AT&T Inc. (NYSE:T) Q4 2022 Earnings Call Transcript

AT&T Inc. (NYSE:T) Q4 2022 Earnings Call Transcript January 25, 2023

Operator: Thank you for standing by. Welcome to AT&T’s Fourth Quarter 2022 Earnings Call. As a reminder, this conference is being recorded. I would like to turn the conference call over to our host, Amir Rozwadowski, Senior Vice President of Finance and Investor Relations. Please go ahead.

Amir Rozwadowski: Thank you, and good morning, everyone. Welcome to our fourth quarter call. I’m Amir Rozwadowski, Head of Investor Relations for AT&T. Joining me today on the call are John Stankey, our 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’ll turn the call over to John Stankey. John?

John Stankey : Thanks, Amir, and Happy New Year, everyone. I appreciate you joining us today, and I hope you enjoyed a restful and healthy holiday season. And at the conclusion of this call, I’m declaring the statute of limitations on this being the new year has run out. I’ll share upfront that our commentary is a bit longer than usual. However, we thought it was important to provide a bit more clarity on our business today, primarily our fiber strategy since we haven’t had an opportunity to discuss our December Gigapower joint venture announcement. Still, we’ll ensure we have enough time to get to most of your questions. As I reflect on not only this past year, but the past 2.5 years, it’s clear that our teams have worked diligently to refocus AT&T around a connectivity strategy that has simplified our company and positioned it for sustainable growth.

Our results over the past 10 quarters demonstrate we are on our way to delivering the full promise of the strategy. We’re operating a streamlined and return-focused business with an improved profit trajectory that’s committed to generating sustained cash earnings growth while delivering an attractive dividend. Underpinning all of our actions is a deep desire to connect our customers with greater possibility through 5G and fiber. And importantly, we’re assembling the right assets, talent and capital structure to offer an experience and value proposition that customers appreciate. Our fourth quarter results are the latest example of how our teams continue to consistently deliver for our customers. We finished 2022 with strong momentum in growing customer relationships.

As you can see from our profitability trends, we’re growing them in the right way. So let me highlight some of our progress. Let’s start with wireless. We delivered 656,000 postpaid phone net adds in the fourth quarter and nearly 2.9 million postpaid phone net adds for the full year. And over the past 2.5 years, we’ve increased our postpaid phone base by nearly 7 million to 69.6 million subscribers which represents our best 10-quarter stretch of wireless growth in more than a decade. During the same 10 quarter time span, we’ve grown wireless service revenues, EBITDA and also increased our postpaid phone ARPU by nearly $1. And while others may have jumped the gun to claim that they were the only ones to reduce churn in the fourth quarter on a year-over-year basis, we also lowered our fourth quarter postpaid and postpaid phone churn without offering richer promotions or free line giveaways.

We consider this yet another data point highlighting that our comprehensive approach to improving the entire customer experience is working from our simplified go-to-market strategy, to our better network experience, to our focused market segmentation practices. On top of that, our growth was not only robust but profitable with 2022 being the most profitable year ever for our Mobility business. We expect profit growth to continue in 2023 as we benefit from the investments we’ve made in our business over the last 2.5 years. Our network teams have also consistently outpaced our mid-band 5G spectrum rollout objective. In fact, we now reach 150 million mid-band 5G POPs, more than double our initial 2022 year-end target. Our goal remains to deploy our spectrum efficiently and in a manner that supports traffic growth.

In the markets where we have broadly deployed mid-band 5G, 25% of our traffic in these areas already takes advantage of our mid-band spectrum. Now let’s move to fiber, where we build fiber, we continue to win. We had more than 1.2 million AT&T Fiber net adds last year. The fifth straight year we’ve totaled more than 1 million AT&T Fiber net adds. And after 2.9 million AT&T Fiber net adds over the last 2.5 years, we’ve now reached an inflection point where our fiber subscribers outnumber are non-fiber DSL subscribers. The financial benefits of our fiber focus are also becoming increasingly apparent as full year fiber revenue growth of nearly 29% has led to sustainable revenue and profit growth in our Consumer Wireline business. As we scale our fiber footprint, we also expect to drive margin expansion.

In summary, we’re enhancing and expanding our networks while extending our long runway for sustainable growth. And I’m very happy with the high quality and consistent customer adds we achieved last year. We’ve emphasized that our plan was to grow customer relationships in a thoughtful and responsible way grounded by an enhanced value proposition that resonated with customers. That’s exactly what our teams have done, quarter after quarter. In addition to growing customer relationships, we’ve executed some of the most challenging actions associated with repositioning our operations. We’ve doubled down on our cost transformation. We’ve now achieved more than $5 billion of our $6 billion plus cost savings run rate target. In 2023, you can expect the benefits from these efforts to increasingly fall to the bottom line.

In fact, you’ve already seen the benefits of this cost transformation beginning to translate into operating leverage despite inflationary pressures. Our teams did an excellent job implementing pricing actions and business efficiencies to offset continued inflationary impacts, impacts we anticipate will be with us in the near to midterm. Part of tapping into these efficiencies entails improving acquisition costs and further streamlining our operations and distribution. Another part entails rationalizing our wireline copper infrastructure and reinvesting those savings into fiber and wireless where we’re seeing improving returns. As we look at our last priority, we also continue to generate meaningful levels of free cash flow even with record levels of investment.

This gives us confidence in our ability to continue delivering an attractive dividend today and in the future, while also improving the credit quality of that dividend as we expect to increase our cash generation over time. We strengthened our balance sheet last year, reducing our net debt by about $24 billion. So as we close 2022, I’m proud of what the AT&T team accomplished despite a competitive market and challenging macro environment. Turning to 2023, what’s our strategy? Well, it’s simple. Do it again. What exactly does that mean? It means we’re focused on the same three operational and business priorities we set in place 2.5 years ago. As I’ve mentioned time and again, our North Star remains solely focused on becoming the best connectivity provider with 5G and fiber.

We’re confident we can achieve this because in wireless, we’ll maintain our focus on building durable and sustainable customer growth in a rational, return-focused manner. Just as we’ve done over the past 10 quarters, we’ll continue to take a disciplined approach to selectively target underpenetrated areas of the consumer and business marketplace and improve the perception and execution of our value proposition. We also expect to continue our 5G expansion, reaching more than 200 million people with mid-band 5G by the end of 2023. In wired broadband, we have the nation’s largest and fastest-growing fiber Internet, and we expect continued healthy subscriber growth as we grow our fiber footprint. As we keep expanding our subscriber base will drive efficiencies in everything we do.

This includes consistently elevating our customer experience through the improved durability and reliability of our 5G and fiber networks. When we couple our evolving networks with further enhancements to our distribution and digital and self-service channels will make a competitive customer experience even more appealing. We expect to realize additional benefits from our consistent go-to-market strategy and lower cost structures. We also benefit from our improved brand perception, strong fiber and wireless asset base, broad distribution and converged product offers. Additionally, we have a clear line of sight to achieving our $6 billion plus cost savings run rate target by the end of this year. We expect even more of these savings to fall to the bottom line as the year progresses.

With that improved performance, we remain focused on further strengthening the balance sheet by using cash after dividends to reduce debt as we progress toward our target of a 2.5x range for net debt to adjusted EBITDA. Our commitment to providing an attractive annual dividend also remains firm. As our CapEx is expected to moderate exiting this year, following the peak investment levels of 2022 and 2023, we expect the credit quality of our dividend to improve on the back of our higher free cash flow and improved financial flexibility. In summary, we feel confident that our growth and profit trends are sustainable despite the uncertain macroeconomic backdrop. As I stated previously, we continue to expect that we will be operating in a challenging macroeconomic environment where wireless industry growth is likely to return to more normalized levels.

The resiliency of the services we provide are time-tested and only growing in importance. When you couple this resiliency with the investments we’ve made to our networks and proven go-to-market strategy, we’re confident in our ability to navigate potential economic headwinds that may emerge and our improving financial flexibility only further strengthens that confidence. Now I’d like to take a moment to touch upon our fiber strategy by quickly level setting on how I’m thinking about the success we’ve had, our plans for the next few years and how we’ll hold ourselves accountable. Similar to the early days of wireless, we consider fiber a multiyear opportunity that will transform the way consumers’ and businesses’ growing connectivity needs are met in the ensuing decade and beyond.

For AT&T, we segment this opportunity into three distinct buckets based on the specific input parameters and return dynamics each one possesses. The first is our in-footprint build where we can take advantage of our existing infrastructure, deep insights on both the customer base and competitive landscape and our market presence in order to take share and deliver attractive returns. We believe our performance over the last few years supports the wisdom of allocating our capital to these opportunities with sustainable and solid return characteristics. As we stated previously, we currently size this opportunity is passing 30 million-plus consumer and business locations within our existing wireline footprint by the end of 2025. We finished last year with approximately 24 million fiber locations passed, including businesses, of which more than 22 million locations are sellable, which we define as our ability to serve.

Our build to these locations is providing great returns, as you can see from our growing fiber revenues and ARPUs. As a general rule, about 5% of consumer locations passed may not be immediately sellable, primarily due to timing factors such as building access, construction or vacancies. Over time, we expect more of this inventory to become addressable for sale. We remain on track to reach our target of 30 million plus passed locations by the end of 2025. The simple math would suggest 2 million to 2.5 million consumer and business locations passed annually moving forward. As we previously shared, build targets will vary quarter-to-quarter in any given year based on how the market is evolving. The second bucket is availing ourselves of partnership opportunities to not only expand but also accelerate our coverage in excess of that 30 million-plus location target.

This is where our recent Gigapower joint venture announcement with a BlackRock infrastructure fund resides. While this deal is not yet closed, we’re very excited about the expected benefit. Through this endeavor, Gigapower plans to use a best-in-class operating team to deploy fiber to an initial 1.5 million locations, and I would expect that number to grow over time. This innovative risk-sharing collaboration will allow us to prove out the viability of a different investment thesis that expanding our fiber reach not only benefits our fiber business, but also our mobile penetration rates. But what makes me most enthusiastic about this endeavor is that we believe Gigapower provides us long-term financial flexibility and strategic optionality and what we believe is the definitive access technology for decades to come, all while sustaining near-term financial and shareholder commitments.

If I were to draw parallel to this partnership approach, I’m reminded the early days of wireless where the race to grow footprint was somewhat time-bound and facilitated by a similar approach ultimately culminating in today’s national networks. The last bucket is framed by opportunities to connect people who previously did not have access to best-in-class technologies through broadband stimulus and BEAD funding. As I shared before, we truly believe that connectivity is a bridge to possibility in helping close the digital divide by focusing on access to affordable high-speed Internet is a top priority of AT&T. The intent of these government programs is to provide the necessary funding and support to allow both AT&T and the broader service provider community that means to invest alongside the government at the levels needed to achieve the end state of a better connected America.

As the year progresses, we expect to gain more clarity around additional opportunities that exist, none of which are included in the 30 million plus fiber location target I mentioned. As we compete for the subsidy, we’ll bring our operational and market experience to compete for contracts in a disciplined manner. In doing so, we may be the only participant that has the ability to bid as part of an embedded wireline operation, a scaled national wireless provider and Gigapower may participate as a focused and flexible commercial open access wireline fiber network. We think this will prove to be a winning combination in pursuit of attractive growth. The bottom line is this. Our commitment to fiber is at the core of our strategy. In footprint, we’re on track to deliver our 30 million plus location commitment and we’re building the strategic and financial capabilities to take advantage of further opportunities as they emerge.

To wrap up, regardless of what transpires in the macroeconomy in the year ahead, we remain confident in the resiliency of the services our customers depend on in their daily lives. I believe our plan for the year rings true to who we are at our core. For almost 150 years, AT&T has invested heavily into connecting our country. And in the process of doing so, we provided a spark for innovation that connects people to greater possibility. This year, we’ll continue to honor this heritage by significantly investing in best-in-class technology to build on a foundation for the future of our country’s evolving connectivity needs, needs that we expect to grow significantly in the coming years. With that, I’ll turn it over to Pascal. Pascal?

Pascal Desroches: Thank you, John, and good morning, everyone. Since John already discussed the great momentum we have this past year in growing our customer base in 5G and fiber, I’d like to start by taking a look at our fourth quarter financial summary on Slide 8. First, as a reminder, with the close of the WarnerMedia transaction in April, historical financial results have been recast to present WarnerMedia and certain other divested businesses as discontinued operations. Therefore, where applicable, I will highlight our financial results on a comparative like-for-like basis. For the fourth quarter, revenues were up nearly 1%. On a comparative basis, revenues for the full year were up around 2%, largely driven by wireless service revenue and, to a lesser extent, broadband and Mexico.

This was partly offset by a decline in Business Wireline. Adjusted EBITDA was up about 8% for the quarter. For the full year, adjusted EBITDA was up around 3.5% on a comparative basis as growth in Mobility, Consumer Wireline and Mexico were partly offset by a decline in Business Wireline. Adjusted EPS from continuing operations was $0.61, up about 9% for the quarter primarily due to strong organic growth in Mobility and lower interest and benefit-related expenses. For the full year, adjusted EPS from continuing operations was $2.57 and I should note that we’ve taken a $24.8 billion noncash goodwill impairment charge in conjunction with our annual goodwill assessment, primarily due to increases in discount rates associated with the overall rise in interest rates.

We also took a noncash charge of $1.4 billion to abandon certain conduit assets related to the ongoing rationalization of our copper network. Free cash flow for the quarter was $6.1 billion, including about $800 million in DIRECTV distributions. This is an improvement of $780 million year-over-year, even with a $1 billion lower distribution from DIRECTV and $500 million less in FirstNet capital reimbursements. We also delivered on our revised full year guidance with free cash flow of $14.1 billion for the year. Cash from operating activities for our continuing operations came in at $10.3 billion for the quarter, up $2.3 billion year-over-year. For the quarter, capital expenditures were $4.2 billion with capital investments of $4.7 billion. Full year capital investment marked an all-time high at $24.3 billion as we continue to make record investments in 5G and fiber.

Now let’s look at our Mobility segment operating results on Slide 9. For the fifth consecutive year, our Mobility business grew both revenues and EBITDA. Revenues were up 1.7% for the quarter and 4.5% for the year. Service revenues were up more than 5% for both the quarter and the year, driven by continued subscriber growth. This exceeds the raised annual guidance we provided to you last quarter. Mobility EBITDA was up about $740 million or more than 10% for the quarter, driven by growth in service revenues, transformation savings and the absence of 3G network shutdown costs versus the fourth quarter of 2021. This was partially offset by higher bad debt levels. For the full year, Mobility EBITDA grew nearly 4%. Even as competitors introduce richer promotional offers during the holiday seasons, our consistent go-to-market approach once again drove our results.

This gives us confidence that we have the right formula and structure in place to continue to grow customers, service revenues and EBITDA at a healthy clip this year. Mobility postpaid phone ARPU was $55.43, up $1.37 or 2.5% year-over-year. ARPU growth continues to come in ahead of our expectation and largely reflects our targeted pricing actions customers trading up to higher price unlimited plans and improved roaming trends. As John previously mentioned, postpaid phone churn of 0.84% for the quarter declined year-over-year even as we were less promotional compared to our peers. We believe that this decline is reflective of our improved customer value proposition. In prepaid, our phone churn was less than 3% driven by Cricket phone churn that was substantially lower than 3%.

While we believe industry wireless subscriber volumes will continue to pace towards normalized levels this year, we also expect our consistent go-to-market strategy to help us deliver strong relative performance and ongoing customer growth. Now let’s move to Consumer and Business Wireline results, which are on Slide 10. Let’s start with Consumer Wireline. As John mentioned, our fiber customer growth and network expansion continue. And wherever we have fiber, we win share. We added 280,000 fiber customers even in a seasonally slow fourth quarter that was impacted by lower year-over-year household move activities and challenging December weather conditions. The increasing mix shift from legacy products to fiber drove strong broadband results, and we expect these trends to continue.

Broadband revenues grew more than 7% year-over-year due to fiber subscriber growth and higher ARPU from the mix shift to fiber. Fiber ARPU was $64.82, up $2.20 sequentially with intake ARPU now approaching $70. Consumer Wireline EBITDA grew over 20% for the quarter and nearly 10% for the full year due to growth in fiber revenues and transformation savings. Turning to Business Wirelines. EBITDA was relatively flat for the quarter due to $90 million in intellectual property transaction revenues and ongoing transformation savings as we continue to rationalize our portfolio of low-margin products. In fact, margins were up 110 basis points year-over-year, thanks to our transformation process. This rationalization process will continue in 2023 as we remain focused on the opportunities that our 5G and fiber expansion create in the small and midsized business category.

Our Business Solution wireless services revenue grew more than 7%. This is very impressive given the fact that we already have the second largest share in are growing faster than our peers. FirstNet wireless connections grew by 377,000 sequentially. Now let’s move to Slide 11 for our 2023 financial guidance. Let me walk you through how we’re thinking about operating expectations for 2023. First, we expect to continue to grow Mobility subscribers against a return to a more normalized industry growth. We also expect continued benefits from a larger subscriber base and improving ARPUs. This should result in wireless service revenue growth of 4% plus for the full year. For broadband, we expect revenue increases of 5% plus reflecting a higher mix shift to fiber with improving ARPUs partially offset by continued legacy revenue declines.

Overall, we expect to grow total revenues next year. However, as you all know, variability in equipment revenues driven by industry volumes could be a factor on consolidated top line trends as we think about EBITDA trends in 2023. We expect to grow Mobility EBITDA mid-single digits as our disciplined approach helps us grow our valuable subscriber base. In Business Wireline, we expect EBITDA to be down high single digits due to continued declines in legacy products, partially offset by incremental cost savings and increased fiber-based revenues. As you consider the first quarter for Business Wireline, it’s worth noting that 2022 included a onetime incentive compensation benefit that will impact year-over-year comparisons. In Consumer Wireline, we expect to grow EBITDA in the mid-single-digit range, plus or minus, due to continued growth in fiber revenues and transformation savings, partially offset by continued declines in legacy copper subscribers.

We expect to benefit from ongoing corporate cost reductions. Altogether, this yields consolidated adjusted EBITDA growth of 3% plus for the full year. When you think about adjusted EPS calculations, note that our guidance reflects nearly $0.20 on per share of headwinds associated with noncash pension costs related to higher interest rates and to a lesser extent, lower spectrum interest capitalization. Importantly, we have no need to fund our pension plans for the foreseeable future. We also expect to incur more than $0.05 of noncash headwinds related to a higher effective tax rate of around 23% to 24%. Combined, these headwinds aggregate to about $0.25 year-over-year. Normalizing for these noncash items, our guidance would imply adjusted growth consistent with our expected growth in adjusted EBITDA.

Given these assumptions, adjusted EPS is expected to be in the $2.35 to $2.45 range. We also expect adjusted equity income from DIRECTV to be about $3 billion for the year versus $3.4 billion in 2022. Here’s what to consider when looking at our free cash flows for 2023. First, we expect adjusted EBITDA growth of 3% plus. Next, expect cash interest to be down about $500 million. Assume your cash taxes will be higher in 2023 versus 2022 to the tune of about $1 billion. And expected cash distributions from DIRECTV should be down about $1 billion. We continue to expect that 2022 and 2023 will be our peak investment year. So capital investment is expected to be consistent with 2022 levels. We also expect about of $2 billion of working capital improvements, largely from lower deferrals and higher noncash amortization of deferred acquisition costs.

As we mentioned earlier, we expect a more normalized industry growth volume which is expected to help working capital as well. When you combine all these factors, you get to a free cash flow expectation of $16 billion or better. This is about twice as much as our current annualized dividend and more than enough to cover other commitments. Similar to last year, we expect greater free cash flow generation in the back half of the year based on higher capital investment levels and device payments in the first half of the year as well as the timing of the annual incentive compensation payout. We will use our free cash flows to pay out our dividend and to pay down debt as we continue to progress towards our target of 2.5x net debt to adjusted EBITDA, which we anticipate will take place in early 2025.

And lastly, the guidance we provided to you is based on our current reporting. We expect our segment reporting in 2023 will remain the same as last year. However, I’d like to note that we no longer plan to record prior service credit benefits to the individual business segments with a corporate elimination. Instead, it will only be recorded in other income. Overall, we are confident in our plan for the year. And as John mentioned, it takes into account our expectations for a more normalized industry growth backdrop against continued challenges in the macro environment. Our confidence is underscored by the resiliency of the services we offer, the consistent strength of our go-to-market strategy, our ongoing momentum in core connectivity and most importantly, our team’s unwavering commitment to deliver best-in-class services to consumers and businesses alike.

Amir, that’s our presentation. We’re now ready for the Q&A.

Amir Rozwadowski : Thank you, Pascal. Operator, we’re ready to take the first question.

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Q&A Session

Operator: Our first question today comes from the line of Brett Feldman with Goldman Sachs.

Brett Feldman : I think I’ll start off with a follow-up here on the outlook that you provided. I appreciate some of the color that Pascal provided about the different operating segments. Maybe at a higher level, could you give us a sense as to what you mean by a more difficult operating environment? In other words, to what extent does the outlook for this year anticipate maybe a recession or ongoing inflationary pressures? And then I imagine one of the questions we’ll be getting today are, what are some of the key swing factors? And so if we were to use your adjusted EBITDA guidance as an example, what’s the scenario that gets you to 3% growth and what could be the swing factors that might take that into the or higher category?

John Stankey : Hi, Brett. Let me go ahead, and I’ll start and then Pascal can jump in. So first of all, look at the foundation of what we’re telling you is we’ve been I think, very conservative and thoughtful in the guidance we pulled together. It is a tough environment to predict. There’s a lot of geopolitical things going on that I think anybody would have a hard time seeing and do a crystal ball on, and that’s probably the most difficult wildcard that I think we’ve tried to take a conservative stance of what we see in the economy today and what the foundation that’s rested on is. We know that the services that we provide to customers are pretty resilient even during more challenged economic times. And so we have a reasonably high confidence level that our customers are going to continue to want to use the product and pay us for it.

I think if you go back and look at my public comments probably over a year ago, I’ve had a relatively conservative view of where I thought the economy was going to go. I’ve been fairly vocal that I think inflation is a tough thing to have a healthy economic environment and that’s good for everybody and it creates some challenges in places. And ultimately, a lot of that came to pass. The good news is I think we’re through the worst of it, and we see it easy. But as you heard from my comments, we’ve expected that we’re going to continue dealing with some of that pressure as we move through this year. So we don’t have an outlook that says that we’ve solved the problem. We have an outlook that says we’re going to continue to deal with pressures that are hitting some of our line items economically that we’ve got to account for and things like energy and some of the continued wage and employment pressures that we’ve had to deal with that will carry through and we have some longer-term contracts that didn’t come up during the last year that we know are going to hit us this year in renewals that we have to factor into that.

And I think we’ve tried to do the best we can around it. I see the economy being relatively stable right now. We’re not seeing anything that’s causing us to be extremely concerned about it. But what happens later in the year, who knows. The point we’ve made is we’ve kind of assumed that we’re not going to be in a robust growth environment as we make our way through the year. And I would tell you if you’re asking kind of what the swing factors are, I think the swing factor, frankly, is if there’s some kind of a geopolitical disruption that’s something significant that none of us anticipated or that we hope would never happen. It creates a disruptive event. That’s probably the thing I’d look at and say, I couldn’t predict it. I couldn’t plan for it, and that’s going to be the issue that we have to deal with, that just pops up and isn’t going to be just an AT&T issue.

Pascal Desroches : Yes. Brett, the only other thing I would add is, look, we’ve assumed in our outlook a more normalized industry growth environment. So to the extent it’s more than that or less than that, that could be a swing factor. But the thing that I think is important, and I said this in my comments there is, whatever the environment is, we expect to perform relatively well versus the peer set.

Operator: And our next question comes from the line of John Hodulik with UBS.

John Hodulik : Maybe just a couple of quick follow-ups on capital uses. Pascal, you may have said this in your remarks, but what’s driving the $2 billion in working capital savings this year? And what are your confidence behind that? And then could you remind us on the working — on the CapEx side, obviously, $24 billion again this year. But just what was the longer term sort of view? When can we expect that to start to come down? And what do you guys think of as a more normalized sort of CapEx, especially given what you have now with Gigapower and all the fiber initiatives?

Pascal Desroches : Sure thing, John. Here is the way I think about the $2 billion that I flagged in our guidance for 2023. The last several years, we’ve been growing our subscribers in wireless with that came some upfront acquisition costs. We’ve said for a while we expect that to level out in 2023. And so once you have that leveling out, we are no longer going to be spending more each and every year than the prior year in acquisitions. So that leveling out, there is assets that are on the books associated with the deferred acquisition costs of those subscribers. That’s going to be amortized we have great visibility into that amortization, and that’s obviously noncash because we spent the cash in the prior year. So that we have very good visibility to. And look, if we grow more than last year in terms of wireless subscribers, that could be a swing factor, but I don’t anticipate that.

John Hodulik : Got it. And then the CapEx?

Pascal Desroches : CapEx, the thing to keep in mind is we plan to be at peak levels in ’22 and ’23 because of the significant contributions that we are getting from DIRECTV in ’22 and ’23’s CapEx is fairly meaningful amounts for spectrum deployment and transformation that will begin to moderate as we exit this year. We haven’t updated the guide we provided at Investor Day. But clearly, we expect to trend down towards more normalized capital intensity as we exit this year.

Operator: And our next question comes from the line of Phil Cusick with JPMorgan.