AT&T Inc. plans to boost investments in 5G and fiber as part of its growth strategy through 2023, following the expected completion of the sale of Warner Media LLC to Discovery Inc. in the second quarter of 2022.
The carrier aims to increase its fiber footprint to more than 30 million locations by adding 3.5 million to 4 million locations per year, a March 11 statement said. It aims to increase its business customer locations to 5 million while also gaining share in the consumer broadband market.
Notably, 30 million locations would represent a 100% increase over customer locations as of the second quarter of 2021.
AT&T also plans to improve its 5G network by deploying the 120 MHz of mid-band spectrum to cover more than 200 million people by year-end 2023. The frequencies will support its existing 5G footprint of more than 255 million people in over 16,000 U.S. communities.
By 2025, AT&T targets to have extended its fiber and 5G services to 75% of its network footprint.
During AT&T's March 11 analyst and investor day presentation, AT&T executives outlined areas for broadband growth opportunities in the business and public sectors. AT&T already has relationships with a sizable amount of larger enterprises, serving about 90% of Fortune 1000 companies. AT&T Executive Vice President Rasesh Patel discussed the company's plans to expand its broadband footprint in the small business sector from about 20% to about 30%.
He also discussed AT&T's plans to "modernize" public safety by increasing the number of connected body cameras, fleet and other devices on the network. FirstNet, AT&T's nationwide wireless broadband network for first responders, has grown to over 3 million connections in the past four years.
To support the planned expansion of its wireless and wireline networks, AT&T expects to allocate annual capital investment in the $24 billion range in 2022 and 2023. By comparison, the company spent $20.1 billion on a pro forma basis in 2021.
While spending more on capex, the company plans to cut costs elsewhere, projecting run-rate cost savings of $6 billion by 2023-end. The cost savings will mainly come from shutting down AT&T's legacy copper network. By 2025, AT&T expects 75% of its network footprint will be served by fiber and 5G, while it will have reduced its copper services footprint by 50%.
At the same time, AT&T will spend over $8 billion on annual dividend payouts to shareholders after the Warner Media-Discovery deal. It expects to pay its May 2022 dividend in the previously announced $1.11 per share.
The company also maintained its guidance for 2022, which includes low single-digit total revenue growth, adjusted EBITDA of $41 billion to $42 billion and pro forma free cash flow in the $16 billion range. It expects low single-digit revenue growth to continue until 2023, with adjusted EBITDA of $43.5 billion to $44.5 billion and increased free cash flow to the $20 billion range.
The Warner Media-Discovery deal would see the formation of a new, stand-alone entity, Warner Bros. Discovery. The deal comes years after AT&T paid $85 billion for the former Time Warner Inc. in a transaction that significantly increased its debt.
Discovery shareholders on March 11 approved several proposals related to the U.S. media company's acquisition of Warner Media.
The shareholders voted to approve the charter amendment and share issuance proposals as well as a nonbinding, advisory compensation proposal. The approvals fulfill one of the merger's remaining closing conditions.