you value a with player. month. of did came getting running the you out departments we people investment tell a making – great industry, I you very With decide whether for critical opportunity to about quality the those to whether and provide all departments established if or getting over also services up short-term, good you on the about. use sign good and to our put XXX because all that they on earlier, authorized We we've as I can bigger

services. ruthless So can that get provide can work pre-emption, they can they We relentless all that. or can get and And now. priority

least ability whether drone the it for to you're from But be some our their whether you migrate that phone, and those FirstNet But to contact a Now, or smart basis, some been could about it person they'd it the given part to connected use. potentially whether folks we we customers device just we've with other camera, a to cities, been be talk been so of I a it up look speak, be reception would also car, personnel, at whether or process. On you there. or want their And employer, whether body frankly, to tablet your at a people pleased four first and they the whether think per at course, weren't services before be the family people will, thinking that previously sell quite other if always our We're the there. can also line, that'll of customers. police to sell some have that dispatch other about the very of can two signed an we have friends the station to approach. in-house there's or three it for looking and we've personnel work points, some responder, opportunity of first the be

So pleased. we're very

continue team already about a active. contracts all, of They're be over we've we First gotten XX number And got in of done very up. it. to a FirstNet very already set They've states. excited

milestone get exceed given a and a year, of FirstNet requirements the we are the will Band We has at XX us. all hopefully meet significant this and expecting minimum, amount that to, up

pretty I I if about So positive am. it, sound

David Barden

John. Thanks,

John J. Stephens

you. Thank

Operator

of have we Amy of the line Macquarie. Yong Next,

advertising you How open. can and maybe do Amy about us. near-term is if the Capital Thank market (USA), up for Inc. think - more you up bit line quickly Your Yong you. Macquarie the size the should could as residential beyond? a you just looking little Maybe opportunity wrap then marketing year how this some opportunity talk the fixed quickly that this XG and very and be then we broadband wireless trends growth is And XXXX trials, opportunity, Thanks. about next? big for we on at think and

John J. Stephens

start. me point out, I'd the in X% revenues. we on were So up quarter let advertising, this

base a million my number that we quarter, the here. a in fingertips about about range. grew And $XXX don't have at at We I specific of have X%.

inventory is ads existing, proving team actually that we will, from the if with already this the works the of as distributor our you folks. that So get content

about that. really and and making getting revenue So we're effective. higher it making good it streams work. more higher CPMs We're We feel getting

we to year, that, like lot inventory through hope that. a this go and add underneath to we our umbrella companies we'd to As more develop of from ownership

digital piece think what in that I numbers, estimates that $XX market, you $XX believe billion, get overall If advertising significant range. We a year, about I north market U.S. in of not the overall was be. last in and think billion We're but digital will can the I the the player. it we know exact call the don't would some

only the Lesser also big investments we're the today. company personnel team our not inside making the have the be. Brian We has and in we've data engines but that and capabilities capabilities And investments to made established, in data our

opportunity. feel that really good So we about

grow stream, advertisers to opportunity and If all you think our TV grow insights and the that, think opportunity we digital help revenue and you anything real is working there. their about the the opportunity and insights about efficiently, to that make of believe opportunity to effectively sure and about if linear data take there's a that digital advertising and

done that protection appropriate data the and rules So within activities. being all of

through XG from wireless, as do away, be tests fixed we to have be question if there feet feel really for prove out. yet the excited We're and some. us will, about The it. case. We have to to we fixed may that something infrastructure. you the that, compelling away, The opportunity see is we X,XXX as feet if still have have still business you done. regard is not – The to about can can not you as that. that it have you wireless where residential, it to reason It's shown our X,XXX good for that backhaul the have So don't will. the backhaul get to the With

that ability successfully upon how So your and going be to buy tricky a be going pick to going could need depending business much who's is case. to to we're very

us, with and quite to this But able customers network, got fiber have got effective as able quality extensive this be may will maybe and extensive FirstNet give we we've fiber-to-the-home. For to just product FirstNet frankly, be network, With that those even backhaul. to be that fiber there, better it backhaul. a we've have if we'll

right things it. about tell, hold – capabilities into fiber there. frankly, Great, (USA), the capabilities work our - made opportunity, to quite out are out that Evolution just requirements overall Capital continuing want in we're you. are mobility are can building or and excited, about XG XG of Amy to mobile Yong broadband demands you network at the I serving more about Macquarie that we're as I've thank FirstNet there don't out as now, overall from our Inc. So selling the it we much and and that, that

John J. Stephens

Thank you, Amy.

Michael J. Viola

take question. more one Justin, we'll

Operator

have Certainly. line of Raymond Louthan the James. Frank Last, of we

open. is line Your

Frank Garreth Louthan

XXXX, flow then in you're switching the Give little free cash can exactly you. maybe would business the color you're you give a bit And for bit the late us a thank of Thanks. NOW to DIRECTV on devices on some Great, launch? being great. That more us aspects waiting be little devices on more what your before XG, available the product. Entertainment more as color

John J. Stephens

me this Okay. to With XG, the make regard let point.

already are our only On them. those now, devices have Evolution, of not the many customers available XG

the which to And up now those is, and to the so using speeds network, the all network spectrum we X-way quick band and put by FirstNet, speeds to an that up aggregation, are the spectrum XG putting which our way you MIMO, exit will, allows if we all us with customers access to having with level. Evolution in be And with working our XXX-meg efficient get X-way speeds regard today. that Evolution we let in and handset carrier that today together, On got full we believe over manufacturer rest our can on already get we network. in the our But they're test base people's network handsets of XG a are and XX% San XXX-meg XX% there of network, time. the that hands, coming speeds out on through might Francisco,

serve MIMO So us really really, reasons of the with gives combined ability the technology excitement developments well. XXX-QAM and all of FirstNet the and why I to one just carrier about real as and to as that That's these the Band point other the want X-way out. things customers well agg XX, new spectrum,

cycles up. the we'll XG types or earlier Those to will, – out or would year, as see we've the we'd upgrade networks I Simon be what will quarter. think And in sub-X% of what will I'll the pucks call, I call a I those if of The the would end by would that tablets On you XXXX. got, I as then to to of many in be handset of and expect And think us devices. a be XG, think connect this puck. normally think out are referenced ability that have device devices probably

to up be speak. running, may so So and to those some there XG handsets time getting

points for many, us of available the that's many how see thing for upgrade a But this or changes Evolution can really beneficial in that whether that we'll handsets because So us not. that goes, all today. be cycles to XG

On the Frank, flow cash guess way. say if side, free I this you will, I'll it

truck one the upfront, turn really to change moving that as the an platform some upfront home roll free change. a is That thin automatic roof perspective. about client of about that things of to billing you that's will aspects of to of if a the that will, credit and platform can eventually a an Moving those climb as card administrative it's all from cash of savings going the things or from all NOW is upfront the the costs, with DTV But NOW attractiveness the fact or cost, well for regard bill of investment. will to having because change the it's the costs, flow bill, the is into economics investment not DTV upfront cash flow the

point. that's our term. flow thing we why this and strongly to regard free quarter to one we want work believe make cash will it So long first With –

low they the bonuses XXX,XXX quarter quarter. sold. up us over all, were is in of this sales for the late because and last We first of were of they huge in over quarter had sales in quarter. quarter, year quarter phones And the First first – up the when a the first year first for quarter. year because those the year paid quarter many the and fourth XXX,XXX the in in fourth year things. fourth we handset actually in always other

point I had we lot flow itself that'll from just will that So to out. itself out. handsets pressure want that wash a cash of reverse

good feel as of range keeping flow free we've in guidance we our guidance that is $XX keeping billion about the all and cash intact. So it well given our as

Frank Garreth Louthan

you. Thank great. Okay,

John J. Stephens

Thank you, Frank.

John J. Stephens

for in start want both We're fast being to customer our growing today. I the world's in the that, With a thank in call to and off building base gigabit network. on XXXX, premier everybody

all U.S. always, the new thought, we Warner towards response year. from XG on tonight, full XG our safe. optimistically way please build first later been the our AT&T. to be and life. expect as has and early network turn again We of remember, subscribers continue this And Have is which are in The you revenues activity last moving great as to kicking add for this also hard One we wireless interest our launched you our case thank evening. make month. We're and is Behind to responders speed first dedicated no the last court nationwide conclusion expanding build wireless, good service year. wireless It a the our and backbone be of in wait. gear, sales your and this Mobile course, wired. home is both can for in very a to court's to await working track all something being core a is Please networks, Thanks decision. on and for fiber your FirstNet carrier We're for as positive. we of network, text on worth FirstNet video, call broadband growth evolution Time and the introduce

Operator

you and conclude does thank Executive Service. today. for for very much for We that And participation using conference you. AT&T's Thank our Teleconference your

now disconnect. You may