Constraints and ongoing challenges in the global supply chain might impact AT&T’s ability to meet or exceed its mid-band 5G deployment plan, AT&T CEO John Stankey warned analysts and investors today.

It’s more of a worry without specific evidence to back it up right now, but Stankey’s vigilance is by no means without merit. Considering all the unexpected calamity and heartache suffered by the world over during the last 16 months, hoping for the best while preparing for the worst is a prudent spirit. 

It’s a mood that everyone who’s lived, loved, and lost so much through this global pandemic can appreciate. 

“I don’t expect that there’s going to be any change right now in our deployment plans, and the growth and the guidance we gave you five weeks ago. We’ll see as we get into this a little bit deeper,” he said. 

“As usual, we’re in that cycle where technology is relatively new, vendors have commitments, we’re waiting on specific units,” Stankey said, referring to the mid-band 5G radio access network (RAN) equipment it has on order from its 5G RAN suppliers Ericsson, Nokia, and Samsung. 

“Global supply chains are stressed right now across the board,” he said. “You ask the question, you do the work, and people will give you comfortable answers, but I’m a little skittish. We’re seeing dynamics that are occurring in the global supply chain where unexpected things are popping up.”

AT&T intends to start activating 5G service on its recently acquired C-band spectrum in some markets later this year, and some of that work is underway now. “There’s things that we can do today as we’re touching towers and doing things in parts of the infrastructure that, for example, maybe aren’t going to be in service until later in 2022,” Stankey said.

That includes a more efficient use of time and labor where AT&T can “pre-provision some things and not go back and touch them [towers] a second time,” he said. 

AT&T previously said it expects to increase annual capex by a cumulative $6 billion to $8 billion from 2022 to 2024 to deploy its mid-band 5G network. The carrier also said its mid-band 5G network will reach up to 75 million people in 2022, and up to 100 million people in 2023. 

That amount of coverage and pace of deployment puts AT&T well behind its competitors T-Mobile US and Verizon on mid-band 5G. Major disruptions in the 5G RAN supply chain could further diminish AT&T’s market position, but delayed equipment shipments would likely be felt by Verizon as well. T-Mobile began deploying its mid-band 5G network in earnest last year with spectrum it acquired through last year’s merger with Sprint. 

“Is it possible that we could see certain element shortages that start to crop up as everybody’s racing to put stuff up on towers? It may, and that’s why I want to be a little bit cautious around guiding up or doing anything different until we get a little bit more momentum around that,” Stankey explained.

AT&T’s financial performance in the first quarter of 2021 was largely positive, but that C-band spectrum came at a high price ($23.4 billion) and pushed its net debt to almost $169 billion. 

That’s not as bad as AT&T’s debt was two years ago following its acquisition of Time Warner, but it’s close. The company said it doesn’t expect to take on debt levels above this new “peak leverage level,” and claimed other activities, including asset sales, will reduce total debt by the end of the year.

AT&T, during the quarter, spun off its declining satellite TV business and other paid TV services in a deal with private equity firm TPG but that move doesn’t dramatically change AT&T’s financial problems. 

Mobility, AT&T’s largest business, reported a 9.4% year-over-year increase in revenues at $19 billion, but that growth was almost entirely fueled by equipment sales, which AT&T is juicing through heavy device promotions. Mobile service revenues were up just 0.6% to $14 billion, but the company said it remains confident that full-year service revenues from its wireless unit will grow by 2%. The company also raised its 2021 capex from $21 billion to $22 billion. 

AT&T banked $7.5 billion in net income on $43.9 billion in revenue, marking a 2.7% year-over-year jump in revenue and a 63% increase in profit.