Counting the cost of AT&T's outage

AT&T said it will offer customers a $5 credit to apologize for its recent outage. According to one estimate, that could cost the company up to $140 million.

That figure puts AT&T roughly in line with other mobile network operators struggling with similar issues. For example, Australian operator Optus said its 2023 outage cost the company around $40 million. And the 2022 outage that affected Canadian operator Rogers is estimated to have cost up to $70 million.

However, AT&T's costs could stretch far beyond the refund it's giving to customers. "We believe the impact of this outage is likely impossible to quantify until the dust settles and the companies provide updates on subscriber trends (likely during upcoming conferences)," wrote the financial analysts at KeyBanc Capital Markets in a note to investors last week, shortly after the outage began.

Aside from potentially losing customers to the likes of Verizon and T-Mobile, the analysts argued that AT&T could also face fines over the situation, as well as a possible congressional review "given the criticality of the service."

There's precedent for at least some of those ramifications. For example, Optus rival Telstra revealed that the company's outage drove "tens of thousands" of Optus customers to its network. Optus CEO Kelly Bayer Rosmarin resigned after the outage.

The details

"We think that AT&T made the right move with the postpaid credit (we would have extended it to all subscribers)," wrote Jim Patterson of Patterson Advisory Group in his weekly newsletter.

AT&T said its $5 credit won't apply to its business, prepaid or Cricket customers, and would only be applied to accounts rather than each line of service. However: "We are also working closely with our business customers and will address their concerns as those discussions take place," AT&T wrote, suggesting further refunds might be on the table.

Patterson calculated AT&T's outage costs by applying its $5 refund against its 28 million consumer postpaid accounts. He noted a $140 million impact is equal to about 2% of AT&T's quarterly earnings in its mobility business. He added though that AT&T's costs "may be lower than that."

Indeed, the financial analysts at KeyBanc estimated AT&T would see a $100 million dip in its wireless service revenue due to the outage bill credits.

"This outage likely had little to do with their move to a virtualized core, and more likely had more to do with someone not following a process (AT&T has more than 22,000 fewer employees since the beginning of 2022)," Patterson added. AT&T, for its part, is shifting its core network operations to a Microsoft platform.

In its own statement, AT&T said the outage "was due to the application and execution of an incorrect process used while working to expand our network, not a cyber attack." The company didn't provide details.

Regardless, AT&T continues to face fire over the situation. "Instead of helping customers put the incident behind them, the company has poured gasoline on the event and prompted them to talk about how cheap AT&T is. The company brought in $118 billion in revenues in 2023," Gizmodo wrote.

The analysts at network-monitoring company Opensignal said that, in states like Texas, Florida and New Jersey where AT&T subscribers felt the brunt of the outage, Opensignal recorded a 12% increase in week-over-week subscriber loss share for AT&T.