
AT&T Inc
NYSE:T

AT&T Inc
AT&T Inc. stands as a giant rooted deeply in the landscape of American telecommunications with a journey that traces back to the invention of the telephone. Having evolved from the original Bell Telephone Company, AT&T has consistently transformed itself in response to the shifting tides of technological and consumer demands. Originally a traditional telephone company, AT&T has diversified its portfolio, now operating through several segments primarily focused on telecommunications, media, and technology services. The company serves millions of customers by providing wireless communication, broadband, and subscription television services under various brand names like AT&T, Cricket Wireless, and DirecTV. By continuously upgrading its infrastructure, AT&T has maintained its position as a key player in the provision of high-speed internet and wireless services, especially through its expansive 5G network rollout.
The company’s revenue streams are largely fueled by its ability to bundle services, offering integrated packages that include mobile and internet services along with entertainment and digital advertising solutions. AT&T leverages its extensive network and significant media holdings, including the acquisition of Time Warner, to provide content and connectivity, capitalizing on the growing demand for online streaming and digital consumption. Through strategic partnerships and its vast subscriber base, AT&T has tapped into the explosive growth of digital media, thereby monetizing content distribution while creating lucrative advertising opportunities. This multifaceted approach not only maximizes revenue generation but also reinforces customer loyalty, ensuring a steady cash flow that supports its ambition to lead in broadband and wireless services. While navigating the challenges of industry deregulation and digital transformation, AT&T remains committed to innovation and adapting its business model to remain relevant in a rapidly evolving marketplace.
Earnings Calls
In the first quarter of 2025, AT&T reported a 2% increase in total revenues, driven by solid gains in their Mobility and Consumer Wireline sectors. Notably, adjusted EBITDA rose 4.4%, reflecting robust demand for services. The company added 324,000 postpaid phone subscribers, while Fiber net adds reached 261,000, contributing to 5.1% revenue growth in Consumer Wireline. Looking forward, AT&T anticipates free cash flow of approximately $4 billion for Q2 and over $16 billion for the full year. They plan to initiate share repurchases of $10 billion beginning in Q2, reflecting confidence in their financial performance and growth strategy.
Management
John T. Stankey is a prominent American businessman who has been with AT&T Inc. for several decades. He became the CEO of AT&T in July 2020, succeeding Randall L. Stephenson. Stankey has had a long career with the company, holding various executive positions across different divisions. He joined AT&T in 1985 and has since been involved in numerous facets of the business, including strategy, technology, and operations. Before becoming CEO, Stankey played a critical role in AT&T's acquisition of DirecTV and the company's transformative purchase of Time Warner, which was later rebranded as WarnerMedia. He served as the CEO of WarnerMedia, overseeing its operations and leading the development of HBO Max, a direct-to-consumer streaming platform. Stankey holds a Bachelor’s degree in Finance from Loyola Marymount University and an MBA from UCLA. Known for his strategic vision and ability to manage complex integrations, he has been pivotal in navigating AT&T through a rapidly changing telecommunications landscape. Under his leadership, AT&T has focused on strengthening its core telecommunications business while exploring new digital and media opportunities.
Pascal Desroches is the Chief Financial Officer (CFO) of AT&T Inc., a leading multinational telecommunications and media conglomerate. In this role, he is responsible for overseeing the company's financial activities, including financial planning, reporting, taxes, audit, treasury, and investor relations. Pascal Desroches joined AT&T in April 2021 after a distinguished career at WarnerMedia, where he served as Executive Vice President and CFO. At WarnerMedia, he played a crucial role in financial operations during a transformative period for the company, particularly involving its strategic initiatives in streaming and content production. Prior to his tenure at WarnerMedia, Desroches gained significant experience at Time Warner Inc. (which became part of WarnerMedia following the merger with AT&T), holding various leadership roles and ultimately serving as the CFO. His work there included driving financial strategy and mergers & acquisitions that helped shape the company's competitive position in the media and entertainment industries. Before his work at Time Warner, Desroches was a partner at KPMG LLP, where he led advisory services for media and entertainment clients. He is a Certified Public Accountant (CPA), bringing a wealth of accounting and strategic financial expertise to his roles. Pascal Desroches holds a Bachelor of Business Administration in Accounting from St. John's University and a Master of Business Administration in Finance from Columbia Business School. His leadership and expertise continue to play a pivotal role in AT&T's financial health and strategic direction.
Jeffery Scott McElfresh is a prominent business executive known for his extensive career at AT&T Inc., one of the largest telecommunications companies in the world. He currently serves as the Chief Operating Officer (COO) of AT&T, a position he has held since May 2021. In his role as COO, McElfresh is responsible for overseeing the company's operations, including its nationwide wireless and broadband networks, as well as its customer experience operations. Before becoming the COO, McElfresh was the CEO of AT&T Communications, a position he held from October 2019. In this capacity, he managed the telecommunications segment that provides mobile, broadband, video, and other communications services to millions of customers in the United States and internationally. Throughout his career at AT&T, which spans over two decades, McElfresh has held a variety of leadership positions. These include roles in operations, strategic planning, and technology deployment, both domestically and internationally. His extensive experience within AT&T has contributed significantly to the company's development and execution of strategic initiatives. Jeffery McElfresh is known for his results-driven leadership style and strategic vision, which have been instrumental in driving AT&T's growth and technological innovation. He is recognized for his deep understanding of both the technological and operational aspects of the telecommunications industry, making him a key figure in AT&T's executive leadership team.
David R. McAtee II is an accomplished attorney known for his role as the Senior Executive Vice President and General Counsel of AT&T Inc. His responsibilities at AT&T encompass leading the company's legal affairs, overseeing strategic initiatives, regulatory matters, compliance, and corporate governance. McAtee joined AT&T in 2012 and quickly established himself as a key leader within the organization, known for his legal expertise and strategic vision. Before joining AT&T, McAtee was a partner at Haynes and Boone, LLP, where he specialized in complex commercial litigation and developed a strong reputation in the legal community. He earned his J.D. from the University of Texas School of Law, where he graduated with honors, and holds a B.A. from Duke University. Throughout his career at AT&T, McAtee has played a significant role in navigating important legal challenges and transactions, contributing to the company's success in a highly competitive and regulated industry. His leadership extends beyond his legal duties, as he is involved in various internal and external initiatives promoting diversity and inclusion within the legal profession and the business community.
Lori M. Lee is a prominent executive at AT&T Inc., holding significant leadership roles within the company. She has served as the CEO of AT&T's Latin America operations, which includes responsibility for the company's services across the region. Her role focuses on expanding and enhancing AT&T's presence and network capabilities in Latin America, one of the key regions for the company's international growth. Prior to her role in Latin America, Lee held various important positions at AT&T. She was involved in strategic planning and execution of initiatives to improve customer experience and streamline operations. Her leadership style is marked by a strong focus on innovation, operational efficiency, and customer satisfaction. Throughout her tenure at AT&T, Lori M. Lee has been recognized for her effective leadership and her ability to drive significant business results. She has played a critical role in the company's efforts to transform and modernize its communications services, meeting the dynamic needs of businesses and consumers alike. Lee's background and experience have made her a respected figure in the telecommunications industry, where she has continued to contribute to the advancement and success of AT&T on a global scale.
Larry Solomon is not widely recognized as a notable figure associated with AT&T Inc. It's possible there may have been some changes or roles within AT&T that were not widely publicized, or there may be some confusion regarding the name or affiliation. If you are referring to another individual or seeking information about a different context within AT&T, additional details would help clarify the request. As it currently stands, I do not have a biography for Larry Solomon from AT&T Inc. FALSE.
As of the latest available information, Rick Moore serves as the Executive Vice President and Chief Human Resources Officer at AT&T Inc. In this role, he is responsible for overseeing the company's global human resources strategy, including talent development, culture, employee relations, and performance management. Rick Moore has been pivotal in driving initiatives that align with AT&T's strategic goals, focusing on building a workforce that can adapt to the rapidly changing technological landscape. His leadership in HR has been marked by a commitment to diversity, equity, and inclusion, as well as fostering an environment that encourages employee growth and development. Prior to joining AT&T, Rick Moore held various HR leadership positions in major corporations, bringing a wealth of experience to his current role.
Susan A. Johnson is known for her significant contributions to AT&T Inc., where she has held prominent leadership roles. As the Executive Vice President for Global Connections & Supply Chain at AT&T, Johnson has been instrumental in managing and optimizing the company's extensive supply chain network, ensuring efficient operations across global markets. With a robust background in international business and telecommunications, she has driven strategies that enhance connectivity solutions and partnerships worldwide. Johnson's leadership has focused on transforming supply chain capabilities through innovation and technology, emphasizing sustainability and operational excellence. Her role involves collaborating with cross-functional teams to streamline supply processes, improve cost structures, and support AT&T's overarching business goals. Known for her strategic acumen and ability to foster productive relationships with suppliers and partners, Susan A. Johnson plays a crucial role in AT&T's mission to deliver cutting-edge communication services globally.
Good morning, and welcome to AT&T's First Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference call over to our host, Brett Feldman, Senior Vice President, Finance and Investor Relations.
Thank you, and good morning. Welcome to our first quarter call. I'm Brett Feldman, Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our Chairman and CEO; and Pascal Desroches, our CFO.
Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they're subject to risks and uncertainties described in AT&T's SEC filings. Results may differ materially. Additional information as well as our earnings materials are available on the Investor Relations website.
With that, I will turn the call over to John Stankey. John?
Thanks, Brett. I appreciate everyone joining us this morning, and I'm pleased to share that we followed a strong performance in 2024 with a solid start to 2025. In the first quarter, we reported growth in consolidated service revenue and adjusted EBITDA driven by strong postpaid phone and Fiber net adds. We also grew adjusted EPS and free cash flow when excluding DIRECTV, with both metrics performing consistent with the outlook we provided in March. Pascal will run you through the details of our first quarter results and outlook. So I'm going to use my time to cover two topics that are top of mind for our management team.
First, I'll review the core operating principles driving our strategy. This includes how our differentiated position as the largest converged provider across 5G and fiber is fueling growth in high-value customer relationships. After that, I'll discuss why we expect to deliver on our 2025 financial guidance and commence our planned share repurchases during the second quarter despite operating in a macro environment with diminished visibility.
So let's start with the core operating principles that are enabling us to drive our long-term strategy forward. As always, we begin with a focus on the customer. This is why we launched the AT&T Guarantee, which is a promise to our customers that will provide them with connectivity they can depend on, the deals they want and the service they deserved guaranteed or we will make it right. AT&T is the first and only carrier that offers a guarantee for wireless and fiber networks to both consumers and small businesses. key reason we can make this promise is because of the significant fiber expansion and network modernization investments we're making to be the best connectivity provider in America.
A little over three years ago, we set a target of passing over 30 million total locations with our fiber network by the end of 2025. I'm proud to say that we expect to achieve that target before midyear as we continue to ramp towards our objective of reaching 50 million plus total locations with fiber by 2029 through a combination of our organic build, GigaPower and other commercial open access agreements. We're also making great progress at retiring our legacy copper network as we transition to modern 5G wireless and fiber technology, and we have an opportunity to move even faster following recent FCC orders. We appreciate Chairman Carr and the FCC for their leadership to advance the tech transition and update requirements to better reflect today's technology and competitive marketplace.
Our customer-focused, investment-led business model has positioned AT&T as a trusted provider of critical connectivity services. As a result, we're well positioned to drive sustainable growth through a range of market and economic cycles. Our first quarter results present further evidence that our differentiated strategy is working. We came into the year with an expectation that the wireless industry would see further normalization in net adds and overall activity levels. So far, this has played out. And to no surprise, we have seen shifts in offers and promotions as the major providers compete for moderating pool of new customers.
Despite a slow January, we were able to fine-tune our offers and competed very well against this backdrop for the balance of the quarter. This was especially true within our fiber footprint, which is the largest and fastest growing in the U.S. As we have said before, where we have fiber, we win in fiber and 5G. This dynamic continues to drive growth, as shown by our increasing rate of converged customer penetration and significant wireless share gains within our fiber footprint. These trends continued and in some cases, strengthened in the first quarter.
For example, a significant portion of wireless gross adds that took our lead offers during the first quarter or with converged accounts. This is a key reason why we had more converged household gross adds within our fiber footprint during the first quarter compared to last year. As a result, our converged penetration continues to climb with more than 4 and 10 AT&T fiber households also now subscribing to our mobility services. This is a key trend because accounts with both fiber and wireless services have lifetime values that are more than 15% greater than customers with stand-alone services.
The message here is that the primary driver of our growth is our success in executing our fiber and 5G playbook, that our increased investments in customer acquisition and retention are driving sustained growth in high-value customer relationships. The fundamentals of our business are very strong, and we continue to feel confident that our strategy and plans for 2025 are on track. However, all companies in the U.S. are now operating with less visibility as the administration pursues policies that are intended to facilitate its laudable goal of creating more equitable global trade and improved domestic manufacturing capabilities.
Like others, we're closely monitoring this journey to rebalance global trade and its impact on the broader economy. The announced tariffs could potentially increase the cost of smartphones and other devices as well as the cost of network and technical equipment. The magnitude of any increase will depend on a variety of factors, including how much of the tariffs the vendors pass on, the impact that the tariffs have on consumer and business demand. Based on the 90-day pause on reciprocal tariffs and our visibility into the supply chain, we believe we can manage the anticipated higher costs within the 2025 financial guidance we provided at the beginning of the year.
Our expectations reflect our strong financial performance in the first quarter, the historical resilience of demand for our critical connectivity services across economic cycles and our decision to reduce discretionary expenses and accelerate cost actions that we had planned for later in this year. That said, this environment remains fluid, and we'll provide further updates based on the ultimate impacts of the reciprocal tariffs.
The priorities we laid out in our 2024 Analyst and Investor Day have not changed, and we continue to operate our business to achieve the financial plan and capital returns we outlined in December. As we shared during that presentation, these long-term plans are based on an outlook that assumes a macroeconomic environment with low single-digit GDP growth and moderating inflation. If we ultimately face a lower growth environment over this period, we have the option to adjust our operating posture to prioritize cash flow. This gives us confidence in our ability to execute the expanded capital returns program announced at our Analyst and Investor Day, we plan on commencing share repurchases this quarter.
We also continue to evaluate opportunities to deploy our financial flexibility towards strategic investments that complement our organic growth plan, additional capital returns or further improvements to our balance sheet.
So with that, I'll turn it over to Pascal. Pascal?
Thank you, John, and good morning, everyone. Let's start by reviewing our first quarter financial summary on Slide 5.
At a consolidated level, total revenues were up 2%, and service revenues were up 1.2% and adjusted EBITDA was up 4.4%. The primary driver of this solid performance was growth in our Mobility and Consumer Wireline businesses, which continues to more than offset secular pressure on Business Wireline. As a reminder, beginning with our first quarter results, adjusted EPS and free cash flow exclude DIRECTV. Adjusted EPS was $0.51 in the quarter, which was $0.03 higher than the prior year when excluding DIRECTV.
First quarter free cash flow was $3.1 billion, which was up more than $350 million on a comparable basis. First quarter capital investment of $4.5 billion was slightly lower year-over-year due to lower vendor financing payments reflecting the good progress made in reducing these balances for the past couple of years. For the second quarter, we expect capital investment in the $4.5 billion to $5 billion range and free cash flow of approximately $4 billion, and we continue to expect full year free cash flow of $16 billion plus.
Now let's look at the trends we're seeing in our Mobility business on Slide 6. Our Mobility business delivered solid results to start the year growing both revenues and EBITDA in a wireless market that remains both healthy and competitive. Total Mobility revenues were up 4.7% year-over-year with service revenues up 4.1%. Service revenue growth was primarily driven by strong customer growth, including 324,000 postpaid phone net adds as well as continued postpaid phone ARPU growth. Postpaid phone gross adds increased by about 13% year-over-year, which more than offset a normalizing trend in churn. Postpaid phone churn of 0.83% was up 11 basis points from the first quarter last year. This increase was primarily driven by the normalization of customers reaching the end of their equipment promotional financing periods in the fourth quarter, which is a trend we highlighted on our prior call.
We also saw some shifts in competitive offers during the quarter that impacted churn. Importantly, involuntary churn remained low and consistent with our expectations. Based on the current market dynamic, and the return to a more normalized cadence of promotional roll-offs, we expect postpaid phone churn to remain at a similar level in 2Q with typical seasonality in the back half of the year, as we approach the holidays. First quarter Mobility EBITDA grew 3.5% year-over-year. EBITDA margins of 43% was down 50 basis points versus last year. This was due to increased advertising and marketing spend related to the launch of the AT&T Guarantee as well as higher spending on customer acquisition and device upgrades.
We're very pleased with the uptake rate of our offers among new and existing high-quality customer cohort. This is evident in our postpaid phone ARPU, which grew 1.8% year-over-year and in the continued growth of our base of converted accounts. Before I discuss our first quarter Consumer Wireline performance, I want to provide some insights into the trends we're seeing in our Mobility business so far in the second quarter.
Postpaid phone net adds remained solid, with both gross adds and churn broadly in line with our expectations. However, upgrades have trended higher than expected since the announcement of the reciprocal tariffs in early April, which we believe triggered an acceleration in consumer upgrade behavior. If upgrade rates remain elevated, this could represent a pull forward from the second half of the year.
Now let's move to Consumer Wireline results on Slide 7. In the quarter, Consumer Wireline performance was led by solid broadband subscriber growth for both AT&T Fiber and AT&T Internet Air. We delivered 261,000 AT&T Fiber net adds up from $252,000 in the first quarter of last year. This was driven by growth in our consumer locations served with fiber, which reached 23.8 million at the end of 1Q. And growing contribution of net adds in regions served with GigaPower fiber. We love the return profile of fiber and the lift that provides our mobility business only makes investing in fiber more attractive.
AT&T Internet Air net adds were 181,000 in the quarter, which is a significant improvement from a year ago, driven by broader availability across our distribution channels. Our combined success with these two services helped us deliver 137,000 total broadband net adds in the quarter. This marks our seventh straight quarter of overall broadband subscriber growth and second consecutive quarter with more than 100,000 broadband net adds. We grew Consumer Wireline revenue by 5.1% versus the prior year. This was driven by fiber revenue growth of 19%, reflecting subscriber gains and solid fiber ARPU growth of 6.2%.
Consumer Wireline EBITDA grew 18.6% for the quarter. Our first quarter results benefited from vendor settlements that positively impacted our total wireline operating expenses by approximately $100 million. Roughly $55 million of the impact was in Consumer Wireline with the rest in Business Wireline. This item has no impact on guidance as it was factored into our full year plan.
Now let's turn to Business Wireline on Slide 8. Starting this quarter, we're providing more detail on the revenue components within Business Wireline to match the disclosures and targets we provided at our Analyst and Investor Day. Business Wireline revenues declined approximately 9% year-over-year, primarily due to continued pressures on legacy and other transitional services, which declined 17.4%. This was partially offset by growth in fiber and Advanced Connectivity Services, which grew 4.5%.
About 1/3 of these revenues are from value-added services, which are variable on a quarterly basis. The remaining 2/3, which is predominantly fiber connectivity, is growing at a faster rate and accelerated relative to the fourth quarter. Business Wireline EBITDA declined less than 2% versus the prior year. I want to call out a few factors that contributed to this improved trend. On the top line, we benefited from pricing actions on legacy services, which helped moderate revenue declines although we expect this benefit to diminish over the next few quarters. On the expense side, Business Wireline operating and support costs were down about $400 million year-over-year.
This decrease is due to solid execution against our cost-saving initiatives, including lower force, contractor and access costs. Lower expenses also reflect the vendor settlements I mentioned earlier as well as the prior deconsolidation of our cybersecurity business. While I appreciate that our first quarter EBITDA performance is pacing ahead of plan, some of the favorability was nonrecurring, and we are facing an operating environment with less visibility. So we expect to see a normalization in the trajectory of Business Wireline EBITDA during the remainder of the year.
We also saw solid trends across Business Solutions, which includes the contributions from business, mobility and FirstNet. As we announced earlier this month, we now have more than 7 million FirstNet connections, which is a tremendous milestone. We continue to grow connections because FirstNet truly is in a league of its own. Let's be clear, no matter if it's New York City Police Department, the Fire Department in New York City, the Federal Bureau of Investigation or any of the nearly 30,000 public safety agencies and organizations that use FirstNet, FirstNet continues its strong momentum and remains the first responders' communication solution of choice.
Now let's move to Slide 9 to discuss our capital allocation. Our capital investment is largely driven by our fiber deployment and wireless network modernization. These remain strategic priorities, and we expect these initiatives to remain on pace with the time lines we outlined at our Analyst and Investor Day in December. We continue to expect our full year capital investment to be in the $22 billion range. During the first quarter, we made further progress on strengthening our balance sheet and reduced net debt by about $1 billion. This was driven by our strong free cash flow and net proceeds related to asset sales and strategic investments, partially offset by $1.2 billion of currency headwinds related to the weakening of the U.S. dollar.
As a reminder, we fully hedged the FX impact on our debt with the offset reported in other liabilities. We ended the quarter with net debt to adjusted EBITDA of 2.63x versus 2.68x at the end of last year. We've worked hard at strengthening our balance sheet and continue to operate the business with a net leverage target of net debt to adjusted EBITDA in the 2.5x range. Since the beginning of 2020, we have reduced our net debt by $32 billion. Based on this improvement in our balance sheet, expected proceeds from the sale of our 70% stake in DIRECTV and our financial outlook for the remainder of the year, we are now in a position to begin executing on the incremental capital returns we outlined at our Analyst and Investor Day.
We expect to begin share repurchases under our $10 billion authorization this quarter with at least $3 billion completed by year-end and the remainder during 2026. We're really pleased with the team's performance and our start to the year, and we're excited to continue to build on this progress.
Brett, that's our presentation. We're now ready for the Q&A.
Thank you, Pascal. Operator, we're ready to take the first question.
[Operator Instructions] Today's first question comes from Peter Supino with Wolfe Research.
A question on tariffs and another on the growth environment. If tariffs increase the cost of phones, I wonder how you would envision AT&T and the industry potentially reacting to that on a sustained basis? And then with your comments on the possibility of a slower growth environment, I wonder if you could refresh us on the expense reduction opportunity outside of Consumer Wireline and what else you might have in mind for a slower growth marketplace?
Peter, so first of all, let's kind of start with our customer base and customers and what might happen or not happen in tariffs. As I said in my comments, the visibility is not great around what the future holds. But if I think about the dynamics of handset costs, it's probably important for us to take a step back and realize we're dealing with SKU costs on handsets right now that are quite a bit more expensive than they were even 4 years ago or 3 years ago. And whenever those dynamics have occurred, we've come up with different solutions in the marketplace that ultimately allows the customer to manage through those things. Customers, of course, make choices from their point of view as to what they wish to do like possibly extending life cycles of handsets. And we've done that within the context of our business model.
Even though we've been seeing average cost of handsets increasing over time, as you know, we've done a nice job of improving the profitability and performance of this business. So if tariffs are the next driver of an increase in the unit cost of handsets, I imagine we're going to have to go through the exact same play, which is first of all, understand what the customer needs and then make some adjustments to how we support them in that process. But that process is going to be taking that cost as we've traditionally done. And largely moving it through to the end user and fitting it into the business model of ultimately what we can afford to drive the right level of returns in our business.
And I think we've demonstrated over time that we've done that fairly effectively. So I think that if ultimately, costs are passed to us from those that we buy handsets from, unfortunately, for the customer, we're going to have to come up with some new ways for then to figure out how to digest that increase in pricing. I don't see the business model dramatically changing to accommodate subsidy levels that are much different from what's out there today and the modest adjustments we make to those day in and day out, but we'll find different creative ways to build plans and approaches and supports that allow them to continue to use the network effectively and do what they need to do and feel good about it.
And I also don't know, I mean, if I step back and think about consumer behavior in this, handsets are just 1 part of a broader ecosystem of decisions that consumers are going to have to make on goods and services. And if their flat panel TV in their house is going to be more expensive. And if their laptop is going to be more expensive and how they choose to kind of manage this dynamic within that ecosystem, I think we're all going to learn, but I feel pretty good that we've demonstrated we can get through that cycle.
In terms of the growth environment, Look, we've -- I thought we've given you some pretty good views around how we're managing costs across the business in its entirety. It's not just Consumer Wireline where we laid out for you in the Analyst Day what we're doing across the entire wireline business, and there's certainly in that $6 billion pool that we're looking at, plenty of opportunity to address things that we can move forward and readjust and we're being pretty diligent about that. But we're also improving in other parts of our business actively and we've shared some of that with you.
We've talked about what we're doing broadly across our call centers. We talked to you about how we're getting more efficient in our software development and our information technology organizations. Shared with you that we've done a lot better in how we've managed our digital channels for acquisition and customer awareness. And that's before I think we've really gotten good at the operational side of our digital channels, which we're investing pretty heavily in that I think we can have some additional uplift in the efficiency of how we bring customers into the business and support them.
So I think we gave you an indication that we're very comfortable with our guidance for this year as there's a lot of places we know we can go and operate the business a little more effectively and continue to work our expense lines more aggressively. And I think you saw that in the first quarter. We clearly invested a little bit more in customer acquisition, but I'm pretty proud of the overall margin performance that the team delivered. And how we balance those things out, and I think we know how to do that, and we'll continue to do that going forward.
Peter, one other thing to add, Q1 when you look at it was impacted by launch expenses associated with our guarantees. So the organic expense performance was really, really good.
We'll go to the next question.
Our next question comes from Benjamin Swinburne with Morgan Stanley.
Two questions. John, I doubt you'll answer this specifically, but I figured I'd ask anyway. There was a press report back in March around AT&T and talks to acquire Lumen's mass market consumer fiber business. Just curious if you had any comment on that or maybe just if you can't or want to talk more broadly about how you're thinking about inorganic investments at AT&T just given the transformation over the last few years, but also the success you're having with your fiber strategy in general.
And then I was curious if you could talk a little bit more about the FCC's recent orders on kind of legacy infrastructure. It sounded like you thought maybe you could move quicker. I don't know if that's on wire centers or that $6 billion pool or kind of all of the above, but could you come back to that comment and tell us what's happened and how that may impact your ability to take costs out of the business even faster than you have already sort of laid out for us?
I'm not going to make any comments on rumors and speculation that you referenced. What I can tell you is I'll repeat what I've said about inorganic activity in the business. I always keep my mind open to something that I think can improve value for the shareholder that's clear and centered on what we have laid out as our key strategic thrust in the business, and that's to be the best in connectivity. I've articulated that anything that allows me to accelerate what I believe is a reordering of assets for converged connectivity in the markets, it becomes a make, buy kind of analysis, which is I know what I can make it for, and I have plenty of opportunity to make more infrastructure investment in the business and across the nation.
Demonstrated that we're pretty good at that, completing our recent commitments early, our cost per we've been giving you a lot of insight into how effectively we've been doing that on our fiber build. I think you should take some satisfaction on what you see happening in the fixed wireless growth. That's an artifact, not exclusively, but partly because of our modernization efforts in the wireless network that as we complete those things, it opens up geographies that we previously had closed that we can now sell into.
So you can see that we're getting operational execution around those things. And as long as I can build opportunity and do it effectively, that's a good thing to do. And I think it's a sensible deployment of shareholder capital. If something were to come up inorganically that looked like rivaled those types of business cases or looked similar to that or gave me a way to accelerate that were the market power of accelerating it, did something good, of course, I'd be open to it. And as I've said earlier, I continue to be looking for opportunities in the business to find those nice tack-ons, bolt-ons, add-ons to our connectivity business that are a little less capital intensive that might be that next thing that we can interest our customers in and making an incremental purchase decision from us that is complementary to connectivity and how they use our core services.
And don't know if and when something like that will pop around. But certainly, if it does, I would spend a lot of time understanding whether or not we can build some organic value for the shareholder as a result of it.
On the FCC order, here's what I would tell you right now. I think we're in a great place. We talked a little bit about this in December when we had you all together, and I think I'd characterize it at the time that, we've been working on this for a number of years and that there had been a lot of pick and shovel work to get to this time and a lot of which we weren't necessarily exposing you to or talking about. But to get to the moment we talked about in December took years of work at the state level, took a lot of work internally about reordering data and structuring organizations differently to get focused on things, to get the work set up properly.
And I felt like we had it all in a pretty decent package, and I used the characterization in December, and I said it felt like we were about ready to move from maybe an environment where there was a bit of regulatory headwinds or little reticence to change to one with regulatory tailwinds. And that ended up being true. And I think this FCC since it ceded what, 90 days-ish ago, has already moved to take out some procedural steps on the applications that we had pending to begin doing the things at wire centers that we articulated to you in December, we needed to do to pull those costs out. And I think we're sitting at somewhere along the lines right now, about 25% of our wire centers where we have what I would call fairly clean sailing to act on all the plans that we told you we needed to do to sunset.
And we have more applications now pending, and we're actively working with the FCC about how to do that more effectively. I would tell you right now, my bias internally, as I talk with our folks is, I think we now are focused on the effectiveness of our execution and less on -- the effectiveness of our operational execution of less on the effectiveness of the execution of our legal and regulatory affairs organization.
And I'm going to say that deliberately because internally, I know there'll be a couple of departments that we'll be running down the hallways cheering and skipping and saying that they're not on the critical path anymore. And that's the way I feel. And I feel that we are now at a point where our operating groups need to go get the work done and there's plenty of runway in front of them to do that. And they are doing that and beginning to step up on that, and that's how the management team is focused. We still have regulatory steps to get through but I'm not worried about those becoming inhibitors for us to achieve the guidance that we put in front of you back in December.
Thanks, Ben. We'll go to the next question.
Our next question comes from John Hodulik with UBS.
And I think just two quick ones. First, for Pascal, is there any way to frame the impact of the -- or quantify the impact of the higher upgrades that you're seeing so far in the second quarter? I guess you gave us the free cash flow for the quarter, but anything on what that could do to wireless margins or wireless EBITDA growth? That's number one. And then on the business side, if we add back the vendor adjustments, it looks like EBITDA was only down about 5%. Is this a good rate going forward? I mean, obviously, the trend had been above 20%. You guys have been -- done a great job on the cost side, but is this about the level that we should expect as we look out over the next 12 months in that segment?
John, thank you for the question. First on upgrades. Here is the way we -- I think you should think about it. probably late in Q1 and it -- and as I mentioned in my comments in Q2, we had accelerated Q2, we saw an acceleration of upgrades. We think some of this may be a pull forward in anticipation of the tariffs. So in terms of Q2, I would expect elevated levels of upgrades. I mean you see Q1 as a bench -- should be as a benchmark. I think thinking about it in the context of at least around the same levels. And so as you make your way through the balance of the year, of course, we're always impacted by the normal seasonality that you get with upgrades being more heavily weighted towards the second half of the year.
But I think that's a good way to think about our upgrade and might be seen how much of this was a pull forward in the second half. In terms of Business Wireline performance, I would start and say we're really pleased with the execution of the team. There's a new leadership team in place there, and they've come in and I think they've gotten the organization focused on driving growth in connectivity revenues, and we're pleased with how that is going. But importantly, they've taken some steps to really rationalize some of the cost base, recognizing that there -- they have a pretty meaningful base of legacy revenues.
I think this quarter, you benefited from price increases in -- on legacy plans. Those price increases typically come with higher churn as you make your way through subsequent quarters. So I think as you think about the balance of the year, we do expect some of the trends to moderate and that we will see a pickup in legacy revenue declines as you make your way through. Also, this quarter, we benefited from the settlement I mentioned in my commentary that was think about that as around $45 million. So we're really pleased, but I think it's too early to really change our outlook for that segment.
And our next question comes from Michael Rollins at Citi.
Two topics, if I could. First, AT&T reported an acceleration of fixed wireless net adds and coming at a time when you're expanding the mid-band 5G coverage. So curious if you can give us an update on how AT&T is looking at the penetration and financial prospects from fixed wireless? And do these network enhancements give you an expanded opportunity to take more share of broadband outside of the 50-plus million passing that you're trying to get to with fiber by the end of this decade?
And then just second, on ARPU. Just curious, when you think about the pricing actions that AT&T has employed over the last couple of years and you set that against the competitive backdrop and macro landscape, could you just frame the opportunities for AT&T to continue to improve ARPU for both postpaid phones and the fiber subscribers?
So as I just mentioned, part of what's happening on the fixed wireless side is as we've done the modernization of the conversion of the Alcatel Lucent, excuse me, Nokia, I'm dating myself, the Nokia footprint into the Ericsson footprint. That conversion as we go into those geographies opens up territory where we -- because we had not done the modernization to the level we'd like with all of our spectrum assets and the most modern equipment, they typically were not open for fixed wireless access. And that has opened up some footprint that will continue to open up as we go through that over the course of the next couple of years.
And I would also tell you on the margin, we're seeing better performance off of that investment than what we would have anticipated. So as we kind of thought about one of the economic reasons why we felt this was the right move, we understood that we would get some better yields off the network, given the equipment deployments we were using, the more modern equipment, some of the strategies around how we would actually integrate on a single vendor solution and those are helping. We've also been doing -- the network is a living breeding thing. We've gotten better yield and traffic management in some ways that we can use some of those efficiencies back against the network in places that maybe we hadn't anticipated two years ago that have opened up some opportunity.
And I would just tell you our strategy overall around how we think about using fixed wireless access has not changed. But what's happening is I think you're seeing the learning benefits of focus. The business, in my estimation, has a much clearer point of view right now on the multiyear capital deployment and what we're doing and what footprint in terms of our investment. And so this is -- it's not just about where you're deploying fiber and where you aren't. It's about what you need to do to make sure that you can transition out of legacy services, so that you have the right infrastructure in place, whether it be wireless, fixed to serve those customers.
I think that clarity and the repeatability of that month in and month out is allowing all the organizations that are necessary to serve customers and sell product to get a lot better at what they're doing. And so we're moving up that learning curve of where we want to deploy our fixed wireless muscle, all consistent with what I talked about before, which is we'd like to use it as a catch product from legacy broadband services that's we're not going to invest in building fiber in. We'd like to use it as a holding product when we know we're going to be building fiber within a period of time, but we can provide a better solution or some market penetration on a converged basis until that fiber gets there.
What we can do in the business segment where the portfolio of the business is clearly a great match for fixed wireless long term, because of their usage characteristics and demand characteristics, all those reasons that we think are the right use cases to deploy, we're just getting better at our muscles around how to find those customers and how to activate that through our various channels and partners to drive that volume. And so I feel really good about the customer base that's coming in. We continue to test that and look at it and say, are we getting the right customers that are going to have longevity. They're going to be profitable. And I think we'll continue to find places to ramp this modestly as we move forward.
But nothing's really changed in our point of view other than we're getting better at all aspects of how we run our business. Yields on the wireless network efficiency, lining up markets to distribution channels, coming up with the right offers that we can make accretive over the long haul. And I think that just means we're going to get better over time.
On the ARPU side, look, I'm sorry to sound like a broken record. We're going to continue to do what we've done pretty consistently over the last 5 years, which is we're going to find opportunities in our customer base where we think utility and value has improved tremendously. And because of the performance of the products and how customers are using them, allow us to have opportunities to possibly adjust what that means for pricing. I think we have done that pretty artfully over the last several years. You see the right trends in our ARPU performance, I think, in this quarter, you should see anything in there that you look at and say, that's disconcerting or different than what you've been seeing over the last number of years.
We're also going to be very sensitive to the realities of the markets we're in. If we walk into a slower growth economic environment or there's a dynamic that goes on later in this year, where growth is not what we expected it to be, then we'll be smart about how we work with our customers over the long haul and make sure that we do the right thing to keep the franchise healthy and make sure that we're providing value in the right ways back to those customers. So I will tell you great products, superior products generally allow you to have a little bit more pricing flexibility. And I've been saying all along, you should expect that since fiber is the best fixed broadband product in the market over time, you're going to continue to see margins improve on it. You're going to see it scale operationally. You're going to see it get more profitable. and you are seeing that, and I don't think we're at the end of that runway of that dynamic continuing to materialize.
Thanks for the question, Mike. We're going to the next one, operator.
Absolutely. Our next question comes from Bryan Kraft of Deutsche Bank.
Just regarding Pascal's churn comments, I wanted to follow up there. I think you said, Pascal, that 2Q would be similar to 1Q and then second half would be characterized by typical seasonality. And I assume that means we should look at the historical sequential step-ups in the back half of the year off of 2Q and estimated churn. Is that the right way to think about? And also in general, how much of the higher churn is a function of, would you say contract roll-offs picking up versus increased competitive intensity?
And then lastly, I was wondering if you would just comment on your outlook for gross add performance. Would you expect this momentum in year-over-year gross adds to continue? And lastly, if upgrades are being pulled forward due to tariff concerns, do you think switching between carriers is also being pulled forward? It seems like both yourselves and Verizon yesterday are talking about pretty strong gross add performance currently.
Bryan, thank you for the question. Remember, coming into the year, we said that we would have a higher level of contract roll-offs this year. And we also said that we would expect the overall industry growth to be lower than it has been. Those two factors were baked into our expectations that this year, we would have higher churn than we saw last year. I think as a good rule of thumb, 2023 was probably a year where we had similar levels of contract roll-offs that we're seeing in 2025.
And so I think that's a good benchmark for thinking about how this is playing out in 2025. And as I would expect, as you look at sequential performance in churn for the back half of the Q2 and the back half of the year, I would tell you, 2023 is probably a good proxy to use as your benchmark. In terms of gross adds, what I can tell you is what we've seen so far in the second quarter. We have continued with really good performance, and we're happy with how the team is executing and competing for the gross adds in the marketplace.
Bryan, I'd just add in. I mean, obviously, we gave you some guidance and we characterize for you what we expect growth in our wireless business, and we do expect to continue growing our customer base and being competitive in the market to do that. And if -- it's a math issue, it turns up a little bit, the gross is going to end up going up a little bit as a result of that. And that's kind of the plan we're operating to right now, and that's all baked into what we just articulated for you moving forward. But what I'd stress is the comments I made earlier in the call, which is how we're focusing on which customers to bring in as we're driving those gross additions and our focus on the high-value customers, especially in the converged space.
And when you -- LTVs are going up because you consolidate customers and we just gave you an indication that, that's the case, then you obviously maybe invest a little bit differently as a result of that. And what I think we're doing, I'm very comfortable with relative to the customers I see coming in and our ability to put incremental products and services on them that have durability and longevity and whether that's a fiber customer that we're adding wireless onto or the other way around or it's the newly consolidated fixed wireless access customer that has good runway because of the profile of the network in that area that ultimately consolidates wireless lines. I'm willing to invest in those in the right way because of that increased lifetime value.
And I think we're doing a good job of making that happen, and I'm very comfortable running that play moving forward to the balance of this year.
Next question comes from Sebastiano Petti with JPMorgan.
Just wanted to maybe I guess kind of wrap in Bryan as well as John and Mike's questions, just help us think about the comfort or the confidence in getting to the higher end of the mobility service revenue, I guess, more particularly the EBITDA guidance of the higher end of 3% to 4%. Just what underlies or underscores that confidence from the management team just kind of given the higher activity that we're seeing here, obviously, cost opportunities, but just you could double-click on that a little bit?
And then John, going back to perhaps what you talked about of the longer-term plans were based on low single-digit GDP, moderating inflation and the management team's ability to adjust their operating posture to prioritize free cash flow. I mean does that put your 45 million fiber target passings at risk at all as you think about or extrapolate over the next several years?
Let me start. In terms of how to think about Mobility, this past quarter, we delivered 3.5% growth. And it's important to keep in mind that we -- that included a cost of launching our AT&T Guarantee. And so we were able to absorb that higher promotions and still delivered 3.5% growth. As I look at the rest of the year, here are a couple of things to keep in mind. There are some adjustments we are going to we've made on auto bill pay discount, which should also help the balance of the year. Also, we said we are accelerating some of our cost actions that were planned for later in the year. We're moving those forward, that will help AT&T Mobility from here.
So overall, we feel really good about the marker we put out there at the beginning of the year, and we continue to march towards that.
Sebastiano, I guess, to answer your question, obviously, like everybody else, my visibility is not perfect right now. I wake up every morning, expecting that I could see something today that I hadn't seen before that we have to adjust to. I feel good about our flexibility in being able to do that given where the business is right now after several years of really hard work to give us that latitude. The way I think about our capital allocation and it's really related to how I characterize our confidence in moving forward with the share buyback right now, trying to be pretty deliberate and foundational and strategic in how we do these things.
And as I shared, I think fiber is a fundamental element to communications networks moving forward. I view it as a very long-lived asset. We're investing in this, not for this year or next year, we're investing in it for decades. I view the restructuring and reordering of the industry that we're in a fairly seminal moment around that and that there's a window here as a result of that reordering. And that window is not going to stay open forever. And I look at the characteristics of the business case of fiber. And I would say that when you have a deployment and an investment that doesn't require what I would say is new market development, but it's a share take, the growth environment in aggregate is less of an impact on it. It's not like all those customers are going to disappear.
There's still homes out there with people in them that want a better service. And so historically, my bias is when you get into these economic cycles, you use your balance sheet and your strength to continue to press your bets that are the right long-term bets are going to help you be in a better position structurally. And as I think about our investments in fiber, I have a lot of reasons to think about that's an important structural long-term bet that we want to make sure we continue to push ahead on. Our supply chains in pretty good shape on that front.
We've talked about this several times. We have longer-term contracts with our suppliers. There's been a lot of work to reshore and manufacture in the United States key elements of it and the most important element of building fiber is services. It's people power. And those all are people who work here in the United States, and they're not subject to the dynamics of tariffs and things like that. So I feel like we can manage through the cost side of it pretty well.
And so my bias would be that that's a place we continue to lean in and push on and execute to our plan.
Thanks for the question, Sebastiano. We can go to the next question, please.
And our next question today comes from Jim Schneider at Goldman Sachs.
Two, if I may. First is on the overall health. How would you kind of characterize the state of the consumer at this point? Obviously, many moving parts in this market. But do you see any evidence of consumers less willing to trade up or even trading down or consumer credit quality issues that may sort of be impacting things over the next couple of quarters from what you can see today?
And the second is on capital allocation. Can you maybe just sort of frame your earlier comments on M&A and buybacks in terms of, is the buyback guidance you've provided independent of any inorganic activities you might consider? Or is it contingent on it? And if it's contingent, is there a minimum level of buybacks you would not go below?
Jim, so I think the short answer to your question is, I'm not seeing anything right now in a change in any dynamics of consumer behavior that I would say is out of pattern or out of trend of the business with maybe a couple of things on the margin. One is, I think the prepaid market is a little bit slower than it had been. I think that's probably an artifact of some degree of immigration, but I don't know that, that's economic per se. I'm not concerned about it. It's what we had expected and have been sharing with you that I would have expected that dynamic to evolve as the policies in the United States changed around it.
And I think what Pascal shared with you earlier, which is maybe there's some behavior in the market right now where some people are trying to get ahead of perceptions of what might happen to unit costs on things that are important to them and pre-buying as a result of that. And we'll see if that is, in fact, the case. Our sense is that there's a little bit of that going on and how that sustains itself over what period of time, and when does that shift, I don't know. But other than that, I think that's all I've seen. I certainly watch what's going on in the broader economy.
I don't have any news to break on that. It's not my news. It's what I see macroeconomists representing, it's what I hear from retailers. We continue to pay attention to it. But as we started out, and as I shared with you in my opening comments, the good news is we're not showing up. We're not that dining out experience. We're not that discretionary choice. We're pretty far down the list of things that people are going to part ways with that they're managing dollars and cents. And I think that's a good place to be. And I believe the combination, as I said earlier, our opportunities to run our business more efficiently are opportunities to take share in places and still grow even if it's growing on more value-oriented plans portend well for the company, even if some consumers are going to put off choices on some upgrades or incremental purchases in places.
Oh, I'm sorry, the capital allocation, I apologize if small trivial question. Look, we gave you our guidance and our commitment in our order of capital allocation for a reason, and we intend to execute it, carry it through, and that's a priority for this management team in the business to do that. I can't see everything in the future. I don't know that something doesn't come up. But we're starting down this path. Our confidence in our share buyback is indicative of the fact that we're starting it early, that we're doing at a time where I think some would say that visibility isn't as great right now as it was 6 months ago. Because we believe strongly in it. We think it's the right thing to do, and I'm committed to executing and carrying it forward.
Thanks for the question, Jim. Operator, we're going to take our last question.
Absolutely. And our final question today comes from Kannan Venkateshwar with Barclays.
So John, just from a macro environment perspective, I guess, is there a certain growth framework you're working with, especially on the wireless side? I mean in terms of either trying to retain a certain amount of share in the market or a certain amount of activity, is that something that sets a floor in some ways in terms of managing your P&L on the mobility side? And then on the copper decommissioning side, I think there's been a couple of real estate sales, at least for some of the wire centers earlier this year. Is there more opportunity to extract capital out of that business potentially at a faster pace at some point? And what should we look out for in terms of goal posts as that process moves along?
Sure. So there -- the way I think about it, and I've articulated this before, is I'm very focused on what our shares of revenues are within that industry. And we've -- as we talk about things like our gross adds or net adds inflated and the value of a particular net add or gross add, the way I try to get the management team centered on it is if we can drive recurring service revenues and we have the right margin structure, that's going to be a good thing for the business. And I think if you go back and you look at what we've been able to do over the last couple of years, we've done a really good job of managing our share of service revenues in the markets that we're actively participating in.
And I think we've done that in a way that's returning. And I believe that, that's where I should have the team focused and it's where we'll continue to be focused, always with the mindset that, I think, to be a really great company, we're ultimately going to have to be a share leader in places. And I'm fully aware that we're not in that position right now. And I would like to see our team achieve that. I don't view that as a quarter-to-quarter thing. I don't engineer a quarter's net adds or gross adds based on some assumption around that. But I step back and I say, what are the right things we need to do structurally in the business that allow us, over time, to affect that kind of a share shift. How do we get the asset base lined up properly. How do we position the brand in the most effective way? What do we do to ensure that we've got the right kind of innovation and converged offers in place that will ultimately's yield the shifts in share that designate us as a market leader in terms of the overall revenues that are available at the pool of the market that we choose to play in?
And I think we're making steady progress across those things. And I just gave you examples of the modernization that we're doing in the infrastructure that I think will serve us well for the long haul. You see what we're trying to do to reposition the brand right now and establish the framework of how we continue to evolve that platform and the value proposition to the customer on that platform. When I talk about where we're going on the innovation of converged products, those are important things that come in with it. So I think that's how I try to get the management team focused as opposed to saying in this quarter, I need to engineer for this number because of some expected goal of me being a share leader in a position.
I think that's earned over time, not earned in a 90-day cycle. In terms of where we have additional opportunities, we we've given you, I think, about as good a visibility to our business over the next 3 years as we've done in a long time. When we talked to you in December, we outlined for you that we have a pretty good handle on that package of opportunities. We restructured the business, exit legacy businesses, exit footprint, that there's a lot of pools of costs and opportunity in that. We have taken what I believe are achievable and reasonable. Estimates of that and factored them into our guidance over the next 3 years that we've provided to you. And some of those things like where we think we have higher value assets for disposition that we can use to reinvest back in the business as cash flows to modernize things, or pay for fiber investment.
We've done the best planning we can about that, and incorporated those things that we can catch. But I'm going to be honest with you. When you're disassembling infrastructure that's been built over 100 years, sometimes you're going to miss something. Sometimes, there's going to be an opportunity that presents itself that you didn't expect. I mean, maybe we were wrong in our estimates of what copper might sell for in the market when it's reclaimed. And it sells higher than we expect and there's incremental money that comes from it.
But we've done our best of kind of giving you our point of view of what we think all those things in the mix master, including property dispositions and things that we can work through are going to yield back to the shareholder base. And I'm not in a position to kind of tell you that I think that there is a remarkable upside or downside you should bet on at this juncture.
Folks, I appreciate you being with us today, and I thank you for your continued interest in AT&T. As I said at the beginning of my comments, I feel really good about where we started the year, coming off what was a really solid and foundational year, and I couldn't be more delighted in the fact that this is the quarter that we're making a pivot and adjusting our capital allocation to begin a buyback program that we worked really hard to get to, and can demonstrate to our shareholders that their patience with us has been rewarded.
So thank you very much for your time, and everybody have a good rest of the week.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.