“We expect our focus on convergence to drive continued strong net additions in advanced home internet and postpaid phone subscribers during the third quarter and continued growth in converged customers.”

In context

“Pascal Desroches : Thank you, John. Good morning, everyone. At a consolidated level, total revenues in the second quarter were up 2.3% year-over-year, driven by service revenue growth of 2.7%. Adjusted EBITDA was up 5.2% year-over-year, our adjusted EBITDA margin increased 110 basis points to 39.1%. For the full year, we continue to expect consolidated service revenues to grow in the low single-digit range and consolidated adjusted EBITDA to grow in the 3%-4% range. Adjusted EPS was $0.65 in the second quarter, which is up more than 20% from $0.54 the prior year, driven primarily by growth in adjusted EBITDA and lower depreciation expense. We continue to expect full-year adjusted EPS to be in the range of $2.25-$2.35. We added over 1 million fiber locations during the second quarter as we accelerated the pace of our deployment. This contributed to higher capital investment of $6.1 billion compared to $5.1 billion a year ago. Second quarter free cash flow increased by roughly $300 million year-over-year to $4.7 billion, which exceeded the high end of our guidance range of $4 billion-$4.5 billion. For the full year, we continue to expect $18 billion+ of free cash flow and $23 billion-$24 billion of capital investment. Compared to the second half of last year, when we were ramping up our fiber deployment, we expect our capital investment to be more ratable during the second half of this year. We also expect higher cash flow from operations during the fourth quarter of this year compared to last year, when our results were impacted by discrete items, including legal settlements and a large contribution to our pension. As a result, we expect free cash flow will be relatively stable year-over-year in the third quarter, with strong year-over-year growth in the fourth quarter. Our consolidated growth continues to be driven by our Advanced Connectivity segment, which contributes over 90% of our service revenue and nearly all of our adjusted EBITDA. Advanced Connectivity service revenues grew 5.1% year-over-year in the second quarter, accelerating by 150 basis points compared to our growth in the first quarter. EBITDA for this segment grew even faster, increasing 8% year-over-year, driven by top-line momentum and our continued cost transformation initiatives. The team is really doing a good job here. We remain on pace to achieve $4 billion in consolidated annual cost savings by the end of 2028. Wireless service revenues grew 3.3% year-over-year, driven by growth in our customer base, including 432,000 postpaid phone net adds, and the uplift from pricing actions that took effect during the second quarter. We are pleased with the execution of our pricing strategy in wireless, including the rollout of new plans and pricing actions during the first half of the year. Impressively, we grew postpaid phone ARPU year-over-year while reducing postpaid phone churn. Our wireless growth is increasingly driven by new accounts and not simply additional lines of service. During the second quarter, we added 147,000 consumer postpaid wireless accounts, which is our best result in more than three years. We believe this is a direct result of our converged go-to-market strategy, which is driving improved growth in new customer accounts that choose AT&T for wireless and home internet. Advanced home internet service revenues grew by more than 27% year-over-year. This was primarily driven by improved fiber net adds as we accelerate our fiber deployment and center our go-to-market strategy around our converged offers, as well as our acquisition of fiber assets from Lumen in the first quarter. Fiber ARPU declined 1.3% compared to a year ago, which primarily reflects a full quarter impact of our transaction with Lumen, whose subscribers have lower ARPUs. Excluding customers in the footprint that we acquired from Lumen, Fiber ARPU was approximately flat year-over-year. This reflects our focus on growing converged customer accounts, which enjoy discounted pricing but typically stay with us longer and increase their spending over time. We expect our focus on convergence to drive continued strong net additions in advanced home internet and postpaid phone subscribers during the third quarter and continued growth in converged customers. In the near term, this will likely put some pressure on Fiber ARPU, but we feel really good about our ability to manage our back book pricing as we grow our base of fiber customers that also subscribe to our wireless services. As we've said before, our goal is not to maximize ARPU of individual products, but instead to maximize total Advanced Connectivity service revenues in order to drive attractive returns on our investments in 5G and fiber. We are expecting continued strong growth in service revenue. As John noted, we are achieving this growth in Advanced Connectivity service revenues across consumer and business operations. Business Advanced Connectivity service revenues grew 1.8% year-over-year in the second quarter, driven by momentum in wireless, fiber, and fixed wireless. We have turned a corner and expect AT&T Business to remain a driver of growth in Advanced Connectivity service revenues going forward. Our advanced connectivity segment enters the second half of the year with strong momentum, and we continue to expect full-year service revenue growth of 5% plus and EBITDA growth of 6% plus. In our legacy segment, service revenues declined 26% year-over-year, and EBITDA declined about 46% as we accelerate the process of powering down our legacy copper network and migrate customers to more advanced and reliable voice and internet services. The retirement of our legacy network is a critical piece of our transformation into a scaled provider of advanced connectivity. As we complete our network modernization and other transformation initiatives, we expect that by the end of the decade, we will have the best-performing network with a highly competitive cost structure. We returned $4.1 billion to shareholders during the second quarter, including approximately $2.2 billion of share repurchases. We are on pace to repurchase nearly $1 billion of stock in July. As John previously shared, we now expect to buy back approximately $10 billion of our shares in 2026. This compares to our prior target of $8 billion of share repurchases this year and represents a pull forward of our planned buybacks through 2028. Together, our planned share repurchases and expected dividend payments will total approximately $18 billion this year, which is essentially 100% of our outlook for free cash flow. Our cash flow and liquidity provides us with flexibility to sustain our dividend and accelerate our planned buybacks while also maintaining our commitment to reduce balance sheet leverage following our planned acquisition of spectrum licenses from EchoStar. We are well-positioned to fund the transaction, which we expect to close by the end of July. We ended the second quarter with net debt to adjusted EBITDA of 2.68 times, which was essentially flat with the first quarter. We continue to expect that our net leverage ratio will increase following the close of our transaction with EchoStar to the 3.2 times range and then return to a level consistent with our target in the two and a half times range within approximately three years following the close of the EchoStar transaction. I'm really pleased with how we have the company positioned heading into the back half of the year. We have great operating momentum, a leading position in fiber and converged connectivity, and a team that's motivated to win in the marketplace. Brett, we're now ready for the Q&A.”