Q3'26 Earnings: AT&T & Comcast; Starlink Wireless Ambitions & Impact on Spectrum Policy

Full Transcript

Don Kellogg 0m10s

Hello, and welcome to the three hundred and nineteenth episode of the week with Roger, a conversation between analysts about all things telecom, media, and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. Roger, how are you doing?

Roger Entner 0m23s

I'm great. How are you?

Don Kellogg 0m25s

I'm good. It's earnings season. Our favorite

Roger Entner 0m28s

Not only... Yeah. Exactly. With fireworks.

Guest Speaker 0m31s

Right. With fireworks. We're not quite through all of

Don Kellogg 0m34s

the earnings, but we've got a couple kind of early finishers this week. So AT&T and Comcast both reported. I think there's some interesting storylines on both of those calls.

Roger Entner 0m45s

And Starlink.

Don Kellogg 0m46s

And Starlink. And Starlink. That's right. Which happens to be intertwined with the other two. Right?

Roger Entner 0m51s

Exactly.

Don Kellogg 0m52s

Who do you wanna start with?

Roger Entner 0m54s

Let's start with Starlink because that's where it started. They added like, what, 1,600,000 customers globally with Starlink. So that's probably like another 300, 400,000 in The US. But the real news here that's overshadowing everything is their ambitions for mobile. There was a story in Bloomberg about 80,000 sites that they're looking at this.

Roger Entner 1m21s

Listeners to show know that we talked about this for a year now, and it's kind of coming through. 80,000 is a little bit on the high end that we expected.

Don Kellogg 1m32s

I mean, that's a full terrestrial macro network, right?

Roger Entner 1m34s

That is a more than full terrestrial network. Because like AT&T, Verizon, T Mobile are somewhere between fifty and seventy thousand. And so 80 indicates high frequency urban build. You don't need this many sites unless you go up in the frequency bands where the cell site radius is small and you build it in urban. You don't wanna build a cell tower in the fields of North Dakota every 100 yards, right?

Roger Entner 2m5s

You do this in Manhattan. So it means he's coming. Right? We talked about this for the entire time. Now, I don't think that all the soothsaying and, you know, the sky is falling type reaction from investors is justified at all.

Roger Entner 2m25s

When you look at it, we expect or I expect about nine to 11,000,000 households to have Starlink. Also, when you look at the timeline, right, he needs five g NTN, which is in 2027. It needs to get into phones and onto satellites. It needs to have sufficient quantities of satellites and phones, which indicates, like, is it gonna launch maybe 28, but not enough satellites, not enough phones. Right?

Roger Entner 2m56s

So this becomes rolling in the upper c band auction that's happening next summer can be built out in the thirty to thirty two timeframe. So all of this comes together 3032. But what we're also seeing, and why do we come up with like nine to 11, is like we look at the convergence of all the other providers, and we're playing this out. Then we're looking at all the unhappy people, the detractors, and they're getting a lot less over time. Right?

Don Kellogg 3m28s

Mhmm.

Roger Entner 3m29s

This is coming together in the thirty to thirty two time frame. But when we look at it, why do we say nine to 11,000,000 households? This is about nonconverged households that are unhappy with their current providers. When we we ask everybody on our survey, who's your preferred next provider? Starlink is rivaling DSL as the preferred next provider.

Roger Entner 3m53s

So people... There's certainly a group of people who are very enthusiastic about Elon Musk. You know, the number one target group is white males driving Teslas, clearly the highest thing. But about 20 to 25% in this country are never for any given carrier. Like, I will never sign up with, you name the ISP.

Roger Entner 4m17s

For Starlink, that's 40% because of Elon Musk. Right? And so there are limits of where he can go. At the same time, when we ran survey, 25% would sign up tomorrow for a conversion offer. So I don't think the sky is falling.

Roger Entner 4m33s

Is it going to limit the number of sunny days? Yeah. But I think the market is terribly overreacting on that. And even though AT&T had a good earnings report, Comcast a little bit less, you know, both of them were like being hammered the day after when that news came out. Right?

Roger Entner 4m55s

When you look at it, AT&T, 379,000 postpaid phone net ads, pretty respectable. Broadband ads, four forty two, five, or three twenty seven Internet air, really, really strong.

Don Kellogg 5m11s

Well, we're starting to see within the AT&T base where folks might be migrating off of AT&T Internet or their legacy VDSL. We're starting to see AT&T Internet air really start to pull its own weight similarly to, like, kind of what we saw on the Verizon base and the T Mobile base mobile bases, when their FWA was kind of ramping up. Yeah. Right? So...

Don Kellogg 5m31s

Well, and then by the way,

Roger Entner 5m32s

that's where also Starlink is ramping up. Right? Mhmm. Because it becomes a very viable base. It's a really good product.

Roger Entner 5m39s

Right? I'm probably repeating myself that Starlink has now as reliable... The reliability figures that we see from fiber. And, you know, we're running in multiple locations now network tests on Starlink. And I was testing this through a nor'easter and it was fine.

Roger Entner 5m59s

Right? So it's like right now, FWA like speeds with fiber like reliability. When we look at AT&T, to a certain extent a little bit, the problem is still outside the footprint. It's a little bit challenging. But the Internet air numbers that are coming up are, you know, for AT&T, very encouraging because bundling should be independent of that.

Don Kellogg 6m25s

Well, and to be clear, they're still a fiber first company. Right?

Roger Entner 6m27s

They're a fiber first company. But what's really, really interesting is some of the testing that we're doing makes FWA look really, really good when you look at it from an in home perspective. So it is more than good enough for a lot of people. But, yeah, no, they had a good quarter. And then Elon came and

Guest Speaker 6m50s

Crashed the crashed the party.

Roger Entner 6m51s

Crashed the party and and, you know, threw a couple of stink bombs around.

Guest Speaker 6m56s

Yep.

Roger Entner 6m57s

Oh, well.

Don Kellogg 6m58s

So let's talk about Comcast, how they do.

Roger Entner 7m0s

So Comcast, again, did really well on mobile and less well on home internet and equally badly on video. The broadband net ads were like minus one forty four, and the market was expecting like a 100. The company Comcast is putting a lot of effort around improving performance. Put it this way, objective improvements are a lagging indicator to net ads. How about that?

Roger Entner 7m31s

And so we're seeing genuine desire to do better and break with the past. It's just like they're living with the sins of the past that are coming through for probably a while longer.

Don Kellogg 7m43s

Yeah. I mean, I think the other issue with cable just in general is that you've got fiber coming in at the top, FWA coming in the bottom, and potentially satellite coming in on top of all that as well. Right? There's just like a lot of price pressure.

Roger Entner 7m56s

There's a lot of price pressure. Also, the cable guys still have their loyalty penalty where their most loyal customers pay the most and get the worst experience. That sucks. And it's extremely hard to rerate the base.

Don Kellogg 8m14s

Well, but if you don't, sometimes the base rerates itself. Right? That's also a problem.

Roger Entner 8m18s

Exactly. That's what you see with a 144,000 people leaving. The base rerates itself. Now damned if you do, damned if you don't. And so from that perspective, it is what it is.

Roger Entner 8m31s

Talking about damned if you do, damned if you don't, last week we talked with Ray Dolan from Cohere. So we didn't cover that AT&T was exiting Mexico. This was like a long overdue change, And it's probably one of the last things that John Stankey cleaned up a mess that Randall Stephenson created. You know, if we go down memory lane, AT&T owned 24% of America Movil. America Movil is the company owned by Carlos Slim, who is now German emeritus, whatever.

Roger Entner 9m8s

He owns Telcel and Telmex with like 80% plus market share. And they thought, yeah, we're going to take you on, buddy. And TracPhone was mostly on AT&T before that happened, and now it's no longer. Right now TracPhone and that whole empire is owned by Verizon. And because of that mishap, Verizon has now a value story, which they didn't have beforehand.

Roger Entner 9m35s

If you add it all up, they paid $4,800,000,000 to buy it altogether. CapEx and accumulated losses over the last ten years is another $12,000,000,000 and they got out for two. So that was a very painful lesson of what not to do. But it was the right thing to get out. They were getting nowhere near ever to get to this.

Roger Entner 10m1s

You know, some people were like griping, oh, they should have gotten $4,000,000,000 At one point in time, you need to get out. Right? And they got out. And so it's a fitting bookend. Thaddeus Arroyo, who left at the end of last year, was doing a lot of the negotiations.

Roger Entner 10m17s

And now Pascal leaving at the end of this year, this is a befitting cleanup of the AT&T balance sheet and operations of getting out of Mexico that didn't make sense. It didn't make sense in the beginning. It didn't make sense during. It didn't make sense in the end. So it's like they got $10,000,000,000.

Roger Entner 10m37s

Take it and run.

Don Kellogg 10m39s

Well, mean, sometimes you have to cut your losses. Right?

Roger Entner 10m40s

You gotta cut your losses. And they did this. They realized it was a mistake, and so you gotta undo the mistake. You can't undamage the situation that got damaged. It is what it is.

Don Kellogg 10m51s

Speaking of damage, there's, I think, one more thing we wanted to talk about, and that's maybe the relationship between T Mobile and Starlink. There's a petition. Right? Tell us about that.

Roger Entner 11m0s

Oh, yeah. Well, a, you know, we talked about it. T Mobile on t satellite is no longer quoting Starlink. But also, they did a petition at the FCC that if Starlink gets its way of using the 2.5 GHz spectrum, which is the capacity layer for the T Mobile network, if Starlink would get its wish, it would wipe out like 90% of the uplink. And it had been previously, repeatedly decided that satellite should not play into this.

Roger Entner 11m35s

But the satellite guys are basically playing Starling doctrines, you know.

Don Kellogg 11m41s

At the gates. Yeah. Yeah.

Roger Entner 11m42s

Well, it's like, you know, version of doctrine was like, what's mine is mine, and what's yours, we'll talk about it. And Stalin doctrine is like, what's mine is mine, and what's yours is mine too. And so the satellite guys are like approaching this of like licensed spectrum. What is this? We have a natural right to use all spectrum.

Roger Entner 12m3s

And no, you don't have this God given right. There's a reason why we have licensed spectrum, and there's a reason why we have unlicensed spectrum, and the people who pay for their license should have the exclusive benefits for that.

Don Kellogg 12m16s

I mean, there's also been a pretty well documented history of arbitrage around what spectrum should and shouldn't be used for, like repurposing terrestrial spectrum for satellite, things of that nature.

Roger Entner 12m26s

Exactly.

Don Kellogg 12m27s

Obviously, if you pay for it, you should be able to use it exclusively.

Roger Entner 12m30s

Yeah. You paid for it.

Don Kellogg 12m32s

Yeah.

Roger Entner 12m32s

You know, I paid for my lunch, I wanna eat it. I don't wanna share it with you. Just because you think you're pretty. Doesn't work like that.

Guest Speaker 12m41s

Right. Anyway. Alright. Alright. Well, we'll

Don Kellogg 12m44s

be back next week with more earnings. Yes. So there's a couple more carriers left to go, and we'll definitely talk through that next week when we talk.

Roger Entner 12m52s

Alright. Talk to you next week.

Guest Speaker 12m54s

Alright.

Roger Entner 12m55s

Thank you. Bye bye.