Business context and reporting period
AT&T Inc. filed this Form 10-K for the fiscal year ended December 31, 2023. It reports continuing operations, principally Communications (U.S. wireless, broadband and business wireline) and Latin America (wireless in Mexico). Communications generated about 97% of segment revenue. WarnerMedia, Vrio, Xandr and Playdemic are reported as discontinued operations; U.S. video operations were separated in 2021 and are held in the equity-method investment DIRECTV.
Unless stated otherwise, amounts below are in millions of dollars. The filing also provides unaudited fourth-quarter results.
Financial performance and position
| Metric | 2023 | 2022 |
|---|---|---|
| Operating revenue | $122,428 (+1.4%) | $120,741 |
| Operating income (loss) | $23,461 | $(4,587) |
| Continuing-operations income (loss) | $15,623 | $(6,874) |
| Net income (loss) attributable to AT&T | $14,400 | $(8,524) |
| Diluted EPS from continuing operations | $1.97 | $(1.10) |
| Operating cash flow | $38,314 | $35,812 |
| Capital expenditures | $17,853 | $19,626 |
| Cash and cash equivalents at year-end | $6,722 | $3,701 |
| Total debt at year-end | $137,331 | $135,890 |
Operating margin was 19.2%, compared with (3.8)% in 2022, when results included $24,812 of goodwill impairment charges. Annual operating cash flow less reported capital expenditures was approximately $20.5 billion; this calculation excludes cash paid for vendor financing. Including $5,742 of vendor-financing payments, 2023 capital investment was $23,595. The long-term debt portfolio’s weighted-average interest rate was about 4.2%; $9,477 of debt matured within one year. AT&T reported compliance with debt covenants and had no outstanding balance on its $12 billion revolving credit facility.
AT&T declared common dividends of $1.11 per share in 2023, unchanged from 2022, and paid $8,136 in common and preferred dividends. Segment operating margin was 23.6% for Communications. Mobility revenue rose 2.7% and operating income 8.6%; Consumer Wireline revenue rose 3.3%; Business Wireline revenue fell 7.3% and operating income fell 43.7%. Fiber broadband connections increased to 8.307 million, up 1.092 million.
Fourth quarter 2023
Revenue was $32,022, operating income was $5,271, and income from continuing operations was $2,582. Continuing-operations diluted EPS was $0.30. The comparable fourth quarter of 2022 included a $21,092 operating loss and a $23,120 continuing-operations net loss, primarily reflecting goodwill impairment and other significant charges.
Material changes versus prior period
- Revenue increased modestly, driven by Mobility and Consumer Wireline growth and Mexico, partly offset by ongoing Business Wireline declines.
- Operating income and earnings rebounded from 2022’s large noncash goodwill impairments. The 2023 results were also affected by $1,193 in asset impairments, abandonments and restructuring, versus $27,498 in 2022.
- Operating cash flow increased by $2,502. Cash used in investing activities declined to $19,660 from $26,899, while cash used in financing activities declined to $15,614 from $59,564.
- Debt increased by about $1.4 billion year over year, while cash increased by about $3.0 billion. The debt ratio improved to 53.5% from 56.1%.
- Mobility service revenue and average revenue per subscriber benefited from subscriber gains, pricing actions and customer shifts to higher-priced plans. Postpaid phone net additions declined to 1.744 million from 2.868 million; postpaid churn was 0.98% versus 0.97%.
Outlook, commentary, risks and unusual items
Management expects 2024 revenue growth in wireless and broadband, supported by 5G and fiber deployment, and continued declines in legacy Business Wireline products. AT&T expects 2024 capital investment, including capital expenditures and vendor-financing payments, of $21–$22 billion. Management expects investment-related expense pressure, higher depreciation, and about $850 of additional 2024 depreciation associated with wireless equipment to be replaced earlier for Open RAN deployment. It also expects interest expense to increase by approximately $400, partly due to C-band licenses entering service. The filing does not provide a clear consolidated revenue or EPS guidance range.
AT&T plans to deploy Open RAN with Ericsson and other suppliers, targeting about 70% of wireless network traffic on open-capable platforms by late 2026. Fiber expansion, customer growth, cost transformation and product simplification are management priorities. The filing identifies competitive pricing pressure, secular wireline declines, inflation and supplier constraints, interest rates and debt access, spectrum availability and regulation, cyberattacks, severe weather, and pension assumptions as key risks. Several union contracts covering approximately 28,500 employees are scheduled to expire in 2024.
Unusual and material matters include $1,594 of pension and postretirement actuarial and settlement losses in 2023, versus $1,999 of gains in 2022; a $450 impairment of an equity investment in a Latin America satellite business; and 2023 severance, restructuring and Open RAN-related equipment abandonment charges. Consumer Wireline goodwill had less than a 10% valuation cushion at the October 2023 test; management disclosed that specified adverse changes in growth, margin or discount-rate assumptions could trigger impairment. AT&T faces litigation and government inquiries related to allegations concerning lead-clad cables, though it stated that pending proceedings did not meet its threshold for material legal-proceeding disclosure. AT&T reported no cybersecurity breach in 2023 that it believed materially affected, or was reasonably likely to materially affect, the business.
Most important facts for investors to verify
- Whether 2024 operating cash flow can support the planned $21–$22 billion capital investment, dividends and debt reduction, and how vendor financing affects cash-flow comparisons.
- Debt maturities, refinancing costs and the trajectory of total debt, particularly with short-term borrowings carrying a 6.0% weighted-average rate at year-end.
- Whether Mobility subscriber additions and pricing can offset competitive pressure, and whether Business Wireline declines continue as expected.
- Fiber customer growth, Consumer Wireline’s narrow goodwill valuation cushion, and the cost and depreciation effects of Open RAN deployment.
- Developments in lead-cable litigation and government inquiries, spectrum and broadband regulation, and 2024 labor negotiations.