John Hodulik: Hey, thanks, again. Good morning, guys. First, it’s sort of a follow-up to Simon’s question on the data breach. That’s a sort of a second quarter issue, but just want to make sure to see if there’s any impact that you saw early in the quarter from the data breach. And then certainly, one of the themes that we’re seeing here in the first quarter is the low upgrades and low churn environment. Do you expect that to continue despite the fact that we may have a sort of AI device launch later this year? And does that low churn environment give the industry and AT&T, in particular, pricing power as you look into the rest of the year? Thanks.
John Stankey: Good morning, John. I don’t want to characterize this incorrectly, but there are a lot of things going on broadly beyond AT&T in the cyber environment. I’m sure you’re all, obviously, consumers and — are seeing the dynamics of what’s happening. There’s clearly — the bad actors have stepped up a level in the last several months I think. And if I were to broadly step back and say, are we going to see more activity and more problems, partly because of just the activity level and how robust the business opportunities are for hackers and those that want to inflict bad act — bad acts on folks. And partly, I think, because of reporting requirements, I expect you’re probably going to see the noise level go up. What we have seen from our notification is very similar to the outage.
I don’t see anything in the customer metrics or anything that’s going on that suggests that it creates a long-term issue on sentiment. That doesn’t mean we don’t take it seriously. That doesn’t mean that we’re not examining what happened back in 2019 and trying to understand what root causes are around that. Those actions are all underway. But it doesn’t appear to me that it’s doing anything to impact our business as we stand here today in 2024. But we’ll continue to evaluate that and we’ll continue to work through the dynamics that are occurring. I would tell you that on the upgrade rates and churn, we’ve seen, as I’ve said last quarter, a little bit of tapering in the industry. We expected that to occur. We expected upgrade rates to be a little bit more tempered than what we had seen last year.
I don’t see anything going on right now that suggests we’re out of pattern to what our expectations were, as we set up plan for 2024. We’ll probably see a little bit of ebb and flow each quarter. I’m not sure that I’m of the mindset that there’s going to be something that occurs in the device portfolio that dramatically changes things in the latter part of the year. There’ll be the usual holiday promotions. There’ll be the usual devices and opportunities for individuals to create something that’s special during the holidays. But that’s a seasonal pattern we’re accustomed to. And I think we’ll be seeing things on the margin adjusting left and right. I just don’t believe we’re going to be into a cycle that’s what I would consider to be an out of pattern cycle in any way, shape or form.
And I’m going to give you the same answer I always give on where we are in pricing power. Look, I think the industry is healthy. I think as I’ve indicated before, we’re coming off of policies that drove record levels of investment in the industry. I think all players are mindful after record levels of investment to try to yield the appropriate returns that you would have to get after making those things and I see that kind of dynamic occurring. I think I know we’re mindful of it that we want to make sure that we’re getting reasonable returns off that level of capital. And my observations of what I see being reported over the last couple of quarters is that others are doing the same and we’re providing tremendous amount more value to customers.
They’re using 30% more of our product, 35% more every year. The performance of these networks is increasingly better. There’s choices that are coming in and how they apply the use of the technology for mobile to fix. So one would expect that maybe there’s an opportunity to change that value equation and continue to take a little price in places and we’re going to continue to do that. Where we think certain products have that kind of staying power, I think we’ve been pretty consistent over the last couple of years of saying there’s opportunities to do that. I think we’ve tried to stress with you when we do it. We’re very mindful of doing it intelligently. I believe our churn numbers reflect that we’ve executed pretty well on that front. And I feel good about the fact that we’ve been able to drive our ARPUs up, keep our margins in check, if not improve them, and continue to do some things that take some price in certain places, where we think we can keep the value equation in check.
And I expect we’re going to continue to do that, as we move through this year.
John Hodulik: Great. Thanks, John.
Brett Feldman: Hi, operator, we’ll take our next question, please.
Operator: Peter Supino of Wolfe Research. Please go ahead.
Peter Supino: Hi. Good morning, everybody. A question about the mobility side. Obviously, the consolidated or segment results were really good. And looking at the EBIT growth, it’s similar to the rate of service revenue growth in a quarter when gross adds and churn were lower, a great thing, less cost. And I’m just wondering why — what else is happening in the cost structure, so that EBITDA wouldn’t outgrow service revenue in a quarter like this? And then a quick one on Internet Air for business. Is your intent to distribute that nationally? Or will that be a more regional strategy in the way that IA has been so far in residential? Thank you.
Pascal Desroches: Hey, Peter, Pascal. How are you? In terms of EBIT and you’re talking about operating income, that’s inclusive of the depreciation, correct?
Peter Supino: Yes, I am. Thanks.
