AT&T's 5G and Fiber Momentum: Should Investors Switch to Verizon?

AT&T Inc. (NYSE: T) recently reported strong subscriber growth, driven by its 5G and fiber network expansion. However, investors may wonder if it's time to switch to Verizon Communications Inc. (NYSE: VZ) due to its improved postpaid phone subscriber performance and superior free cash flow. This article explores the subscriber momentum of both companies and the factors driving their financial performance.

AT&T's 5G and fiber network expansion has fueled subscriber growth and retention. The company's third-quarter results showed consistent growth in Mobility service and broadband revenues, attracting high-quality, converged customers. AT&T's 5G network now covers more than 250 million people, while its fiber network has reached over 20 million locations. This expansion has enabled AT&T to offer world-class connectivity and attract more subscribers.

Verizon, on the other hand, has seen improved postpaid phone subscriber performance, particularly in the fourth quarter of 2023. The company managed to recoup its postpaid phone-customer losses, providing it with momentum as it entered 2024. Verizon's focus on fixed wireless and fiber expansion, along with its improved subscriber performance, has made it a more attractive investment option.

Key drivers behind Verizon's superior free cash flow include growth in its wireless-service sales and a lower debt-to-EBITDA ratio compared to AT&T. Verizon's net debt-to-adjusted EBITDA ratio is already at 2.6, while AT&T targets a ratio in the 2.5 range by the first half of 2025. Verizon's debt reduction efforts and higher free cash flow put it in a stronger position to maintain its dividend and invest in network upgrades.

AT&T's debt reduction plan is crucial for its ability to invest in network upgrades and subscriber growth initiatives. The company aims to achieve a net debt-to-adjusted EBITDA ratio in the 2.5x range in the first half of 2025. This goal, along with AT&T's continued performance in attracting converged customers, will help it maintain its competitive position in the market.

In conclusion, while AT&T's 5G and fiber network expansion has driven subscriber growth and retention, Verizon's improved postpaid phone subscriber performance and superior free cash flow make it a more attractive investment option for long-term passive income. Both companies have their strengths, but Verizon's debt reduction efforts and higher free cash flow give it an edge in the current market landscape.