AT&T Rustles Up New Subscribers, Beats Street
Subscribers flocked to AT&T in the third quarter, helping to push revenue and profit beyond analyst expectations. The company will have a balancing act to do going forward, though, noted Credit Suisse analyst Joseph Mastrogiovanni. "As AT&T's basic feature phone base becomes smaller, it could reduce the smartphone adds." That's not likely to happen for at least another 12 months, however.
AT&T on Wednesday posted third-quarter earnings that beat analyst expectations with increases in revenue and net income, thanks largely to solid subscriber growth.
It reported net income of US$3.8 billion, or 72 cents per share, a 4.9 percent increase from the $3.6 billion, or 63 cents per share, it reported in the same quarter a year ago. Revenue was up 2.2 percent to $32.16 billion.
Wireless subscribers increased by 989,000, including 363,000 contract wireless customers, compared with an increase of just 151,000 a year ago and 551,000 during the second quarter.
New tablet users accounted for 388,000 of those users, and postpaid smartphone users for 178,000. AT&T sold 6.7 million smartphones over the three-month period, a third-quarter record.
Win Some, Lose Some
Smartphone subscriber growth, which is helping to offset the loss of feature phone users, likely will continue in the short term, said Credit Suisse analyst Joseph Mastrogiovanni.
"As AT&T's basic feature phone base becomes smaller, it could reduce the smartphone adds," he told the E-Commerce times. "However, AT&T still has feature phone subscribers in its postpaid subscriber base which will be enough to fuel smartphone subscriber adds for at least another 12 months."
Customers left at a slower rate. Churn was 1.07 percent, down slightly from the 1.08 percent during the third quarter of 2012.
Total wireless revenue hit $17.5 billion, up 5.1 percent for the quarter. Wireless data revenue also increased, making a 17.6 percent jump to $5.5 billion.
"AT&T reported very solid results," Mastrogiovanni added. "The company can manage its way through heavier wireless competition and tighten the spread on subscriber growth."
Investing in Growth
AT&T is investing in the expansion of both its LTE wireless network and its U-verse fiber-optic service, which saw a 28.1 percent increase in revenue from the same time a year ago. U-verse TV added 265,000 subscribers, bringing its total number to 5.3 million. U-verse broadband subscriptions also were up, with AT&T adding 655,000 subscribers to hit the 9.7 million mark.
That focus in growth outside of phone contracts has served the company well so far, and will be crucial to AT&T's success going forward, said tech analyst Jeff Kagan.
"The wireless world today is growing, but growth is changing," he told the E-Commerce Times. "Not every area in wireless is booming, but the industry in general is. The latest numbers from AT&T continue to look positive and strong. AT&T remains one of the most innovative growth companies in wireless today."
AT&T might not be on track to overtake Verizon, Kagan acknowledged, but as long as it can continue to anticipate consumer demand and invest in growth markets, it should continue to enjoy similar solid quarters going forward.
"Companies like AT&T must continue to stay in touch with customer expectations and demands and continue to offer them what they want," he pointed out. "So far, they have done an excellent job."