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AT & T has Q2 net loss of broadband subs

Thu, 07/22/2010 - 8:20am
Peter Svensson, AP Technology Writer

NEW YORK (AP) – AT&T Inc. said Thursday that its earnings rose 26 percent in the latest quarter and raised its forecast for the year, helped by its iPhone-fueled wireless arm.

The company also posted its first-ever decline in wireline broadband subscribers, capping a decade of growth.

The company lost 92,000 wired broadband connections during the quarter, to end at 16 million.

The company lumps in DSL, U-verse, satellite broadband and 3G cards for laptops. AT&T added 255,000 U-verse broadband subs, but the loss of DSL customers far surpassed the U-verse adds (the company also lost 1,000 3G broadband subs).

AT&T attributed the decline in wired broadband connections to cut-throat competition from cable companies and the saturation of the market, exacerbating a typical second-quarter decline.

A spokesman said that in non-U-verse markets, competitors offered aggressive promotions. The company vowed it will start responding with counter-promotions.

U-verse TV subscribers increased by 231,000 in the quarter to reach 2.3 million, up approximately 1 million over the past year. Meanwhile, satellite TV subscriptions (offered through DirecTV) are down. The spokesperson said the company is not commenting on the relationship between the two – if, for instance, new U-verse subscribers are trading AT&T/DirecTV DBS connections for U-verse TV.

The company last week announced it was going to introduce pair bonding, which would help the company reach more customers, as it drives toward its goal of 30 million homes passed by the end of 2011. The company now counts about 24 million homes passed.

As for bundling, the company reported its U-verse high-speed Internet attach rate continues to run well above 90 percent, and the AT&T U-verse Voice attach rate increased to approximately 75 percent in the first quarter. More than three-fourths of AT&T U-verse TV subscribers have a triple- or quad-play option from AT&T.

The company achieved 32 percent growth in wireline consumer IP data revenue, driven by AT&T U-verse expansion. The quarter just completed is AT&T's first billion-dollar revenue quarter for AT&T U-verse.

The country's largest telecommunications provider said it now expects a "strong" increase in earnings over last year, compared to its previous forecast of "stable-to-improved" results.

Its shares rose 63 cents, or 2.5 percent, to $25.55 in morning trading.

AT&T said its net income rose to $4.02 billion, or 68 cents per share, in the April-June period, from $3.2 billion, or 54 cents a share, a year ago.

Excluding a gain from the sale of stock in an overseas firm, earnings would have been 61 cents per share, still beating the average forecast of 57 cents per share by analysts surveyed by Thomson Reuters.

Revenue was $30.8 billion, compared with $30.7 billion a year ago, and slightly below analyst expectations at $30.9 billion. However, AT&T is no longer including e-business subsidiary Sterling Commerce in its results, which analysts have not taken into account. The unit is being sold.

The company signed up a net 496,000 new wireless contract customers, down slightly from the 512,000 it signed in the first quarter. That's about half of what it has signed up in recent years, but it will still likely prove a strong result compared with the rest of the industry, where contract signups have collapsed this year.

AT&T is helped by the iPhone, for which it is the exclusive U.S. carrier. AT&T said it once again activated a record number of iPhones: 3.2 million. That was boosted by the launch of the iPhone 4 in the last few days of the quarter.

Contract-signing customers are the most lucrative, but AT&T also added a net 300,000 no-contract, prepaying customers, more than it has in any quarter since 2007. That's thanks to another Apple Inc. product, the iPad. AT&T is the exclusive U.S. provider for the tablet computer, which launched on April 3.

With signups of new phone subscribers slowing to a crawl in the industry, AT&T and other carriers are banking on keeping growth going by providing wireless services to non-phone devices, like the Kindle e-reader. AT&T said it added 896,000 such devices, less than the 1.05 million it added in the first quarter.

Wireless service revenue grew 10 percent from a year ago, as average monthly fees rose 3.4 percent, bucking the industry trend. Data plans for iPhones and other smartphones help AT&T offset declining prices for voice calls.

AT&T keeps laying off workers, mainly from the dwindling wireline business. It has cut more than 10,000 jobs this year, ending the quarter with 272,450 employees.

The layoffs helped AT&T cut costs faster than the 3.7 percent year-over-year revenue decline in wireline, letting it post a tiny increase in operating income for the segment. The revenue decline was the smallest since the first quarter of 2008.

AT&T is the first major telecommunications company to report for the quarter. Verizon Communications Inc., the second largest, reports early Friday.

– CED's Brian Santo contributed to this report

More Broadband Direct 7/22/10:

•  AT&T has Q2 net loss of broadband subs
•  Motorola sues Huawei over trade secrets
•  ACA: Comcast-NBCU merger worse than we thought
•  Cable-Tec to focus on IP technologies
•  Netflix's Q2 profit shines, stock still loses luster
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