TD Ameritrade Network asked me to discuss the AT&T () and Verizon ( VZ ) investor earnings call and the current state of the industry. Let me share some key points of that interview which are important to understand. Also, I will include thoughts on T-Mobile ( TMUS ) earnings which occurred a few days later.
On a top level, AT&T and Verizon are in the process of turning their giant ships around and focusing on their core strengths, which include 5G, wireless and broadband. This is a process which will take a while, but at least finally they are heading in the right direction. The weak economy is putting pressure on and slowing their recovery.
T-Mobile is looking much stronger today compared to the past. Years ago, it was in terrible shape, but it has been on a growth swing for several years. I hope this is something which will continue moving forward, even with a weak economy.
TD Ameritrade Network interview on AT&T, Verizon, T-Mobile in wireless
Now let’s get into the gritty details.
Over time, AT&T and Verizon had become industry leaders in wireless, telecom and broadband. Then as their growth rate slowed, they spent years trying to figure out their next course of action to keep their strong growth and keep shareholders happy with them.
This happened years earlier, but then the iPhone and other super smartphones were introduced and that rejuvenated growth for a long period. In the last decade, however, growth had been slowing.
Seeking growth and seeing Comcast ( CMCSA ) acquiring NBC Universal, AT&T and Verizon realized that they were not just limited to wireless, telecom and broadband for expansion and growth.
So, AT&T acquired DIRECTV and Warner Media, which included CNN, Warner Brothers Studio and more.
Verizon acquired AOL and Yahoo in an attempt to become the next Amazon.com, or something like that. Its strategy seemed muddled, and the company was never very clear about what it wanted to accomplish.
Both companies were focused on their transformation and talked about it like it had already happened. It was an exciting time in the changing industry.
AT&T Industry Analyst briefing at Warner Brothers Studio
I remember attending an AT&T Industry Analyst briefing at Warner Brothers Studio. It was exciting and enjoyable to see the studio and the sets, going behind the scenes of popular television shows and movies. I just have to get a Batmobile like the one on display.
While this was a fun meeting, however, I realized it had little to do with wireless, telecom and broadband. It was all about entertainment.
So, yes this was an impressive event, but it left me scratching my head.
Then again, if AT&T could do what Comcast Xfinity did and make lightning strike twice, perhaps this move would be the right next path for Ma Bell.
Fast forward… it failed.
You see the traditional pay television marketplace was changing. Even the big cable TV companies are showing reduced traditional cable TV customers.
The marketplace is moving to the online world, getting news and entertainment over the web, not over the air or over cable TV. Plus, AT&T did not understand the fickle world of television, Hollywood and cable news.
So, like many other companies trying to expand beyond their comfort zone, AT&T got burned acquiring these news and entertainment assets.
Verizon’s foray with AOL and Yahoo was even worse. The company seemed lost in the dark and didn’t do a good job of convincing the marketplace this was a realistic path for growth going forward. It wasn’t.
It failed as well.
Thank goodness, both AT&T and Verizon eventually realized the mistake of this new path and they sold everything off to get back to their core.
AT&T, Verizon, T-Mobile now focused on core strengths
Now, once again AT&T and Verizon are focused on their core strengths, like wireless, telecom, broadband and high-speed data networks for consumers and business customers.
While I am happy to see they are back on the right track, the weak economy, Covid-19, technology changes, industry changes, increased competition and more are slowing down their recoveries.
I believe two things. One, they are finally back on the right track and heading in the right direction. Two, I also believe it will take them longer to show recovery because of many external forces.
That puts short-term pressure on these two companies.
T-Mobile back on growth track, finally
T-Mobile is a different story altogether. It was in trouble a decade ago. In fact, the company was in such trouble that it missed the move from 2G to 3G. When it finally woke up, the company had missed the 3G move altogether and focused on moving to 4G.
It has spent the last several years focused on wireless and getting its house in order. The good news is after acquiring Sprint, it is now a full-fledged wireless competitor and is doing well.
In fact, T-Mobile is still showing strong growth today even with the weak economy and screwed up marketplace that are both impacting AT&T and Verizon.
Wireless, telecom, broadband, data networks as vital as water, power
Bottom line: wireless, 5G, telecom, broadband and data networks are a vital industry moving forward. They are as vital as water and power.
Growth in the wireless industry will continue.
Additional growth will come from other companies in other industries reinventing themselves and using 5G wireless to gain a competitive advantage.
Growth for AT&T Business, Verizon Business, T-Mobile Business
This represents a huge, potential growth opportunity for AT&T Business, Verizon Business and T-Mobile Business as they help the marketplace transform.
That being said, these individual players will respond differently.
One more thing. I see a split coming. AT&T and Verizon will focus on growing their wire line, wireless, broadband and data business, while T-Mobile will continue to focus on wireless.
As we move ahead, we may look at these competitors in two different groups.
Their actual corporate growth rates will vary depending on the company and the sectors they serve, but no matter what happens, wireless will remain a powerful and vital growth industry.
Jeff Kaganis an Equities News columnist, wireless analyst, consultant, speaker and author. Areas of interest include wireless, 5G, telecom, Internet, AI, IoT, pay TV, autonomous driving, healthcare, telehealth, Metaverse, mobile pay, new technology, drones, regulation, M&A, changing political environment and more. He has a strong following on Twitter and LinkedIn. Kagan has been an influential independent industry analyst and columnist for more than 30 years. His web site is www.jeffKAGAN.com, and you can follow him on Twitter @jeffkagan and on LinkedIn at www.linkedin.com/in/jeff-kagan/.
Equities News Columnist: Jeff Kagan
Source: Equities News