AT&T posts $6.7B loss despite surging smartphones
Verizon wasn't the only telecommunications company to slip into the red this week. AT&T said this morning it lost $6.7 billion during the fourth quarter on the cost of its benefit plans, the downgrade of the value of its directory assets and a $4 billion charge for its attempt to acquire T-Mobile USA.
Excluding one-time items that contributed to the $1.12 per-share loss, AT&T would have made 42 cents per share. Sales rose 3.6 percent year-over-year to $32.5 billion.
AT&T U-verse TV added 208,000 subscribers to reach 3.8 million in service. In the fourth quarter, 90 percent of those customers also subscribed to broadband, and about half took AT&T U-verse Voice.
ARPU for U-verse triple-play customers was almost $170, up 2.5 percent year-over-year, the company said.
Verizon hit its limit of 18 million homes passed for FiOS, and AT&T signaled it may be done with its U-verse build-out now that it has reached its goal of passing 30 million living units.
AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached 5.6 million at the end of the quarter.
On the wireless side, the demise of the T-Mobile deal has increased tensions between AT&T and the FCC, whose opposition to the deal contributed significantly to its failure.
President and CEO Randall Stephenson skewered the agency during remarks on a conference call with analysts, saying, "Even the most smallest and routine spectrum deals are receiving intense scrutiny."
"It appears that the FCC is intent on picking winners and loser rather than letting the markets work," Stephenson said, stumping for proposed legislation that would limit the FCC's ability to create new regulations and impose conditions on spectrum auctions and mergers.
Aside from its grim opinion of the regulatory environment, wireless was a bright spot for the country's second-largest mobile operator.
"Our mobile broadband sales were nothing short of incredible," CFO John Stephens said during the company's earnings call.
AT&T solidified its lead in the smartphone arena, selling a record 9.4 million smartphones, nearly double the number sold during the third quarter. It activated 7.6 million iPhones, blowing past the 4.3 million iPhones sold by Verizon Wireless during the fourth quarter.
The majority of AT&T's new iPhone activations were for the iPhone 4S, which went on sale Oct. 14.
AT&T didn't break out specific numbers for its Android smartphone sales but said it sold "more than twice as many" Android devices during the last three months of 2011 than it did during the same period in 2010. The company also said it sold 311,000 tablets, more than half of which were on contract.
Smartphone customers now make up nearly 57 percent of AT&T's postpaid base, compared with the 44 percent of Verizon Wireless' postpaid subscribers who use smartphones.
AT&T posted strong net adds, but nearly half of its new customers came from connected devices, which tend to generate less revenue than more lucrative smartphone customers.
Of AT&T's 2.5 million net new customers, about 1.03 million were connected devices, and another 592,000 stemmed from resellers. AT&T added 717,000 net new postpaid customers and 159,000 prepaid customers, coming short of the 1.2 million postpaid and 252,000 prepaid customers added by Verizon Wireless last quarter.
AT&T's wireless subscriber base now stands at 103.2 million, slightly less than Verizon Wireless' 108.7 million connections.
The heavy cost of subsidizing smartphones pressured profits at Verizon Wireless last quarter, and that was no different at AT&T as its profit margins dipped more than 7 percentage points. AT&T's wireless division made $2.5 billion on sales of $16.7 billion during the fourth quarter, a 27 percent decline from the previous year's profit of $3.46 billion.
A 19 percent increase in AT&T's wireless data revenues helped total postpaid ARPU inch up to $63.76. Postpaid data ARPU came in at $26.01.
Postpaid churn ticked up to 1.21 percent, from 1.15 percent the previous year. Churn across AT&T's entire wireless base came in at 1.39 percent, from 1.32 percent.
AT&T's tiered data plans appear to be gaining traction. About 22 million of its smartphone subscribers have signed on to the plans, with about 70 percent choosing higher-tier plans.
Looking ahead, AT&T expects top-line growth across all of its businesses and a 2 percent increase in postpaid wireless ARPU to result in "mid-single-digit" earnings growth, excluding "any significant items." It isn't banking on much help from the nation's struggling economy and said "little economic lift" was included in its forecast.
AT&T also said it will "immediately" act on a plan to repurchase 300 million shares.
For the full-year 2011, company-wide sales rose 2 percent to $126.7 billion. The increase in revenue wasn't reflected in its annual profits, which dropped 80 percent to $3.9 billion, from $19.9 billion in 2010.
– CED's Brian Santo contributed to this report