AT&T open to more fiber M&A at the right price ... and the right place

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(Source: Allen Creative/Steve Allen)

AT&T wrapped up the acquisition of Lumen's fiber assets in January and is willing to consider additional, similar opportunities should they arise. Just as long as the assets are available at the right price and serve the right areas, President and CEO John Stankey said.

"Sure, I'd be interested in picking up more footprint if it holds to my point of view of use getting scale in the right geography. I don't want to just buy footprint for the sake of buying it," Stankey said on today's Q3 2026 earnings call when asked if AT&T would be interested in more fiber M&A as certain overbuilders struggle and interest rates climb.

Stankey said AT&T would only be interested in opportunities that "bridge to other parts of our network" that drive efficiency and scale. "Lumen clearly fit that bill across the footprint that we picked up, in my point of view," he said.

Brightspeed brought up

Regarding overbuilders that are struggling, the analyst who asked the question name-checked Brightspeed, an operator with a presence in parts of 20 states. Brightspeed came up after auditors recently issued a going concern warning. Meanwhile, the Apollo Global Management-backed company has reportedly entered talks about securing new financing options to help its fiber buildout.

Related:AT&T to pack Gigapower and Forged Fiber 37 into one JV

Brightspeed's auditors issued a going concern notice, which alongside soft results and no obvious progress (yet) on new, likely asset-backed security (ABS), funding, has driven debt prices lower. In a recent research note, New Street Research Analyst David Barden noted that this issue would go away once Brightspeed secured more funding, but he also held that Brightspeed should likewise be able to raise money in the ABS market, which has already been used by other broadband operators including Frontier Communications (now part of Verizon) and Optimum Communications.

Meanwhile, there's plenty of scuttlebutt about other potential M&A targets that a company such as AT&T might pursue. In a report issued late last month, Mike Dano, a lead industry analyst at Ookla and a former Light Reading editor, called out seven that "stand out" given their market reach, network expansion efforts and the level of competition they currently face: Allo Fiber, Gateway Fiber, LiveOak Fiber, Wire 3, Ripple Fiber (already being acquired by Verizon partner Eaton Fiber), Intrepid Fiber and Ezee Fiber. It's of course unclear if any of those would meet the M&A bar set by Stankey.

AT&T is also keeping an eye on ways to extract more revenues from its existing networks. Stankey reiterated he has an interest in applying an open access, wholesale model to AT&T's legacy wireline markets. AT&T is already using that model for its fiber joint ventures.

Related:AT&T copper network retirement set to accelerate as legacy base shrinks to 1%

"I wouldn't rule that out over the long haul," he said.

Stankey also outlined some ways AT&T might pursue that angle with other service providers, including potential exclusive MVNO agreements or partnerships that involved AT&T also gaining access to fiber footprint that it finds attractive but would not otherwise have access to.

"You can be geographically driven … [but] not all markets are created equal."

Much ado about fiber ARPU

AT&T's fiber business turned in solid subscriber and revenue gains while also expanding its overall fiber footprint by 1.1 million locations during the period. However, the company's fiber average revenue per user (ARPU) dropped 4% to $70.35 on a year-over-year basis following aggressive discounting.

Outgoing CFO Pascal Desroches attributed the decline to multiple factors, including traction with introductory pricing, "converged" accounts that receive discounts by combining mobile with home broadband and lower prices offered in the recently acquired Lumen fiber markets. He said AT&T expects to see a similar year-on-year decline in fiber ARPU in Q4.

Related:AT&T ramping up fiber buildout pace as it closes in on Lumen

AT&T's ARPU drop also comes along amid Comcast's lament that it saw "irrational" pricing in Q2 and into Q3 from certain fiber service providers that analysts say has been driven by AT&T.

AT&T argues that it's not basing success solely on ARPU, but other metrics such as subscriber and revenue growth along with the benefits it gets from customers who bundle AT&T's home broadband and mobile services.

"I don't want to focus on that [ARPU] exclusively," Stankey said. "What we want to focus on is the fact that we're seeing great service revenue growth in our business."

That metric continues to rise. AT&T advanced connectivity (which includes fiber, fixed wireless and mobile) saw revenues rise 6.1% to $29.48 billion. Q3 fiber revenues hit $2.60 billion versus $2.19 billion in the year-ago quarter, and AT&T Internet Air revenues reached $366 million versus $213 million.

AT&T also added 442,000 fiber connections in the quarter (including adds from the acquired Lumen areas), up from 288,000 a year earlier, for a total of 13.31 million. The company also tacked on 327,000 fixed wireless access (FWA) customers, up from 203,000 a year earlier, for a total of 2.23 million. Some 6.33 million AT&T customers combined mobile with an "advanced" home Internet connection (fiber or FWA), or 42.8% of that broadband subscriber base, at the end of the quarter.

Fiber footprint nears 40M locations

During the quarter, AT&T added 1.1 million consumer and business fiber locations, including 1 million in networks owned-and-operated by AT&T and 100,000 via joint ventures.

AT&T ended the quarter with 39.7 million fiber locations comprising 34.7 million that are owned-and-operated and about 5 million via the fiber JVs. AT&T expects to operate a fiber footprint (via its own network, JVs and open access deals) spanning 60 million locations by 2030. Notably, AT&T recently took a 50% stake in a new joint venture that combines Gigapower (the JV with Blackrock) with Forged Fiber 37, a holding unit for AT&T's Lumen fiber deal.

Desroches noted that the annual capital investment for AT&T's fiber network strategy is coming in at roughly $1 billion lower than previously anticipated, with a portion of it to be reallocated to support customer acquisition.

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