Strategic Expansion: AT&T Advances Fiber Optic Business

AT&T, the telecommunications giant, is increasingly focusing on expanding its fiber optic network, while the majority of its revenue still comes from the mobile business. Thanks to existing infrastructure in selected markets, the network expansion is less capital-intensive. The strategic plan includes providing fiber optic service to at least 30 million potential customer locations by the end of 2025, although only a fraction of these locations will actually be acquired as paying customers. By the end of the second quarter of 2025, AT&T had approximately 8.8 million fiber optic connections at 27.8 million covered locations. The penetration rate in the residential customer segment was around 40%. AT&T is pursuing three strategies to drive growth in the fiber optic business. First: the expansion of the network to create new potential customers. It aims to increase coverage to up to 45 million locations over the next few years. Second: increasing the penetration rate by convincing more households and businesses to use the service. The rate has already increased by about three percentage points over the past two years. Third: raising prices. In the second quarter of 2024, the average monthly revenue per fiber optic customer was $69, up from $61.65 two years earlier. Starting November 10, monthly prices for all internet plans will increase by $5, representing a 7.2% increase. Despite planned investments of $21 to $22 billion this year, the expected free cash flow remains stable between $17 and $18 billion. The fiber optic business, currently achieving an annual revenue volume of $7.2 billion, will continue to experience robust growth. The durability of fiber optic cables, which require little maintenance and last for decades, makes the investment profitable. AT&T's stock has risen by more than 50% in the past year, reflecting investor confidence in the telecommunications company. The current stock price corresponds to nine times the median free cash flow. Investing in this stock could still be a worthwhile investment, although it is no longer as affordable as it was a year ago.