Good morning. An American legacy company that’s nearly 150 years old is working to modernize itself for the next 150 years.
Embracing its telecommunication roots, AT&T over the last three years has spun off DirecTV and WarnerMedia, with the firm setting its sights on building out higher-margin areas such as 5G and fiber. With the nation’s largest wireless network, and a fast-growing fiber network, there are opportunities to upsell fiber to wireless customers—both residential and business customers—and vice versa, which is why the company has invested some $145 billion in those networks over the last five years.
Transforming a legacy company comes with growing pains. What’s been essential for AT&T (No. 30 in the Fortune 500) is a growth plan that’s strategically synchronized investments with cost savings.
“We needed to invest significantly,” CFO Pascal Desroches said during the Deutsche Bank Media, Internet, and Telecom Conference on March 12. “We understood that we had legacy systems that were going to decline, so we leaned into our transformation program understanding we had a challenge ahead of us.”
So far, AT&T has garnered $6 billion in cost-savings—with the goal of trimming another $2 billion in annual expenses by 2026, according to Desroches. How is the company cutting costs?
AT&T has shuttered some retail locations, reallocated staffing resources pertaining to real estate and administrative tasks, and improved customer service. In just one example, using an AI chatbot has resulted in a 50% decrease in the number of customer calls escalated to live agents.
In January, the company reported Q4 revenue of $32 billion, up 2.2% year over year, and full-year free cash flow of $16.8 billion, exceeding guidance and $2.6 billion higher than a year earlier. Full-year mobility service revenue and consumer broadband revenue also exceeded prior guidance.
The company said it expects capital investment in the $21 billion to $22 billion range in 2024 and that it’s on track to reduce net debt and reach net-debt-to-adjusted EBITDA in the 2.5x range in the first half of 2025.
“We’re seeing growth in IoT relationships…and I would expect that to continue, and our mobility relationships in business are very attractive,” Desroches said during the conference. “We are in the middle innings of legacy declines. We think we can manage that and still grow the overall company.”
Have a good weekend.
Sheryl Estrada
[email protected]
María Soledad Davila Calero curated the Leaderboard and Overheard sections of today’s newsletter.
This story was originally featured on Fortune.com
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