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Data Demand, Wireless Services Fuel AT&T Revenue

AT&T
Source: Reuters

Increasing demand for data services and wireless connectivity are key segments driving revenue growth for AT&T (NYSE: T), as more enterprises migrate to IP technology and big business contracts cement future growth expectations, AT&T reported during today's quarterly earnings call.

Despite a few months of shaky economics and ever-increasing competition in the mobile sector, AT&T reported double-digit growth for the 12th consecutive quarter, with first-quarter profits increasing 21.5 percent to $3.46 billion. That translates to 57 cents per share, up 12 cents, from $2.85 billion a year ago.

The boost is strongly tied to an 18.3 percent growth in wireless revenue and a 22.9 percent increase in IP data revenue. Both are key factors cited by AT&T that contributed to a 4.6 percent growth in consolidated adjusted revenue.

Enterprise high-speed Internet services and consumer connectivity increased 13.9 percent year over year to 14.6 million.

Industry watchers said results indicate AT&T understands where users and enterprises needs are today and for the near future. The question is if the carrier's strategy will remain solid when facing stronger competition and potentially darker economic times.

"They're doing great in an industry where others are struggling," Jeff Kagan, telecom analyst, told InternetNews.com. "They're offering compelling and easier-to-use devices," he said, adding that the company has performed well while transitioning from traditional phone services to a world of Internet voice and data technology.

"AT&T is clearly making that transition from landline revenue to wireless revue and getting rid of business programs in decline," said Carmi Levy, senior vice president for strategic consulting at AR Communications.

Tuesday's earnings call followed last Friday's layoff announcement that the carrier was cutting 4,600 jobs -- a 1.5 percent workforce cut. That news, Kagan said, further substantiates that AT&T is on target.

"The industry is changing, and AT&T realizes it can't be overloaded in areas where demand isn't needed and they're adjusting," he said.

According to AT&T, revenue growth in the enterprise data segment was tied to managed services and specific solutions such as VPN technology. AT&T cited these aspects as "signature" wins in its earnings call.

"They're being driven by both new and existing services customers," McCall Butler, AT&T's senior vice president, told InternetNews.com.

The most notable, thought not financial, user impact has been from the carrier's iPhone user base. Apple chose AT&T as sole carrier for the flashy device that debuted last June.

At the time AT&T reported it had signed up 146,000 subscribers in just two months. Although she declined to provide current iPhone subscription figures, Butler said data use among iPhone users has been "significant."

The average iPhone user spends an average of $90 a month in voice and data services, while the average enterprise wireless user cost hovers around $50 a month.

That's in line with recent studies about iPhone user trends. One report noted that iPhone users spend 12.1 percent of their time accessing the Internet compared with just 2.4 percent for all U.S. mobile phone users.

"We have seen a 57 percent increase in wireless data use among iPhone users," said Butler, noting that 40 percent of iPhone subscribers are new customers to AT&T services.

One program announced this week is aimed at wooing small and medium-size enterprises to AT&T via BlackBerry. AT&T has also initiated new BusinessTalk voice plans, starting at $60 a month for five users.

Ovum analyst Jan Dawson noted that AT&T has done a good job in growing the wireless segment. "They're allowing enterprises to do more with data but also do it with more efficiency and cost savings," Dawson said.

According to industry pundits, the key aspect to AT&T's continued growth will hinge on its ability to build out a service foundation that can sustain a stormy economic churn.

"With its diversification [in services], though, AT&T is in a better position than most right now to survive," Levy said.