AT & T’s profits soar on wireless, U-verse revenues

Thu, 10/22/2009 - 8:40am
Andrew Berg, Wireless Week

AT&T today reported impressive financials for the third quarter of 2009. The telecom giant cited record wireless gains on top of strong growth in its U-verse service as the main drivers for its recent success. Overall, third-quarter revenues totaled $30.9 billion.

In light of Apple’s fourth-quarter iPhone sales, analysts had been expecting good things from AT&T. In an earnings call on Monday, Apple reported sales of 7.4 million iPhones in its fourth quarter.

AT&T's third-quarter integrated device growth included 3.2 million iPhone activations, the company's largest quarterly total to date, with nearly 40 percent of the activations for customers who were new to AT&T.

The third quarter marked the carrier’s best postpaid wireless subscriber churn rate of 1.17 percent and record-low total subscriber churn of 1.43 percent. The iPhone drove postpaid wireless subscriber ARPU, which was up by 3.8 percent to $61.23 versus the year-earlier quarter of $58.99. This marks AT&T’s seventh consecutive quarter with a year-over-year increase in postpaid ARPU.

But according to Ralph de la Vega, AT&T’s president and CEO of Mobility and Consumer Markets, it wasn’t just the iPhone that helped drive AT&T’s success this quarter.

De la Vega said that the carrier’s shrinking churn rate was due in part to the company’s IP-based U-verse service and subsequent triple- and quad-plays offerings, which seem to have been successful in driving revenue per household and customer retention.

Wireless data revenues increased by $916 million, or 33.6 percent, from the third quarter of 2008 to $3.6 billion, more than double the company's total in the third quarter two years earlier. As expected, data revenue was a significant portion of revenue. Data accounted for 29.4 percent of AT&T's third-quarter wireless service revenues, up from 24.2 percent in the year-earlier quarter and 18.4 percent in the third quarter of 2007.

When asked about tiered data pricing going forward, de la Vega agreed that something needed to be done. He said that AT&T does have a plan to address different usage tiers for data and said the public will be seeing those in the near future.

In the Q&A after the call, no one came right out and asked what’s next for AT&T after the iPhone exclusivity expires. However, de la Vega was pressed on how the company will drive non-iPhone subscriber additions in the future.

De la Vega responded by highlighting the carrier’s line of texting and messaging phones, noting that the GSM network’s ability to run voice and data will act as a differentiator going forward. And like everyone else in the wireless industry, he noted new Android phones coming soon.

As was the case with Apple, AT&T isn’t hurting in cash, either. The operator saw $9.7 billion in cash from operating activities in the third quarter and $25.5 billion year-to-date. Free cash flow was $5.5 billion in the quarter and $13.9 billion year-to-date, up from $7.9 billion in the first three quarters of 2008 (free cash flow is cash from operating activities minus capital expenditures).

In early morning trading, AT&T’s stock was up only slightly to $26.55 from its opening price of $26.38.

More Broadband Direct 10/22/09:
•  FCC votes to begin crafting `net neutrality' rules
•  AT&T's profits soar on wireless, U-verse revenues
•  Broadband stimulus panel elicits heated comments over net neutrality
•  BigBand names initial partners in IPTV strategy
•  AT&T sues screen makers, alleging price fixing
•  Nokia sues Apple over patent infringement
•  Ixia buys Agilent data network test unit
•  Ericsson's Q3 profit drops
•  Biap renamed FourthWall
•  Broadband Briefs for 10/22/09



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