Telco giant AT&T (T 2.15%) is finally showing some much-needed signs of life. The company picked up an impressive 708,000 postpaid wireless customers last quarter, and added 338,000 fiber broadband subscribers. AT&T says it's grown its wireless business more than any of its rivals have this year, in fact, and touts 11 consecutive quarters of fiber broadband customer growth in excess of 200,000.

There are a couple of important footnotes regarding the company's recently ended third quarter to consider, though. AT&T isn't exactly firing on all the cylinders it seems to be firing on.

The rest of the AT&T story

Yes, AT&T has brought 2.2 million wireless subscribers into its fold through the first three quarters of the year. It's arguable, however, that this growth is more the result of rival Verizon's (VZ 1.57%) own struggles than AT&T's savvy.

Verizon lost 36,000 postpaid users in the first quarter of this year, added 12,000 postpaid accounts during the second, and only picked up another 8,000 postpaid wireless customers last quarter. They're un-Verizon-like numbers compared to last year's growth of more than 500,000 and 2019's net postpaid wireless additions in excess of 700,000 (2020 was just so-so, but still better than 2022 to date).

A great deal of this tepid growth is the result of unpopular price hikes imposed earlier this year. Consumers are looking for alternatives, and they're finding AT&T.

Perhaps the lesser-realized nuance of AT&T's Q3 successes is buried within the telecom outfit's broadband data. The company picked up 338,000 new fiberoptic broadband customers, but lost 367,000 non-fiber broadband subscribers. Indeed, it was the second quarter in a row that AT&T lost -- on a net basis -- broadband subscribers. This was the third time it's happened in the past four quarters. The growth surge linked to the COVID-19 pandemic isn't just stalling. It's now starting to unwind.

Chart showing AT&T's non-fiber customers falling and fiber customers rising since early 2019.

Data source: AT&T. Chart by author.

It's not necessarily the end of the world. Fiber-based broadband is usually a faster connection than non-fiber. The higher-speed service also commands a higher price. That's why AT&T's overall broadband revenue was up 6.1% in Q3, extending a growth streak that's been underway since mid-2020.

Chart showing AT&T's broadband revenue rising sharply since mid-2020.

Data source: AT&T. Chart by author.

Continued broadband revenue growth is anything but guaranteed, though. A price war is underway on this front too, particularly now that wireless at-home broadband is proving itself. Verizon added 342,000 fixed wireless broadband users to its customer base last quarter, for instance, and 61,000 fiber broadband subscribers of its own.

Connect the dots. Eventually, all telco services become commodities, putting pressure on their revenue and profit margins.

For perspective, about a tenth of AT&T's top line comes from broadband service subscriptions.

Plenty to think about

None of this is to suggest that AT&T is un-ownable. The wireless and broadband business is here to stay, and this company is a key fixture of its landscape. It's also unlikely the Federal Trade Commission, the Federal Communications Commission, or Congress are interested in allowing any name in the business to gain or lose much of its current market share. AT&T's dividend yield of 6.5% is pretty compelling too.

None of the most-touted numbers from last quarter are quite as impressive as they seem to be, though.

The growth of Ma Bell's broadband and wireless businesses won't be nearly as easy to maintain as it superficially seems to be. Leichtman Research Group believes only 87% of domestic residents are actually paying for home internet service, but of those, 98% are already broadband subscribers. That doesn't leave a whole lot of room for new market penetration.

In the meantime, although AT&T may be adding plenty of wireless customers at Verizon's expense right now, the wireless market itself isn't exactly positioned for major expansion. Pew Research says 97% of Americans already own a mobile phone. The vast majority of them won't need a second one.

Bottom line? The company may finally be shrugging off the fallout from the purchase (and then sale) of DirecTV and Warner Media. As a result, AT&T is faring better with its core business. It's a bit of a stretch, however, to assume last quarter's highlights tell the whole story.

Interested investors may want to remain on the sidelines for a bit longer and just watch how this story progresses. Current owners are OK to keep holding, though, as you've already suffered the lion's share of any setback coming your way.