管理層發言
Good morning, and welcome to AT&T's First Quarter 2026 Earnings Call. As a reminder, this conference is being recorded. I would now like to turn the conference call over to our host, Brett Feldman, Treasurer and Head of Investor Relations. Please go ahead.
Thank you, and good morning. Welcome to our first quarter call. I'm Brett Feldman, Treasurer and Head of Investor Relations for AT&T. Joining me on the call today are John Stankey, our Chairman and CEO; and Pascal Desroches, our CFO. Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in AT&T's SEC filings. Results may differ materially. Additional information, as well as our earnings materials are available on the Investor Relations website. I also want to note that the quiet period for FCC Spectrum Option 113 is in effect. During this period, applicants are required to avoid discussions of bids, bidding strategy and post-auction market structure with other auction applicants. And finally, I want to note that the discussion of our operating results and outlook during this call will be on a continuing operations basis. With that, I'll turn things over to John.
Thanks, Brett, and good morning, everyone. I appreciate you joining us today. We executed well in the first quarter, delivering results that were consistent with the outlook we provided while implementing several key strategic initiatives. Last quarter, we told you that we had positioned AT&T for improved growth with our investment-led strategy in fiber and 5G. There's clear evidence of this in our first quarter results. We reported 584,000 total fiber and fixed wireless advanced Internet customer net additions. This is our best ever first quarter result in the sixth consecutive quarter with over 0.5 million consumer and business net adds. We also continue to see an accelerated pace of our customers' purchasing through wireless and Internet connectivity together. 42% of our advanced home Internet customers also choose AT&T Wireless. But when excluding the transaction with Lumin, this convergence rate approached 45% on an organic basis during the first quarter.
This is more than a 3 percentage point increase compared to last year, which is our fastest ever year-over-year convergence growth rate. These results are encouraging but not surprising. It is exactly what customers have told us they want. They're increasingly choosing what we believe to be the best combined fixed to mobile Internet service in the market. When our customers choose AT&T for their wireless and Internet connectivity, they consistently express stronger brand love, higher Net Promoter Scores and ultimately stay with us longer. During our Analyst and Investor Day in 2024, we shared a few data points highlighting the relative improvements that we see among our converged customers in key operating metrics such as customer lifetime values and churn. These benefits remain robust, and we expect that as a greater portion of our customers purchase their wireless and Internet connectivity from AT&T, we will demonstrate improved trends in churn and additional improvement in account growth.
During the first quarter, we made further progress at positioning AT&T as the preferred provider for connecting consumers and businesses to the Internet. We closed our transaction with Lumin ahead of schedule, adding 1.1 million fiber customers and over 4 million fiber locations. We're pleased with the progress we're making as we integrate these assets in several major metro areas and position the business for faster growth. Early indicators are positive. We now offer fiber services throughout our distribution channels in these areas, which has driven sales activity well above pre-transaction trends. We're executing the steps to scale engineering, construction and service delivery in the acquired geographies expected as we move into the back half of the year. We will achieve steady improvement in fiber and wireless customer growth in these areas. When we focus on customers' needs and invest in the experience and products they want, we find success, and in the first quarter, we gave customers more reasons to choose AT&T. We expanded the AT&T guarantee to cover Internet Air and launched a new flagship app to deliver a simple digital-first experience to customers.
We also launched AT&T OneConnect, which enables customers to easily connect all their eligible devices at home and on the go, and eliminates the need to buy Internet access twice. We refreshed our Unlimited Your Way plans to deliver more value. All these moves are based on a consistent set of principles that drive our approach to serving customers the way they want to be served, with offers that deliver simplicity, value and choice and converged connectivity. After years of industry-leading investments in our fiber and wireless network, we believe that we have now established a structural advantage that others will not catch. We reached more than 90 million customer locations across the country with our advanced Internet services, over either fiber or 5G. We believe this provides us with more scalable reach and converged connectivity than any of our peers, including a meaningful scale and performance advantage in fiber.
This is an advantage we're growing as we ramp our deployment at a faster pace than anyone else. Today, we reach over 37 million customer locations with fiber, and we're on track to reach 60 million plus locations by the end of the decade. As I discussed last quarter, when we complete our work at a fiber location, we believe we're able to offer that customer access to the Internet on a lower marginal cost structure than any competitor, with superior performance and an industry-leading experience on America's best and fastest home Internet. This positions AT&T to compete on performance and value by putting our service at the center of our converged offers and shifting the focus away from expensive device subsidies. You saw us lean into this advantage with the launch of AT&T OneConnect, the industry's first ever single subscription service for fiber and wireless with a flat monthly price. This is how you should expect us to go to market as we accelerate the expansion of our fiber availability, with offers and marketing strategies that yield attractive returns by driving deeper fiber penetration and growth in converged customer relationships.
Running these plays has not only strengthened our performance in the consumer market, but they've begun to demonstrate that the same strategy can strengthen our business enterprise operations. During the first quarter, Advanced Connectivity business service revenues stabilized on a year-over-year basis for the first time ever. This reflects improved growth in fiber and 5G that is now offsetting declines in transitional services such as VPN, as we drive better sales execution across an expanding footprint of business locations that we can reach with fiber and fixed wireless. We're operating from a position of strength as we lean into the strategic foundation we've built. Our investments have positioned us to accelerate and scale the execution of our strategy in 2026. And through the course of the year, you can expect to see the momentum in our operating trends build. As we continue our journey forward, our strategies and capital allocation will remain focused on meeting the Advanced Connectivity needs of consumers, businesses, the public sector and first responders as they adopt and rely on AI-enabled tools and applications.
We expect AI to fundamentally transform network requirements beyond download speeds to the ability to support enhanced capacity, ultra-low latency and session control across multiple access technologies under sustained load. And that's how we're architecting our converged network. We've committed to greater investment than any of our peers in the U.S. connectivity infrastructure. And by the end of this decade, we expect to operate the most advanced and open communications network in the U.S., built on a foundation of dense metro fiber and deep nationwide spectrum. With the opportunity to reach more end users than our competition, coupled with our historically scaled metro and long-haul core, AT&T is well positioned to lead our industry in AI-ready connectivity. Investment in high-performing networking is a critical component of a competitive American AI ecosystem. We continue to appreciate the leadership of SEC Chairman in the commission's continued efforts to modernize America's networks.
What we see transpiring on the federal policy front are the absolute right moves for the U.S. to sustain leadership in communications infrastructure at this critical moment and the birth of the AI economy. I reflect on this moment within the context of AT&T's milestone celebration of the 150th anniversary of the first phone call. For a century and a half, we've adjusted to markets, technology and the evolution of public policy. It's a story of many chapters over 150 years shared by proud and dedicated AT&T employees and retirees, consistently rising to our long-standing call of the spirit of service. While all the chapters are important, some turn out to be more consequential than others. And I believe we're entering one of those chapters that will be exactly that. I couldn't be more optimistic given how this company is positioned itself as we enter this defining moment, that our best days are ahead of us. With that, I'll turn it over to Pascal.
Thank you, John, and good morning, everyone. At a consolidated level, total revenues were up 2.9% year-over-year in the first quarter, and service revenues were up 1.4%. Our growth is increasingly driven by gains in fiber and fixed wireless Internet customers, as well as our success at growing customer accounts that choose AT&T for both Internet and wireless connectivity. We continue to expect we will grow consolidated service revenues in the low single-digit range for the full year, driven by growth in wireless service, fiber and fixed wireless revenues, partially offset by declines in transitional and legacy revenues. Adjusted EBITDA was up 2.3% year-over-year in the first quarter, and adjusted EBITDA margin decreased 30 basis points to 37.4%. As a reminder, our first quarter 2025 results included a benefit to adjusted EBITDA of approximately $100 million related to the resolution of vendor settlements.
During the first quarter, we made good progress executing against our ongoing transformation initiatives as we work towards achieving our target of $4 billion in annual cost savings by the end of 2028. These include workforce optimization and federal rationalization, efficiency gains from further AI enablement, accelerated digitalization efforts and reductions to our legacy operations and support costs. We expect improved growth in adjusted EBITDA in the second quarter as comparisons normalize. Service revenue growth improves and as we implement further cost actions. And we continue to expect consolidated adjusted EBITDA growth in the 3% to 4% range for the full year. Free cash flow was $2.5 billion, which is at the high end of the $2 billion to $2.5 billion outlook we provided in January. Free cash flow declined by roughly $600 million compared to last year, which was driven primarily by higher capital investment of $5.1 billion as we accelerate the pace of our fiber deployment.
For the second quarter, we expect free cash flow in the range of $4 billion to $4.5 billion, and we continue to expect $18 billion plus of free cash flows for the full year. Adjusted EPS of $0.57 in the first quarter was up nearly 12%, and we continue to expect full year adjusted EPS to be in the $2.25 to $2.35 range. Under our new segment reporting, over 90% of our consolidated revenue and nearly all of our adjusted EBITDA is generated by our Advanced Connectivity segment. We believe this new reporting format improves transparency into the growth we are achieving from our investments in fiber and 5G, as well as our progress at powering down our legacy copper network. Focusing first on Advanced Connectivity. Service revenues were up 3.6% compared to a year ago. Wireless service revenues grew 1.7% year-over-year which is consistent with our guidance that growth in the first quarter would be below the run rate we expect for the full year.
Our wireless service revenue growth was primarily driven by growth in our customer base, including 294,000 postpaid phone net adds in the first quarter. Postpaid phone ARPU was flat versus a year ago. This is consistent with the outlook we provided for relatively stable ARPU as we gain customers in underpenetrated categories such as the value segment and grow our base of converged accounts that receive discounts, but typically stay with us longer. We expect second quarter year-over-year wireless service revenue growth to improve from growth reported in the first quarter and maintain our full year outlook for growth in the 2% to 3% range. This is driven by our outlook for customer gains from our new unlimited and converged subscription plans, and our expanding opportunity to sell wireless and home Internet services together. It also reflects our recent pricing actions that take effect during the second quarter.
Advanced home Internet service revenues grew 27.3% year-over-year. This includes 2 months of revenues from fiber customers in geographies we acquired from Lumin, which added about 650 basis points to our reported growth rate in the quarter. Similar to wireless, our organic growth in Advanced home Internet service revenue was primarily driven by growth in our customer base. Advanced home Internet net adds were 512,000, which does not include the 1.1 million customers we acquired from Lumin in early February. This was our best ever first quarter and included 273,000 fiber net adds and 239,000 Internet Air net adds. We continue to expect that our fiber reach will grow by about 8 million locations in 2026, including over 1 million new locations we acquired from Lumin. As we ramp our fiber reach, we expect to see improved trends in our fiber net adds over the course of the year while still considering typical seasonality.
We are also seeing strong growth in our business fiber and advanced connectivity service revenues, which include business fixed wireless and value-added services. In the quarter, these revenues grew 7.2% year-over-year which is consistent with the trend last quarter and improved from mid-single-digit growth a year ago. As John noted, total Advanced Connectivity business service revenues were essentially flat year-over-year for the first time ever. Based on our improved sales execution and expanding fiber reach, we expect total business service revenues within the Advanced Connectivity segment to remain stable in the near term and continue to grow at a low single-digit CAGR through 2028. Advanced Connectivity EBITDA grew 5.6% year-over-year, and we improved EBITDA margin by 30 basis points despite a few notable headwinds. These include high single-digit growth in low-margin equipment revenues, as well as the inclusion of revenues and geographies acquired from Lumin, which did not make a material contribution to EBITDA in the quarter.
In addition, about 40% of the adjusted EBITDA benefit from the vendor settlements we called out in the first quarter of 2025 was incurred in the Advanced Connectivity segment. So the improvement in Advanced Connectivity EBITDA margin was driven by service revenue growth, as well as the durable benefit of cost actions that I discussed earlier. Our outlook continues to anticipate immaterial EBITDA contribution this year from the operating regions acquired from Lumin. This reflects increased spending within these geographies to stand up a business that is positioned for faster growth in fiber and wireless customers, as fiber deployment accelerates and as we leverage our existing distribution in these regions. We're really pleased with how the business is positioned coming out of the first quarter and continue to expect Advanced Connectivity service revenues to grow 5% plus this year with EBITDA growth of 6% plus.
Legacy service revenues declined about 25% year-over-year, which is consistent with our outlook for 20% plus decline in 2026. We stopped taking new orders for legacy services last year in most of our wireline footprint, and we now have approval to discontinue legacy services in more than 30% of our operating areas. We're actively working with customers in these areas and helping them upgrade to more advanced services like Internet Air and Phone Advance. There is a lag between when customers migrate to more advanced services and when we are able to discontinue operations in certain infrastructure. This is the primary reason why the decline in legacy EBITDA of about 40% was greater than the decline in revenue. And we expect this dynamic will persist for the next several quarters. We ended the first quarter with a net debt to adjusted EBITDA ratio of 2.71x, which is up from 2.53x at the end of the fourth quarter last year.
This was primarily due to the close of the transaction with Lumin. We continue to expect that our net leverage ratio will increase to approximately 3.2x following our transaction with EchoStar, then decline to approximately 3x by the end of 2026, and return to a level consistent with our target in the 2.5x range within approximately 3 years following the transaction. We ended the first quarter with $12 billion in cash and with $19 billion available to draw under term loans. So we are in a strong liquidity position as we prepare to close our transaction with EchoStar. We also continue to expect that we will close the transaction with an equity investor for the acquired Lumin fiber assets during the second half of the year. We returned $4.3 billion to shareholders in the first quarter through dividends and share repurchases. We continue to expect to repurchase approximately $2 billion of stock this year and to maintain a consistent pace of buybacks through 2028 as we execute against our plans to return $45 billion plus to shareholders over this time period.
I'm really proud of the team's ability to successfully balance our investment in fiber and 5G, while maintaining consistent returns to shareholders. To wrap up, we continue to execute well, and I'm confident that we're positioned to drive improved growth and consistent capital returns through 2028 as we execute on our strategy. Brett, we're now ready for the Q&A.
Thank you, Pascal. Operator, we are ready to take the first question.
分析師問答
The first question comes from John Hodulik from UBS.
Two if I could. First on OneConnect. Can you talk about sort of how widely it will be rolled out? What kind of support you have from an advertising standpoint, maybe the target market? And then, do you think it can drive subs in the near term? Just sort of your view on what the impact that could have? And then secondly, the phone churn trend definitely improved up 6 basis points. You have been seeing double-digit increases. Can that kind of improvement in churn that we've seen continue despite the increases from the pricing?
In response to your first question, we wouldn't have pursued this initiative if we didn't believe it would be impactful. To address the core of your inquiry, as we mentioned during the rollout, this will be an iterative process. We've created a platform with OneConnect that enables us to analyze segments and customers in a new way. The tailored plan clearly targets specific customer groups, particularly as the BYOD segment is on the rise. Increasingly, customers are holding onto their devices longer and switching carriers more frequently, which is why we designed this plan to attract such customers and connect them to a network structure that reduces churn. We aim to simplify their experience by allowing them to manage multiple devices without worrying about connections, whether it's their car's WiFi or a smartwatch. This approach is intended to foster customer loyalty and strengthen relationships, which we excel at.
Additionally, this plan requires fiber broadband, and pairing fiber with wireless is one of the best strategies for improving customer retention and lifetime value. This initiative also caters to smaller accounts that may evolve into larger family plans over time. You should anticipate that this platform will evolve, with more variations being introduced throughout the year to attract a broader customer base that fits the criteria. It will be one of several offerings in our portfolio. We have revamped our rate plans, and this particular plan is focused on a specific segment of customers to enhance convergence and reduce churn over time. We've also revised other base plans to address different market segments. These changes are a natural progression, considering the maturity of the wireless market and the ongoing shifts in convergence that allow us to take proactive steps. I don't expect a large volume immediately in the initial weeks as we anticipated this outcome.
However, we do foresee this platform becoming a crucial part of the portfolio moving forward, emphasizing the network as a foundation for customer attachment while minimizing other factors that influence service provider choices over time. Regarding your second question about churn trends and their potential to continue improving, I want to clarify that managing churn is essentially a mathematical equation. As I mentioned earlier, the best method to handle churn is through customer convergence. As we navigate the repositioning occurring in the industry, aligning customers to asset bases should naturally lead to improved churn dynamics. We have reported that 45% of our base has converged on non-Lumin customers, and we've shared numbers in recent quarters indicating this acceleration. Our guidance for the past several years outlines our fiber and AI footprints, alongside the customer cohorts we aim to retain.
We believe this will create a sustainable business model, driving service revenue growth and establishing industry leadership by the end of the decade. While it may take some time for customer bases to realign with asset bases, we anticipate an uptick in churn dynamics that has been evident in the last couple of quarters as this transition unfolds. Eventually, we expect to reach a tipping point where the benefits of our strategy will materialize. When we indicate that we possess strong lifetime values for converged offerings, particularly in fiber and wireless, we will have a substantial segment of our portfolio reflecting that, leading to favorable profitability and a robust business model moving forward.
The next question comes from Michael Rollins with Citi.
John, in your opening comments, you described that AT&T operates the most advanced and open communications network by the end of the decade. Can you unpack how AT&T is defining the term open, including how that impacts your go-to-market? And how you look at further partnerships, or acquisitions to maximize the TAM and your return on capital? And then just secondly, if I could, on the account growth sequentially in consumer and mobility. Can you share what's working for you and how you're balancing growth in accounts ARPA relative to what you were just describing in convergence, versus kind of the core mobility services that you offer?
Michael, so when I think about open and what we're driving toward the thrust, I would articulate in that regard are one, you know what we're doing in our wireless network. And the purpose of us opening aspects of our wireless network is to manage supply chain costs and performance of equipment and the architecture over time. I think we're leading the industry in that regard, and I would expect shortly as we begin to get to a point where we start to deploy some new spectrum as we close the EchoStar transaction, you'll see the first instantiation of that as we move forward and work our process of deploying that spectrum and how we build our network and what we're able to gain from that. And so that's one aspect of it. The second aspect is the complete reengineering of the core of the network that we're doing that I think sometimes is overlooked a little bit. As I've shared with you before, we have multiple routing infrastructures that support different product lines in this business or different segments.
What we use for routing infrastructure and consumer broadband fixed services is different than what we do, for example, for our business enterprise services, which is different than how we ship around our wireless packets and services. We've been investing very aggressively to re-architect that network, flatten it, integrate it so that it's one solid routing network that handles all traffic. In doing that, it does a lot of things. One is it opens up the opportunity, given the software stack and how we build that to begin to offer a much broader set of APIs out into the public domain that allows people to manage and control their traffic differently. That's going to allow for a tremendous amount of flexibility. If you want to think about it in the context of just as hyperscalers opened up, the ability to spin up compute and storage through touching parts of the terminal. There's no reason why our routing infrastructure, and what we turn out to customers shouldn't have that same software-based capability that is digitally driven through API structures and allows not only our end users, but partner network customers to be able to control aspects of the network moving forward at a much lower internal operating cost that's all software-driven, and as that core becomes software-driven, it allows us to also use AI as a basis of us administering and managing that network.
Instantiating those APIs out to the broader domain of our customer base is what makes the network flexible around it. I would say that those are the two most fundamental aspects of opening the network that allow for us to be effective moving forward. If we have great preferred access technology, meaning we can get bandwidth in more places than anybody else, hence a deeper fiber network, or a denser spectrum footprint and better wireless network, then that attracts traffic onto that network. It's the software control and programming of it and the dense access capillaries that allow people to say, I can get to more places with better bandwidth and better performance than anybody else and therefore, that's why I want to be on that network. When it matters, it must be AT&T, and that's how you drive returns over the long haul on that investment strategy and that aggregation of capabilities. In terms of account growth and what's working, it should be, I think, fairly apparent from what we shared.
What's working is converging customers. When you look at the step-up in the convergence levels that you're getting, and I look at what's happening now, we're getting account growth. If you looked at like average line sizes, for example, on our wireless account base, those accounts that are coming in tend to be below average for what we might have in the embedded base. That's an indicator that we're picking up. One and two line accounts that are new to us. They're new, new. They're new fiber, they're new wireless. That's really good because ultimately, those 1- and 2-line accounts become the 3 and 4 line accounts of the future. If we get them anchored in on a fiber base when they come in, we generate the highest brand perception for any product in the market. It's the best performing product in the market. They have great positive brand perceptions. They're more likely to stay with us longer.
They're more likely to buy more from us in the future. That's what all the data sets on the customer base that's out there. Those new, new customers, those kind of accounts are the ones that I want to grow. Secondly, we're getting some lift from Internet Air and the ability to converge both wireless and Internet Air with new customers on a combined basis, and we're being more specific in targeting that in places, for example, where we know we will have fiber in the future, so that we can grow that customer base today and ultimately meet them with a very, very good, robust, sustainable offering over time. Those two things, I would say, are probably the biggest impact on the consumer side. Then I would also tell you to look at the business revenues and look at the business performance and what we've been able to demonstrate to you that doesn't happen without some new business account growth that's occurring in order to stabilize the advanced connectivity service revenues that you've seen in the quarter, very proud of what the team has done, on that and obviously optimistic that we can carry that momentum forward and there's more that we can do there as we fine-tune our distribution even further.
The next question comes from Sean Diffley with Morgan Stanley.
I was curious how you assess and plan for the perceived threat from satellites more on the fiber and broadband side. But anything you would add on direct to sell. Clearly, you have an AST SpaceMobile partnership? Would you ever consider doing MVNOs with emerging players? And how would you compare and contrast satellite versus the fixed wireless learnings?
Sure, let me start by reiterating what I just mentioned and our direction. We aim to create the best converged network offering in the United States. To achieve this, it’s crucial to have strong foundational assets that we own and operate. Having a core switching and routing architecture that allows visibility into every packet on the network is essential for managing service performance, security, and delivering various capabilities across different access technologies like wireless, fixed fiber, and Wi-Fi, ensuring quality service. We are in a strong position with excellent fiber, a robust wireless network, and a well-managed customer base, allowing us to build trust over time. As more access technologies become available, such as direct-to-sell, we can incorporate these capabilities alongside our existing integration to become a converged access provider. I want to emphasize the importance of fiber because, once established with the customer, it provides the lowest marginal cost for data transmission.
In networking, achieving high performance with low marginal costs is a promising combination for the future. We will continue to integrate partners. When considering LEO satellites, I believe they will drive significant innovation for consumers, leading to unexpected applications that will expand the market. In the near future, we can expect always-on connectivity in the United States, which is something our customers will demand. Collaborating with LEO providers capable of addressing this need will enhance our service offerings. Ideally, there will be multiple satellite constellations, with at least three service providers in the U.S. I am currently focusing on one to ensure its successful launch and viability, and I aim to establish strong wholesale relationships, potentially with more than one provider. It’s crucial that we manage traffic effectively on our network to provide a seamless end-to-end integrated service.
Regarding direct-device approaches, while the deployment of LEO constellations may happen, it won't be a straightforward process due to various challenges, including spectrum allocation and interference issues. Satellite technology works well outdoors, but not indoors, and our extensive investment in communications infrastructure has been aimed at improving service levels for end-users. Interruptions are no longer tolerated by customers, given the decades of infrastructure designed for high-stakes environments like hospitals and stadiums. In considering an MVNO model, my perspective is to look at MVNOs as a means to reach market segments we currently can't address. It’s important to use our network capabilities in line with our long-term goal of being the premier converged operator in the U.S. We are selective about how we collaborate commercially. Currently, I don’t see satellite LEO as a viable area for MVNO relationships; I believe we can provide significant value to customers directly.
I’m confident about competing effectively in broadband, especially with our fiber connections in homes. The combination of low marginal costs and superior performance typically leads to strong market results. I am also pleased with our investment strategy, aiming to connect over 60 million fiber homes by 2030.
The next question comes from David Barden with New Street Research.
So I guess two, if I could. The first would be, John, the EchoStar Spectrum acquisition. Could you elaborate on how that's going to augment the business and how we generate a return off of that opportunity? And then second, could you update us on the copper retirement program and some of the advancements that you guys have been able to generate at the FCC along that front? What does that mean from a cost savings and return standpoint?
Sure, David. So on the EchoStar side, look, there are two fundamental things that come here. One, the improvement of performance in the network is noticeable, and there are markets where because of the deployment of the spectrum, we are seeing perception shift. As a result, it will help our wireless business just by nature; it will help in terms of customer growth and retention. When we can buy spectrum, there's economic value created that is capital efficient. It avoids us from having to grow capacity in other, more expensive ways. We're also able to expand and increase our Internet Air penetration and distribution. I'm very happy with where we stand on that right now. It's a fantastic tool for us to get businesses we haven't had before. I think it's very sustainable for certain types of businesses. Again, I'll go back to where you’re seeing improvement in our business performance, Internet Air is a part of that, helping us get into customers we didn't have fiber before.
In the consumer space, we're creating markets where we know we will have fiber. We can hold converged customers. The growth is good and they transition from a broadband connection to a fiber connection. That's a very profitable transition when you have a converged customer in that situation. In markets where we won't be in fiber in the near term, finding the right segments to attack is critical, and we believe that a fixed wireless and wireless combination can do just that. On your second question about copper retirement, I probably five years ago, when I started setting the direction on aggressively shutting down legacy infrastructure in this business. I would tell you, I probably got some looks across the table that said this will never happen. We went to work on what we needed to do to get to a path to shut down the infrastructure. To sit here today, five years later, and have this in front of the FCC is absolutely fantastic.
It's the right moves for this country because the old copper infrastructure does nobody any favors. It consumes significant power, and the operational costs are dramatically reducing in the geographies. As we get the copper turned down, we'll have even more cost benefits. We're actively working on this task with a good organization in place. The leadership has been successful in getting us in line with everything we need to do. It's not necessarily the most glamorous work to shut this stuff down, but it is essential work.
The next question comes from Mike Ng with Goldman Sachs.
I have two, if I could as well. First for John, in prepared remarks, you talked about shifting away from device subsidies competing more on service. Will that be more gradual as OneConnect gains traction? Or do you expect a harder shift away from subsidies that we may see across 2.0 plans as well? And then for Pascal, it was encouraging to see the reiteration of the guidance. You talked about accelerating growth in Q2. I was just wondering if you could provide some color on key drivers for the EBITDA acceleration throughout the year. How do you expect the Lumin opportunities, cost efficiencies, and kind of new plan traction just impacting the curve of growth throughout the year?
Mike, the short answer to your question is it's a balancing of the portfolio is the way I think about it. Our portfolio right now is over-indexed on devices. The devices aren't unimportant to customers; in certain segments, they'll continue to remain important. But we need a more balanced portfolio that ensures that customers understand the inherent value of the network underneath the relationship. I believe we've an opportunity to help people understand the value of what's in the network and differentiate between what they pay for the device versus the network. We'll gradually work our way through this over time, not throwing a switch but working from foundational capability in OneConnect that we can iterate on in the coming quarters. I'll leave your second question for Pascal.
Sure, Mike, pleasure to talk to you. Going into Q2 and improving for the rest of the year, we expect both service revenues and EBITDA to accelerate gradually. There are a few factors at play. One, in our wireless business, we expect to continue to drive growth in converged relationships. That should drive improvement plus we have pricing action that begins to take effect in April. For Q2, it's going to be not the entire quarter that benefits, but most of it. It will contribute for the rest of the year, full quarter benefits of those pricing actions. We're scaling Lumin. We said coming into the year that we would need to invest significantly to drive incremental fiber penetration into their footprint. That process began in earnest in Q1 and would continue. But I expect every month that passes the performance of the Lumin will continue to improve. We're going to see improvement in fiber net adds and converged relationships.
Also, as you get through, in terms of free cash flow, Q1, as a reminder, is always seasonally low. One, you have our annual incentive comp payment in Q1. That's a significant cash flow in Q1. Two, the majority of the devices from the holiday season are paid in Q1. Those headwinds go away. We stepped up our capital investment, which was a headwind. As the year progresses, I expect to see a similar seasonal pattern and remain confident. All in all, you should see meaningful improvement in our service revenue trajectory as well as our EBITDA trajectory. So I feel really good about where we are and the pacing for the rest of the year.
Our last question today comes from Peter Supino with Wolfe Research.
Question about the broadband market. AT&T reported 2.5 million DSL subs, and that's been a really valuable feedstock for the fiber business over time. It's a great thing that you have a long-term declining business that is going to stop diluting your growth rate over the next couple of years. I'm wondering if the fade of the DSL business in general, including in beyond our own, affects your view of the broadband market over the next couple of years. Whether that relates to fiber volume growth or fiber pricing or FWA pricing, all of the above?
Peter, I don't know that the fate of the DSL base in and of itself causes me to think differently about things. I offer a couple of observations on the market. First, the pace is getting pretty tiny at this juncture. Our fiber growth numbers have been relatively consistent over the last number of years. Our ability to find DSL customers who want to be fiber customers is much more difficult these days because there really aren't many DSL customers left. When you look at our growth numbers on fiber, the question asked earlier about new accounts, they're new accounts. They're customers coming in, and that's that new new dynamic I talked about. We're getting better at picking up those new new customers. The other observation is that you've got certain parts of the DSL base that, in some cases, customers self-selected. They may be in a situation where it’s the best that they can get in a not very good set of choices.
Some of that's being taken care of today. That's what satellite serves well. It's also important to note that there are price-sensitive segments because, in many cases, people can buy broadband. That value segment from 40% to 50% is important for us moving forward. That customer base often includes those with a DSL holdout base you referred to, and I need to be good at picking up those more value-sensitive price segments. I think we can be more effective in hitting all segments of the market with our offerings. Getting our fiber to more customers helps with this dynamic.
Operator, that's it. You go ahead and close out the call.
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