AT&T expresses optimism about FirstNet prospect, might accelerate deployment with tax reform

Top AT&T executives yesterday noted that the possibility of the carrier winning the nationwide FirstNet award is one of several “potentially very good things” that could happen this year. Another is tax reform that would lead to the telecom giant paying a lower corporate tax rate, allowing the company to invest the money necessary to accelerate the deployment of various initiatives, including the potential FirstNet buildout.

Of course, any FirstNet activity is contingent upon AT&T winning the nationwide FirstNet award, according to John Stephens, AT&T’s chief financial officer (CFO). A consortium headed by AT&T as the only bidding team to reach the “competitive range” stage of the procurement for the 25-year nationwide contract, but a legal protest means an award will not be made until at least March 1, according to court documents.

“We’re waiting to hear for the final outcome of the FirstNet process,” Stephens said during yesterday’s AT&T earnings call, which was webcast. “You know that we are an approved bidder, and we are optimistic about our opportunity, but we don’t know the answer to that yet.”

AT&T Chairman and CEO Randall Stephenson noted how the FirstNet award could improve the carrier’s already-attractive spectrum position.

“We've invested $27 billion in spectrum over the past five years,” Stephenson said during the earnings call. “As a result, we have the premier spectrum position in the industry—40 MHz of fallow spectrum. And, if we're successful with our FirstNet bid, we get access to another 20 MHz of prime nationwide spectrum for public-safety and secondary use.

“Our 2G network has now been shut down, and that spectrum is being reformed for future use, as well.”

Stephens said that the company’s official guidance for 2017 calls for single-digit growth, based on the notion that business environment for the company would not change during the year. However, Stephens cited the potential FirstNet award among a group of items—others being approval of the Time Warner merger, an improved economy and a regulatory environment that encourages investment—that could happen this year that are “potentially very good things” for AT&T.

Another key item in this category is tax reform that would reduce the corporate tax rate that AT&T pays—a change that AT&T Chairman and CEO Randall Stephenson believes is “more than possible; I think it’s likely” after speaking with then-President-elect Donald Trump last week. If such tax reform is implemented, it is possible that AT&T could outperform its current 2017 guidance, he said.

“We've seen the President's [tax-reform] proposal. We've seen [House Speaker] Paul Ryan's proposal. Both of them, I think, trigger the impact that I have been talking about for quite some time,” Stephenson said. “And that is, if we want to get off this 1% to 2% growth plane, there is nothing that will trigger that like tax reform.

“We have … the highest tax rate in the developed world in the United States. And to bring that into competitive levels … will have a stimulative effect, we’re convinced. In fact, we know at AT&T, if you saw tax rates move to 20% to 25%, we know what we would do. We would step up our investment levels and there are things we would like to accelerate, if we had a more favorable tax environment.”