AT&T Expands Cost-Cutting by $2 Billion

AT&T’s wireless profit center kept growing in the second quarter, prompting executives to back an upbeat estimate of earnings through the end of the year.

The Dallas company said Wednesday it hit its target of $6 billion of yearly cost savings ahead of schedule and plans to trim another $2 billion or more off its annual expenses over the next three years. 

The earlier belt-tightening campaign launched three years ago shrank the telecom company’s operations by closing stores, closing satellite offices and replacing older network infrastructure with gear that is less expensive to maintain.

The new target came as AT&T continued growing the wireless business that powers most of its profits. The unit ended the June quarter with a net gain of 326,000 postpaid phone lines, helping increase division revenue by 2%.

Overall profit rose to $4.49 billion from $4.16 billion a year earlier—61 cents compared with 59 cents on a per-share basis. Revenue increased 0.9% to $29.9 billion as stronger mobile-phone and fiber-optic services overcame weaker sales in the shrinking business landline unit.

AT&T has honed its focus on wireless and broadband service after a multiyear expansion into the entertainment business failed to woo investors. Chief Executive John Stankey made a hard break with its media assets after taking over in 2020 and vowed to focus on the company’s traditional moneymakers.

The company spent the past three years fighting rivals Verizon and T-Mobile for new cellphone business while working to increase its fiber-optic network to more homes and businesses. Verizon on Tuesday reported a relatively modest gain in postpaid phone connections, suggesting its competition could be clawing back more market share.

AT&T affirmed its 2023 projections for 3% adjusted earnings growth and free cash flow of $16 billion or better. 

Write to Drew FitzGerald at [email protected]