Good morning, everyone. Welcome back to the conference. I'm John Hodulik from the Media, Telecom, and Infrastructure team. This morning, I'm happy to welcome John Stankey, the CEO of AT&T. John, thanks for being here.
Thanks for having me in. It's good to see you. If you all take a quick look at the screen, you'll notice our safe harbor statement is up there, and it indicates that John and I are going to be talking about some things that are forward-looking. There may be some uncertainty and risk involved in it, and if you'd like to see more information on any of these things, you can go to our investor relations website and see the reams of disclosures that we have so.
Perfect. With that out of the way, we've got about 35 minutes for, for Q&A. We've got a bunch of questions here-
About 32 now after that, right?
32. Exactly. Exactly. And if anybody in the audience has questions, just hit them in the iPad, put them on the app, and I'll see them here, and I'll weave them into the discussion. But John, why don't we start with the announcement you guys made last night? You know, moving ahead with Open RAN and a, and a new agreement with Ericsson. Do you want to, you know, talk to us about the sort of the timing and the implications for AT&T?
Sure. So first of all, I wouldn't blow this out of context. I mean, part of the reason the disclosure and the announcement was made last night is it's material for the vendors that we work with. Within the context of AT&T, it's a, you know, could be up to a $14 billion agreement over five years. I think most of you know, I mean, we'll invest $24 billion in our network this year. This is a component of our investment. It's, it's not all of our investment, it's not all of our RAN investment either, it's a portion of it. It's the right time for us to think about doing this.
I don't ever recall that you, as an analyst, probably ever wrote a note that said, you know, "AT&T made a technology choice on the foundation of their network, and it's going to give them this wonderful competitive advantage." I don't expect that you're going to write that note today after this. It's important in terms of the infrastructure that we do here, but we need to keep it in context, and the context is we had an opportunity. We've been working hard on O-RAN for a number of years. There's been progress, but it's been slow progress. With the slowdown in the vendor markets, we were able to step back and say: What can we do to get an opportunistic agreement where we can drive vendors into a position to move more aggressively on O-RAN, to position us long term?
Long term, in particular, is whenever the next big investment cycle comes. That could be when more spectrum comes about, if the government ultimately gets their policy together and figures out what they want to do. Could be at a 6G level, but we want to make sure we're ready to go when those moments occur. And, you know, we can take advantage of a little bit of a lull right now in the supply base of what's going on in terms of existing equipment. And so we stepped back, looked at it, and said, "This was an opportunity for us to do that." And, we had two very good suppliers. They both did good work for us. They both had really good equipment.
We stepped back and said, "How can we get to the most modernized network that gets the most amount of traffic across open-- potentially open interfaces?" It was this path that we chose with Ericsson. Then by 2026, we'll have about 70% of our traffic across infrastructure that effectively will have interfaces on it that could be opened up for other supply. That allows us then to think long term as we get to decisions on expanding the network and pushing it out further, how we choose to use a vendor base on that. It's entirely possible Nokia could be one of those suppliers of that more diverse vendor base that we ultimately start working toward. We'd obviously like to see multiple players there.
We think that's how we manage one cost in the network, but also a degree of innovation on the packaging, and that's going to become more important as networks become more distributed, and you start dealing with smaller packages that have to get out because the macro game has largely been played out at this point. So, that's the logic behind it, and then it, you know, allows us to operate our business more effectively, right? It's simpler for us. It's one network infrastructure at the core. It's one set of systems to support it. It's all those things that you want to do that allow us to be a more efficient business and focus on what we really need to do, which is serving customers and bringing new product to market.
Just to finish up on the topic, is O-RAN, as you look out a number of years, and obviously, I'm not looking for guidance, but is it the efficiency gains that you see on the horizon enough to sort of move the needle from a capital intensity standpoint?
I don't think it's going to move the needle from a capital intensity perspective. I mean, we've been telling you, for example, 2024, our capital intensity was going to tail off from kind of the peak levels we've been at the last couple of years. I expect that's going to be the case. I think we'll be right in between $21 billion-$22 billion next year, in terms of where we're going to fall in. You know, we have a fair amount of investment that we want to make in other parts of our business that are still really important. I think, you know, what we're going to probably see is a little bit more efficiency on a unit level.
But as I said earlier, the dynamic is that the units that you're deploying right now don't give you quite as much, yield and coverage, and so you tend to have to do more units. So we're fighting this never-ending battle of getting more efficient to kind of keep up with traffic. I think that battle will continue, and I don't think I'm going to walk out and tell you, you know, O-RAN is the secret sauce to take this down to a single-digit teens as a percent of revenue, capital intensity business. I don't believe that will be the case. It'll be a tool that we'll use to continue to manage this and, and keep ourselves in that mid-teens level of, capital intensity.
Makes sense. So one area where you continue to invest heavily is on the fiber side, and the results that we've seen, you know, recently in terms of Net Adds have been strong, ahead of where we were. How should we think of the longer opportunity for fiber deployment? You have a target out there for 30 million at this point. Where does that go over time? And if you could just talk about the economics you're seeing in that part of the business.
Well, it all ties up into capital allocation decisions for the business, and we've been very deliberate in how we've communicated that. You know, first and foremost, we, we wanna make sure that we do the right things to protect the balance sheet, and we're doing that. I think you're seeing the results this year that are demonstrating that march, that we want to get to 2.5x net debt to EBITDA. We think that's an important place to run the business, to give us the flexibility to do what we want to do and how we want to respond to things that pop up in the market and opportunities. We're committed to doing that. We're, of course, committed to ensuring that we provide a competitive dividend on the stock.
And, I think we're, we see those as very much within reach, within the plan and the guidance that we've given you, that those are, things that we've secured. Now, the question is, what else do you want to do? And right now, what we want to do is finish the build on 30 million homes and execute really well, and we're doing that. Now, do I think, as I've said, probably from the first day we announced that we're gonna do 30 million, I said, of course, there's always going to be more. More homes get built, there's more opportunity that pops up. I have no reason to believe there isn't that in the future.
If I were to look at our current performance right now, rate of penetration, the average revenue per user we bring in, you know, kinda where we get on share, ultimately, steady state, all those things. There's probably 10-15 million more homes in our existing footprint that, you know, clearly, economically, are as attractive as the ones we're building right now. How that plays out over time, whether 10-15 million becomes 12-17, I don't know. It's really not today's question. Will we continue to look for opportunity if we think the business is going well? Most importantly, if the regulatory environment stays attractive to building infrastructure, which is, you know, I think it will, if cool minds prevail and if good policy is put in place.
We have a world-class infrastructure in this country right now because of good policies that have been in place, and I hope policymakers understand that and want to continue with those winning policies. Assuming that occurs, can we move beyond 30? Sure, there could be an opportunity for us to allocate capital and move beyond 30. I think as we just discussed, things like O-RAN, what we're doing to get more efficient in other parts of our capital spend, open up opportunities to continue to do that within the envelope of how we've been operating this business.
Makes sense. We had a panel yesterday where we really sort of dug in on some of the money that the government is allocating to broadband deployment.
Boy, I wish I would've seen that.
Yeah.
Stimulating.
Actually, one of the more interesting sort of regulatory-
It is incredibly interesting.
And there's a lot going on. There's a lot of different pools of money out there. I mean, is that good or bad for AT&T? I mean, I think on the one hand, you know, it's it could be good, something you could tap into and maybe expand the footprint economically. But on the other hand, it may create some, you know, other operator doing uneconomical things. So how do you see it?
If the policy and the intent of the policy, which is to serve the underserved, is a very, very good policy for the United States. And by definition, if it's a good policy for the United States, I think it's a good policy for AT&T. I believe strongly that eliminating the digital divide and bringing everybody on the internet is a rising tide that lifts all boats, and we're a boat that sits in this water of this country. And however it gets done, if it gets done in a prudent and effective way, I think it'll be really good for this country and really good for the economy, really good for the citizenry, really good for opportunities for new innovation.
I think that ultimately works to a company like ours advantage over time, even if we weren't directly participating in building that. Now, I also believe we can directly participate in that. You're correct, it's an interesting topic, and it's interesting because there's, you know, 50 permutations of the topic, and I do get a little worried. You know, we're all taxpayers. We all want the money to be spent effectively. I know that the government is trying hard to do that in a way that is executed well, but the jury is still out on that. You know, as I move around the country and go state by state, there are very different approaches being adopted in some places.
I see some states that are very focused on getting money out there quickly, and they're using KPIs, indexes, as to whether or not they're effective, as to how many people they get on the internet, how quickly. I can resonate with that, and I understand that. That's probably a goal of this. There are others that are using it as an opportunity to maybe think about reshaping structure of the industry, and they want to drive, you know, smaller providers and a more entrepreneurialism into the sector. You know, I'm skeptical that you can necessarily be successful in what is... I think we've demonstrated a scale business, and that there are scale economies in this, and it's really important to sustain it, that that's necessarily an optimal strategy, and to experiment with taxpayer money that way.
But there are some states moving in that direction. I think what's important is, from an electorate perspective, we hold those policies and policymakers accountable. We look around to see where the results are best. We try to influence through data and public opinion, driving people to the most effective outcome. If we do that, I think as a country, we will be in a better place.
Let's stick with the sort of regulatory backdrop. You know, two things, more recently, one that we've been talking about for 15 years, Net Neutrality, and the other, the,
Fifteen.
At least. The other would be the digital discrimination. I mean, those are sort of two new initiatives, I think, put forward by the FCC. You know, it does seem like the tone is a bit different on Net Neutrality this go around. But just also your thoughts on the digital discrimination rules and what that means for AT&T as it relates to the sort of deployment of broadband.
Yeah, I'm not, I'm not exactly sure what you mean by the tone is different on Net Neutrality. I would infer that the tone is different, and that, right now, most of the people in the populace, when you say Net Neutrality, they go, "What?
Yeah.
And maybe previously, it was like, you know, darn right, you know, somebody needs to protect my internet. And I think maybe there's kind of an apathetic tone on the issue right now because there isn't an issue.
Seems fine. Internet seems fine.
I mean, nobody's walking around saying, "You know, there wasn't a website I couldn't get to recently." And, in fact, more often than not, they're worried about whether or not the platform provider, the edge provider, the application provider, is doing something to restrict their free speech or something like that. They're not wondering whether or not the pipe did it, it's whether or not the person who owns the platform did it. And so if that's what you mean by the tone is different this time, it's kinda like, why are we spending scarce time and energy, resources, policymaking capability on a topic that really isn't today's burning bush? It's not, you know, it's not a really critical issue, and I step back, and I ask that question.
And I worry because we've got enough challenging issues in this industry that really need important cycles. We need spectrum. That's, for me, if you want to talk about, let's secure the future of the internet, let's make sure there's enough capacity. You want to manage pricing on something? Make sure there's capacity. If there's more capacity, then pricing manages to stay down. When peak capacity is restricted, when people can't invest in more infrastructure, pricing is gonna go up because it becomes a scarce resource. That's the best way you get a market to operate efficiently, and that's where time and energy should be spent.
I think we should work on closing the digital divide, and if aspects of making sure that that money is being spent appropriately in a nondiscriminatory fashion in underserved areas, as the legislation intended, is important to do that because there will be oftentimes a single provider with government support on that, then that's where that time and energy should be spent. The market, in the rest of the areas that have already been served by competitive investment, doesn't need that administration, and the legislation didn't intend for that to happen. The legislation intended it to be a targeted look at what happened with government investment in underserved areas. And now we have some policymakers who have said, "No, we're gonna stretch this bigger.
We're gonna make it broader." When there's three, four, five providers in a market today, and why we're concerned about discrimination when there's five markets, you know, providers in a market that are competing against each other, you don't need to spend time and energy on that. So if in fact, that's where it goes, if in fact, we see the proclivity of the regulator to move that direction, that was not the legislative intent, and I suspect there'll be challenges as a result of that, because, as you know, there's some celebrated cases right now of what's been going on with some folks who think the charter is that the regulatory agency can do what it chooses to do, and courts are saying, "No, they can only do what the law allows them to do." And, we'll watch that very carefully.
I hope it doesn't go to that, John, I really don't. It shouldn't, 'cause the markets are functioning pretty effectively right now.
Makes sense. Maybe switching over to wireless. The wireless industry, you know, and we had conversations about this last yesterday, seems to be in a good place. But just, can we get your thoughts on sort of, you know, Black Friday and the holidays are a big sort of promotional period for wireless. Just what you're seeing, maybe compared to what we've seen in past years, and then, you know, how is AT&T performing against that background?
The fact that you waited till, like, your fifth question to get to it, must indicate that it's in a pretty good place, right? And I think I would resonate. I'm glad that everybody has kinda come to my point of view, where I have said that, you know, I see the industry as being very competitive, and it has been, but also being very rational in its competition. And the way I would characterize it is, it was a unprecedented amount of investment into the wireless space. You know, we're coming off of two record years in the industry of investment, and that's good. The policy must be right if that's happening. And as a result of that, now I think those that made the investments are stepping back and saying: How do I earn a return on that investment?
And they're making decisions that are appropriate and rational for the amount of money that they've put into their business to do that. And I do see... Well, I see a very competitive bent on attracting new customers into your business. I also see carriers and service providers being very diligent around trying to walk customers up to higher returns with better ARPUs and trying to keep them longer as customers, and they're doing it in a very appropriate and rational fashion. And certainly, I think what you've seen from what we've reported at AT&T, that we've been effective at doing that with our customer base, and I feel really good about where the business is as we are moving through the fourth quarter.
The plan that we laid out for the year, and what we've seen in the early days of the fourth quarter, which includes, of course, Black Friday, to your reference, is very consistent with what we expected. I would expect you're gonna see sequential growth in our net adds from, you know, third quarter, fourth quarter to third quarter. I think you're gonna see very similar dynamics of how the business has performed at the level of promotions we've used from previous years. We see the market responding to our offers in a way that's very consistent with what we've seen in the past. We're not, we're not doing it the same way as others, as you would expect. Everybody finds their competitive swim lane that they-...
They want to work in, and we found ours, and it's been very effective the previous years, and it's been very effective this year in the play we want to run. I feel really comfortable about some new areas that we've been able to get a little bit more effective in. I like what we're starting to see and how we're playing on the converged offers in the market, where we either have fiber with no wireless or wireless with no fiber, and we're putting a lot of time and energy in that. We're seeing, I think, the early green shoots of us even figuring out how to do that better than what we've done in the past. So I sit here right now, and I go, you know, it's a, it's a holiday season. It's a fourth quarter that we laid out plans, and we're running the plans.
We're not having to alter the plans or change the plans much, and that's, that's a good thing.
Now, you touched on sort of ARPU trends and the ability to walk, you know, the subscriber base up to sort of higher tiers. There's also been some pricing actions in the industry over the last... I mean, are those still, you know, we're a little bit further along in the process here. Is that still a source of upside to ARPU as we look out into 2024 from, you know, from both of those metrics, and sort of how would you characterize it?
Yeah, I think, and I've said this many times, if you run a large subscription base, and we've run large subscription bases for a long period of time, every year is a pricing year. And maybe there's just been a little bit more in tune on it of late. I don't know, but every year is a pricing year. You always look at the base and ask yourself, are there places where you can deliver more value into a consumer and ultimately, drive improved returns on what you're doing to invest substantially in that business? And I think there is more room, to answer your question, and there are a variety of different ways to go after it.
And, I think what's important and what we've demonstrated at AT&T is, we can find ways to drive our relationship, to sustain a relationship with a customer, get them in a position where they see more value, get them comfortable with the fact they may be paying for that value that they're receiving, and do it in a way that doesn't disrupt our base. And, you know, we're driving record churn back in the business. I feel really good about how the team's executed around that, and I have no reason to believe moving forward, we won't continue to do that.
And all these trends are sort of proving out in terms of the record wireless EBITDA you guys generated last quarter. I mean, can you talk about... Are there any other sort of, aside from the strong ARPU and the subscriber trends, anything else we should think about in terms of the ARPU trends going forward? I know low upgrades have been a tailwind for you, but how should we think of EBITDA trends going forward?
Yeah, I think you should expect that, you know, we are going to, we'll obviously give you guidances when we traditionally do it in January, after we report the quarter, but you should expect those trends are established, and they're not going to change. I would expect we're going to grow cash next year. I think we're going to grow cash on the dynamic of better EBITDA. We're going to get better EBITDA because we're able to grow the business, and we're getting better on the expense line. And, you know, combination of ARPUs improving and us getting more efficient in how we're operating the business, you know, we've had really strong margins, and that's a good combination. We still have a ways to run on that.
As we've indicated, we've told you we'd do another $2 billion of costs over the next 3 years. I feel really good about that. There is a momentum in the business that is an execution momentum. And I made this comment the other day in a meeting with the team, you know, it's nice to turn over rocks, and you're not looking for pebbles. And we're still turning over some rocks, and we're not looking for pebbles. There's still some meaningful opportunities for us to run our business more effectively. And I believe, you know, as we're getting better in the market, our fiber product is incredibly well-received, our service levels are improving in our wireless space.
As we get better on combined offers, that's going to make us even better in the market, more effective in the market, and I feel really good about our prospects of continuing to grow our shares of revenue in the industry, and that's, that's where we have been focused. We're, we're less consumed on units per se. We're more consumed on whether or not we're growing shares of revenue in the industry. You know, that's, from our point of view, the sustainable approach to the market. I think we're doing that, and I think we have the right combination and mix of strategies to make that happen.
Got it. So finishing up on wireless, you know, obviously, a big topic of conversation has been competition from cable. You talk about converged offerings, and it sounds like we're going to see more of that in 2024 from AT&T. I mean, how would you characterize competition from cable in the wireless space? And, you know, I guess besides converged offerings, are there other things you can do to combat it, or do you even feel the need to combat it?
Absolutely. I mean, cable's a very capable competitor, and they're certainly a very, very capable broadband competitor, and they're smart individuals and, you know, would be very wrong to discount what they can do in the market. Now, I also have been around this industry for a long time, and I don't know... I'm trying to think of a resale model or a wholesale model in our industry that started when I was young in the business and still exists today and, you know, didn't run some cycle where it started and built a customer base and ultimately had to be aggregated into something else or sold or shut down.
So, resale in an industry that has high fixed costs and input components are really important to pricing, it's tough, and that's why I think AT&T is in a unique position. We're in a unique position. We have a scaled, owned, and operated wireless network, and we have the largest fiber network in the U.S., and it's getting bigger by the day... and I think that's, you know, where we can run over the long haul, and momentum is in our direction over the next decade as this industry restructures and changes. Where could we get better as a company? I'm very cognizant of where cable has been effective, and they've been effective in places where we are under-penetrated.
They've been affected in the smaller one and two-line type accounts, single-line accounts, what I would refer to, not in a disparaging fashion, of more the value segment, people who are far more price-conscious. AT&T has done very, very well in other segments, and, you know, our growth has been because we've been ultra-focused on some of those higher value customers, multi-line accounts, family accounts, and we manage those incredibly well. I'd like 2024 for my company to be one where I said we are better at the end of 2024 in working in that under-penetrated segment than we were when we entered the year.
Some of the things when I talk about us focused in getting better as a company, getting our service capabilities lined up properly, tuning our distribution a little bit differently, are focused at us being able to maybe attack those segments of the market and improve our performance a bit. I've been around the industry a long time to know you're not gonna move tons of share quickly. It doesn't happen. But can we get incrementally better in that space that will take our strength that already exists in a number of segments that are delivering the strong results that I think you've been seeing over the last couple of years, and make them even stronger? I do.
Is that more on the postpaid side or prepaid side? Obviously, you have a prepaid brand that is sort of more focused on that end of the market.
Yeah, I would typically say it should tilt the Postpaid. More often, we know who these customers are. We know a relationship with them that allows you to put them into a Postpaid product. It doesn't mean that there aren't some that maybe a Prepaid construct is more appropriate for, and I think we need to be cognizant of the fact that we could get into an economic environment that's different than the one we're in now. If that were to happen, historically, in the industry, we see shifts in Postpaid and Prepaid occur during times of economic stress. It's possible we may see some, you know, on the margin shifts of some of those inbound customers if we got into an economic environment that was a little bit more challenged. And, look, if that were to happen, we've got the best Prepaid brand out there.
It's the best performing, best ARPU, lowest churn. You know, we've got the right tool to carry on with that, and I feel really comfortable about where we're positioned in that space.
So turning to consumer wireline, and you know, we started earlier in the conversation with fiber deployment. You had almost 300,000 fiber net adds last quarter, solid ARPU growth. You're really, you know—and this seems very different than where you were a decade ago. You're really playing offense. You're on the front foot when it comes to that consumer business. I mean, do you feel that you've got enough infrastructure in the market that you can sort of sustain this level of growth on both sides of the fence, both the sort of 300,000-ish sub growth and strong ARPU?
Are you gonna write that in your notes that we're really-
Probably already have, but, we're just-
It's a good line. You should do that, John. We are, and, the answer is yes. I think we have a cadence right now where, at the rate we're building, we're building at a very, very comfortable pace. There is no stress in the system. I say I'll run back home, and of course, I'll run into somebody in a garage someplace. "You don't think I'm stressed?" They work really hard to deliver the results we get, but we are at a very comfortable rate and pace from a supply chain perspective. I think where we are from a talent and resource perspective, our ability to market into inventory as it comes up, we're doing it in a incredibly... The team's been really, really good in driving acquisition costs in the right way, getting yields.
I've told the story about how we've effectively doubled penetration rate in the first year. That's a big driver of the dancing cash flows. So I think that's absolutely sustainable. And I think when you look at where we are, we could be at this clip and continue. We could probably even improve the clip a little bit more once, you know, we have some capital allocation decisions to make. Could I possibly pick up the rate and pace if our unit cost structures were improving and we got some other capital efficiencies in the program that allowed us and gave us some space to maybe do a little bit more? I'd be very comfortable if we picked it up a bit more.
I think the other thing that we have that we should factor into 2024 as we think about it, as you know, we've been fine-tuning where we are in Fixed Wireless. You're starting to see that play into the overall equation. I think you've heard my comments. I'm very measured about how we use the technology, but a very appropriate way for us to use it is when we know we're gonna be building an area with fiber over the course of the next 24 months, we have an existing, long-standing, high-value copper broadband subscriber that maybe could get a better, faster service on Fixed Wireless, and we can hold them for that period of time.
I, I think it's appropriate for us to use that technology to hold that customer, and if that slows down some of the deterioration of that base while we're getting the new infrastructure in place to catch that customer, that's a good thing for us. I think that'll allow us, as we move through 2024, to make some of our net numbers even better. While we're growing the consumer space, we're growing EBITDA. We've turned this into a fantastic growth business. I'd, I'd like to see us get into a unit growth business for customers as well, and I think we now have the formula where we can start to see that happen in 2024.
If I remember correctly, I think you guys did this year or this quarter with-
We did
... with Fixed Wireless. So that was the thing that really flipped it into, you know, into the black. So you think that that trend continues?
I think it's gonna be a little choppy, getting into what I would call consistent growth. But, what you're seeing is you're on the cusp right now of, look, the team's executing incredibly well. You know, we've got some things that I don't know what housing starts are going to do in the next couple of, you know, quarters. I don't know exactly what the move rates are gonna be, given interest rates. That puts a little bit of uncertainty into the market as to what we're gonna do. But relative to everybody in the space, I think we are performing incredibly well in bringing in some really high-value customers, and I'm very satisfied with where the team is on that.
And then, maybe let's pivot to the business market a little bit. First of all, Fixed Wireless would seem to be a good way to... You know, you're gaining scale in terms of your fiber footprint, so that's got to help. And then a new tool in the toolbox with Fixed Wireless, probably more on the smaller end of the business. You can correct me if I'm wrong there. But talk about those two issues, and then how should we think of sort of the trajectory in general of the business wireless?
Yeah, Fixed Wireless is great in the business space, and I think you've also have no trepidation whatsoever selling that product on a national basis into the right business segments that are, that typically aren't the folks that are sitting around, you know, streaming Netflix all day long and driving massive consumption levels. And with service differentiation, customers are often willing to pay a different amount. We have an opportunity to consolidate it in with other wireless services. You know, given the size of certain accounts, it makes sense. And the other area I would tell you about is, look, we are—don't underestimate this: we are the leading provider on advanced networking into businesses, and Fixed Wireless is a backup to advanced fixed network. Infrastructure is a great complement.
And, when you start thinking about what that does for many of our customer base, where does AT&T typically play well in advanced networking? It's entities that have a lot of distributed endpoints. It's banks, it's retail stores, it's insurance brokerages, and all of these, customers of ours, you know, don't want downtime. And when you think about being able to sell that fixed infrastructure for the core of their business but ensure that they have backup with a Fixed Wireless configuration supporting that high-performance network, that's really important, too. So it's a great product in the business segment, and it will be really important to cross-sell back and forth between both networks.
And then on the business market in general, I mean, obviously, a lot of secular headwinds that you guys are dealing with, a lot of it through, you know, shifting the product portfolio, but also cost cutting. So how should we think of the trajectory?
Yeah, you know, I think, John, it relates to what you said earlier in consumer. We're playing offense in consumer, right? We're building, and we're winning. We can get the business segment to that same place. We're just not there yet. Our share penetration in the low end of the business market, and the mid part of the business market, is below where it should be. We have traditionally made our bread and butter up market. That's where the secular impacts are occurring on technology and how customers are buying. We'll still continue to be an important provider up market, but what we need to do is we need to be more effective in the mid-market, the low end of the market, and we can be a significant share taker there because we've been absent from that space. We haven't had our distribution channels tuned.
We haven't had our infrastructure deployed in the right places. We've been doing that hard work over the last two years, and we're now seeing the green shoots start to occur of how that is bringing benefits back into the business, and 2024 will be a really important year for us to get some momentum there. I'm confident that we can do that. Our brand plays well. We have the right products. It's not hard for us to get in and talk to those customers and convince them that we should be able to support what they need. We just haven't been present with them, and we haven't been focused there, and that, that shift is underway right now in the business. I have every degree of confidence that we can have this same conversation as we start moving into, you know, next year at this time-
The same year.
... and you say, "Wow, I'm starting to see, you know, there's some offense being played.
Right.
You should be able to look at that in the numbers starting to manifest itself and see us coming back to a place where that segment performs as it should. I have no desire to, you know, throw in the towel and say, "This should be a declining segment in perpetuity." It isn't. We should be more pervasive in the business market, and that's how we get our growth.
Great. All right, so one last question to wrap up. You talked earlier about sort of free cash flow trends. Can you talk a little bit about, you know, as you look out, again, not asking for specific guidance, but talk about some of the drivers of free cash flow growth over the next couple of years. And then maybe touch on the sort of cadence of, you know, if you go back to the first quarter of this year, I think people were surprised at the sort of lack of free cash flow in the first quarter. What should we think about in terms of cadence of free cash flow as we start to look out the two-
You don't want guidance. You want-
I want everything just short of guidance.
You want texture. It's a fair question. I think let's start with the first one. I think you should see a little bit more ratable performance in cash flows as you move through 2024 than you saw, what's going to be a great year in 2023. I think you're gonna see great execution by the team, and we're gonna have done exactly what we said we were going to do, and we're gonna have delivered it, frankly, the way we communicated it would be delivered. But we're gonna do it without a little bit of the first-quarter drama. You know, we've done a lot of hard work in the business this year to try to smooth that out for everybody so that we're not spending our time explaining-
Right
... why it's loaded the way it is, and I think you will see that occur. It won't be perfectly ratable, but I think you're gonna see a little bit of a different dynamic as we move through the first quarter because the business is architected better, because we've done a lot of things to manage, you know, our cash flows, and, and when you're building true organic cash growth, that's a good thing. What you're gonna see overall for 2024, without giving you the guide, cash taxes are gonna be up. We're gonna see a little bit of a down contribution from what we get from DIRECTV, but our operating momentum is really good. Profits are up. EBITDA is going to be up because we're operating better. That's going to come on both growth and more efficient costs in the business.
We're going to see, you know, as I said earlier, a tapering of some of our capital investment. We'll be in the $21-$22 range, you know, as opposed to $24. As a result of that, you know, that's going to help on the cash equation as well, and when you get that, you're gonna see cash growth as we go in the next year.
That's fantastic.
Is that the texture you were looking for?
I mean, short of actual guidance-
Short of the number.
... but that was, that was anything I could ask for.
I want to see how well you do your work when you-
Yeah
... write your note.
That was good. Awesome. Well, John, let's leave it right there.
All right.
Thanks for coming again.
Thank you, John.