Must know: Why AT&T’s wireline business continues to decline

In this series, we’ll discuss the main drivers behind AT&T’s wireline business. AT&T’s wireline business is as important for the company as its wireless business.

Puneet Sikka - Author

Nov. 20 2020, Updated 2:46 p.m. ET

The consumer sub-segment is a bright spot within AT&T’s wireline division

In our previous series on AT&T (T), AT&T shows a major shift happening in the telecom industry, we covered the main drivers behind the telecom industry’s wireless business. In this series, we’ll discuss the main drivers behind AT&T’s wireline business. AT&T’s wireline business is as important for the company as its wireless business.

Last quarter, AT&T’s overall revenues increased by 1.6% year-over-year to $32.6 billion. Its wireless revenues grew by 3.7% year-over-year to $17.9 billion. Meanwhile, the company’s wireline revenues declined by 0.9% to $14.6 billion.

AT&T’s wireline business revenues have been declining consistently in the last few quarters. Verizon (VZ), on the other hand, managed to revive its wireline business in the last quarter. We covered this revival in Must-know: Why Verizon saw a turnaround in its wireline segment.

As the chart below shows, except for the last quarter, the wireline business revenue growth rates for both AT&T and Verizon were in negative territory.

Growth in the consumer segment of the wireline business offsets a decline in the legacy business 

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AT&T’s legacy voice and data products are undergoing a structural decline. This decline is the main reason why AT&T’s wireline business continues to decline. Total revenues from business customers declined by 2.9% in the last quarter to $8.7 billion. However, this decline was somewhat offset by double-digit growth in AT&T’s strategic business services.

This sub-segment includes solutions like VPNs, ethernet, cloud, hosting, IP conferencing, VoIP, et cetera. Another bright spot for AT&T in its wireline business has been its consumer business. This business includes high-speed Internet and TV, U-Verse, and consumer IP data services.

But if AT&T manages to grow its wireline business as Verizon did last quarter, it will benefit exchange-traded funds (or ETFs) like the Technology Select Sector SPDR (XLK), the iShares Global Telecom ETF (IXP), and the iShares U.S. Telecommunications ETF (IYZ). These ETFs have high exposure to AT&T.


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