AT&T (T): Do Fiber and Wireless Bundles Create More Valuable Customers?

AT&T Inc. (NYSE:T) wants households to buy mobile service and home internet together. In the second quarter of 2026, 42.5% of its advanced home-internet customers also used its wireless service. Longer relationships must repay discounts and network investment, a central question for a stock included in 10 Deep Value Stocks to Invest In Now.

AT&T Inc. trades at 10x forward P/E versus 8x trailing P/E. Trailing P/E uses past earnings, while forward P/E uses forecast earnings. The $5.6 billion gain from selling its investment in DIRECTV Entertainment Holdings LLC in 2025 boosted reported profits. That makes separating recurring earnings from unusual items essential.

The forward multiple is below 14x in June 2025. Heavy investment and acquisition debt help explain why the old valuation is not an automatic target. Verizon Communications Inc. (NYSE:VZ), the closest comparable operator, trades at 9x forward P/E. Both have extensive wireless and broadband networks, although their business mixes and earnings adjustments differ. Separately, management guidance for fiscal years ending December 2026 implies company-adjusted, non-GAAP EPS growth of 6%–11% for AT&T Inc., versus 6%–7% for its peer. The modest premium looks fair if bundling produces stronger cash returns.

One Household, Several Services

For AT&T Inc., cross-selling to existing customers can reduce the marketing needed to win each additional service. Lower cancellations would spread installation and acquisition costs over more paying months. Management reports lower churn and higher lifetime values among bundled customers, but does not quantify their profit advantage after discounts and servicing costs.

The 42.5% figure covers fiber and fixed wireless home internet, rather than fiber alone. Competing carrier bundles make distribution efficiency more valuable while limiting pricing power: customers have other ways to combine services and save. Advanced Connectivity segment EBITDA, a non-GAAP measure of operating income before depreciation and amortization, grew 8%, ahead of 5.1% service-revenue growth, suggesting better operating leverage. Cost reductions also contributed, so the improvement extends beyond bundling.

AT&T Inc. reported second-quarter postpaid phone churn of 0.86%, versus 0.87% a year earlier. Across the first half, however, churn rose to 0.87% from 0.85%. These companywide measures cannot isolate bundling’s contribution. Investors need sustained retention gains within comparable customer groups.

A Discounted Bundle Must Earn More Over Time

AT&T Inc. reported a 1.3% decline in fiber revenue per customer, mainly reflecting acquired customers with lower average bills. Excluding that acquisition, the measure was approximately flat. Management expects bundles to pressure it further near term. As with the cost of rewarding loyal customers, the financial test is whether additional spending and retention outweigh the giveback.

Discounting households that would already buy both services sacrifices revenue without necessarily extending their relationships. New cross-sales and demonstrable retention gains must therefore produce enough profit to offset discounts granted to existing customers.

AT&T Inc. generated $4.7 billion of company-defined, non-GAAP free cash flow in the quarter after $6.1 billion of capital investment, including vendor-financing payments. Operating cash flow also benefited from lower cash taxes and payment timing. Second-quarter adjusted EPS also benefited from lower depreciation, which lifts earnings without establishing better customer cash returns.

AT&T Inc. plans $23 billion–$24 billion of annual capital investment through 2028. Its approximately $18 billion of planned 2026 dividends and repurchases would absorb roughly the minimum $18 billion free-cash-flow target. That makes buybacks compete with other uses of cash, including debt reduction. Fiber connections must generate enough incremental household profit to recover installation costs, service the network, and compensate shareholders for the capital committed.

Conclusion

AT&T Inc. looks fairly valued at 10x forward P/E. Bundling can justify its modest peer premium if retention improves and household profit rises after discounts. A stronger valuation needs growing cash flow after network investment and room to reduce debt. More bundled accounts without those financial gains would weaken the case.

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This article is originally published at Insider Monkey.