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Can AT&T Woo Back Customers With Bill Credits for Network Outages?
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AT&T Inc. (T - Free Report) has reinforced its focus on the customer-centric business model by promising to pay bill credits for any network outage across its wireless and fiber networks for consumers and small businesses. The first-of-its-kind industry initiative, dubbed AT&T Guarantee, aims to maintain customer loyalty and win back trust after the carrier faced severe backlash for a nationwide wireless service outage last year.
An independent investigation by the Federal Communications Commission found that the 12-hour outage on Feb. 22, 2024, affected customers in all 50 states, blocking 92 million phone calls and more than 25,000 attempts to reach 911. This dented AT&T’s brand image and hurt customers’ reliability quotient.
With AT&T Guarantee, the company intends to iron out shortcomings for fiber and wireless customers who experience outages for 20 minutes or more and 60 minutes or more, respectively, by offering an automatic bill credit equaling a full day of service. It also promises same-day or next-day fiber technician availability to resolve issues, failing which consumers will receive a $5 reward card, while business customers will receive a choice of benefits or bill credit.
Depleting Margins Weigh on AT&T
Such innovative customer outreach activities seem to be the call of the hour as AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines because of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential.
Image Source: Zacks Investment Research
Spectrum Crunch Mars AT&T’s Prospects
The company operates in a competitive and almost saturated U.S. wireless market. Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly challenging to manage mobile data traffic and video streaming demand, which is growing by leaps and bounds.
AT&T Earnings Estimate Revision Trend
Earnings estimates for AT&T for 2024 have moved down 3.1% to $2.20 over the past year, while the same for 2025 has declined 8.5% to $2.14. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
AT&T’s Price Performance
T has gained 31.5% over the past year compared with the industry’s rally of 19.9%. It has outperformed peers like Verizon Communications Inc. (VZ - Free Report) but lagged T-Mobile US, Inc. (TMUS - Free Report) .
T Stock One-Year Price Performance
Image Source: Zacks Investment Research
AT&T Focuses on Wireless Infrastructure
Despite short-term headwinds, AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The infrastructure investments position it for long-term growth by ensuring widespread access to its services. AT&T's commitment to closing the digital divide underscores its dedication to fostering inclusive connectivity and driving socio-economic progress as the digital landscape evolves.
With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience. By 2027, AT&T expects to complete the modernization of its 5G wireless network with open radio access network (Open RAN) technology, with mid-band 5G spectrum covering more than 300 million people by the end of 2026.
By the end of 2029, it expects to reach more than 50 million locations with fiber, including about 45 million through organic fiber deployments and more than 5 million through Gigapower. This will coincide with its proposed plan to exit legacy copper network operations across most of its wireline footprint.
End Note
By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business. Backed by an ambitious growth plan supported by a customer-centric focus, the company expects to gain a competitive advantage within the connectivity industry by the end of the decade.
However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #5 (Strong Sell), AT&T appears to be lurking in forsaken territory, and investors would be better off if they avoid this stock at the moment.
Image: Bigstock
Can AT&T Woo Back Customers With Bill Credits for Network Outages?
AT&T Inc. (T - Free Report) has reinforced its focus on the customer-centric business model by promising to pay bill credits for any network outage across its wireless and fiber networks for consumers and small businesses. The first-of-its-kind industry initiative, dubbed AT&T Guarantee, aims to maintain customer loyalty and win back trust after the carrier faced severe backlash for a nationwide wireless service outage last year.
An independent investigation by the Federal Communications Commission found that the 12-hour outage on Feb. 22, 2024, affected customers in all 50 states, blocking 92 million phone calls and more than 25,000 attempts to reach 911. This dented AT&T’s brand image and hurt customers’ reliability quotient.
With AT&T Guarantee, the company intends to iron out shortcomings for fiber and wireless customers who experience outages for 20 minutes or more and 60 minutes or more, respectively, by offering an automatic bill credit equaling a full day of service. It also promises same-day or next-day fiber technician availability to resolve issues, failing which consumers will receive a $5 reward card, while business customers will receive a choice of benefits or bill credit.
Depleting Margins Weigh on AT&T
Such innovative customer outreach activities seem to be the call of the hour as AT&T is facing a steady decline in legacy services. The company’s wireline division is struggling with persistent losses in access lines because of competitive pressure from voice-over-Internet protocol service providers and aggressive triple-play (voice, data, video) offerings by the cable companies. High-speed Internet revenues are contracting due to the legacy Digital Subscriber Line decline, simplified pricing and bundle discounts. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate, affecting its growth potential.
Image Source: Zacks Investment Research
Spectrum Crunch Mars AT&T’s Prospects
The company operates in a competitive and almost saturated U.S. wireless market. Spectrum crunch has become a major issue in the U.S. telecom industry. Most carriers are finding it increasingly challenging to manage mobile data traffic and video streaming demand, which is growing by leaps and bounds.
AT&T Earnings Estimate Revision Trend
Earnings estimates for AT&T for 2024 have moved down 3.1% to $2.20 over the past year, while the same for 2025 has declined 8.5% to $2.14. The negative estimate revision depicts bearish sentiments for the stock.
Image Source: Zacks Investment Research
AT&T’s Price Performance
T has gained 31.5% over the past year compared with the industry’s rally of 19.9%. It has outperformed peers like Verizon Communications Inc. (VZ - Free Report) but lagged T-Mobile US, Inc. (TMUS - Free Report) .
T Stock One-Year Price Performance
Image Source: Zacks Investment Research
AT&T Focuses on Wireless Infrastructure
Despite short-term headwinds, AT&T continues to enhance its network infrastructure, including 5G and fiber networks, to provide best-in-class coverage and capacity across the nation. The infrastructure investments position it for long-term growth by ensuring widespread access to its services. AT&T's commitment to closing the digital divide underscores its dedication to fostering inclusive connectivity and driving socio-economic progress as the digital landscape evolves.
With a customer-centric business model, AT&T is likely to benefit from the increased deployment of mid-band spectrum and greater fiber densification. An integrated fiber expansion strategy is expected to improve broadband connectivity for enterprise and consumer markets, while steady 5G deployments are likely to boost end-user experience. By 2027, AT&T expects to complete the modernization of its 5G wireless network with open radio access network (Open RAN) technology, with mid-band 5G spectrum covering more than 300 million people by the end of 2026.
By the end of 2029, it expects to reach more than 50 million locations with fiber, including about 45 million through organic fiber deployments and more than 5 million through Gigapower. This will coincide with its proposed plan to exit legacy copper network operations across most of its wireline footprint.
End Note
By investing steadily in infrastructure and pioneering new technologies, AT&T is well-positioned to bridge the digital divide and enhance the connectivity landscape nationwide. This is likely to translate into solid postpaid subscriber growth and higher average revenue per user in the Mobility Service business. Backed by an ambitious growth plan supported by a customer-centric focus, the company expects to gain a competitive advantage within the connectivity industry by the end of the decade.
However, a saturated wireless market and price wars owing to competitive pressure have eroded its profitability. The downtrend in estimate revisions further portrays skepticism about the stock’s growth potential. With a Zacks Rank #5 (Strong Sell), AT&T appears to be lurking in forsaken territory, and investors would be better off if they avoid this stock at the moment.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.