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U-verse doing OK, but wireless drives AT & T's Q4

Thu, 01/27/2011 - 7:45am
Brian Santo

U-verse remains a modest, though growing success for AT&T, which just reported its fourth-quarter earnings.

AT&T said it recorded its second consecutive quarter of year-over-year growth in wireline consumer revenues, growth it said was driven by U-verse. That included a net gain of 246,000 U-verse TV subscribers, giving it a total of just fewer than 3 million. Toss in satellite TV customers, and the company now has a total of 4.9 million TV subs.

About 90 percent of U-verse TV customers also take U-verse broadband, and about 60 percent take VoIP. AT&T said U-verse passes 27 million "living units."

IP services – U-verse, basically, as opposed to legacy voice and DSL – represented 45 percent of AT&T consumer wireline revenue as of the end of the quarter, up from 35.3 percent in the similar quarter a year ago.

Despite all of that, U-verse gains are not enough to offset losses in DSL and traditional phone customers, the company said.

For the full year 2010, compared with 2009 results, AT&T's consolidated revenues totaled $124.3 billion versus $122.5 billion. Net income was $19.9 billion versus $12.1 billion.

Like Verizon, which reported earnings yesterday, AT&T is relying on its wireless network as the main focus of its broadband strategy.

iPhone defections expected
AT&T soared in the fourth quarter of last year as record numbers of new subscribers flocked to high-end devices, but the company warned that the first half of the year could be unpredictable as it loses its exclusive grip on the iPhone.

AT&T CEO Randall Stephenson said in the company's earnings call that more than 90 percent of the company's iPhone subscribers are under contract, but warned that "it may be rocky in the beginning of the year, volatile and hard to predict" after Verizon Wireless begins selling the iPhone on Feb. 10.

The high fees associated with breaking a contract will buffer AT&T from large-scale defections to Verizon over the iPhone, and Stephenson said the company expects to continue to add customers in the upcoming months.

AT&T CFO Rick Linder emphasized that customers continued to flock to AT&T for the iPhone despite widespread expectations that the device was about to land at Verizon Wireless.

"As we look at the trends, what we're seeing is continued strong iPhone sales despite the anticipation of the iPhone being non-exclusive," Linder said, adding that the company expects to see strong smartphone sales going forward. "In terms of how you compete in this environment, we feel we're in a good position. We're going to have a tremendous device portfolio for customers to choose from."

AT&T activated 4.1 million iPhones in the fourth quarter and 3.3 million other "integrated devices" – cell phones with qwerty keyboards or touchscreens, bringing the company's total integrated device sales to 7.4 million. The company's foray into tablets paid off as it sold 442,000 iPads and Android-based tablets in the fourth quarter.

The three months before Dec. 31, 2010, marked AT&T's best-ever quarterly net adds as 2.8 million new customers signed up for the company's service. The net adds included 400,000 postpaid customers, 307,000 prepaid customers, 1.5 million connected devices and 595,000 new customers from resellers.

Data usage drove the eighth consecutive quarter of growth for AT&T's postpaid ARPU growth, which reached $62.88 in the fourth quarter. Postpaid data ARPU grew nearly 18 percent to $22.64.

AT&T's wireless division saw its profits dip slightly to $3.4 billion on a 10 percent increase in sales, which rose to $15.2 billion. Wireless data revenue rose 27 percent to $4.9 billion.

Looking ahead, Stephenson said the company was "bringing Android into the mix very aggressively this year" and had resolved some backlog with its equipment vendors to increase capacity in key markets, including San Francisco and New York City. The company expects sales to increase over the next year.

– Wireless Week's Maisie Ramsay contributed to this report

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