 |
Despite a 9 percent drop in revenue for the first quarter, AT&T (NYSE: T) pleased Wall Street today with solid financial numbers driven primarily by the Apple iPhone, wireless services and growth in its enterprise business.
Net income for the first quarter totaled $3.1 billion, or $0.53 per share, down year-over-year from $3.5 billion, or $0.57 per share — but topping analysts’ forecasts of a per-share profit of $0.48. Revenue, however, was less impressive, totaling $30.6 billion, down from $30.7 billion from a year earlier, and under analysts’ expectations at $31.1 billion, according to Reuters Estimates.
Though wireless revenues are under siege from pre-paid service providers enticing customers who are on a budget and want to avoid commitments to subscriber plans, the telecom giant is doing well, AT&T CFO Rick Lindner told analysts on a call.
“We’ve had a solid first quarter, and our focus is, first, to execute discipline on the cost side, and then to continue to invest and drive growth in wireless data, business and u-Verse [digital television] services.”
The company’s wireless business posted a 13 percent increase in profit and nearly 9 percent gain in revenue. The rate of customer cancellations held stable at 1.2 percent despite increasing pressure for customers to cut costs.
Wireless data again proved to be an especially bright spot. AT&T’s wireless data revenues grew by $884 million, or 38.6 percent, to $3.2 billion. Data service revenues checked in at 27.2 percent of AT&T’s first-quarter wireless revenues, up from 21.5 percent in the year-earlier quarter.
A large part of the credit for that performance goes to the Apple (NASDAQ: AAPL) iPhone, for which AT&T is the exclusive U.S. carrier.
In previous quarters, the high cost of the iPhone had actually hurt AT&T’s earnings. But with iPhone users contributing to AT&T’s growing data usage, the effort is paying off, Lindner said.
“We said that our upfront investment in iPhone customers would depress margins in the short-term,” he said. “But given the attractive customer profile, it would support margins in the quarters and years ahead, and that’s what you see in our first-quarter results.”
Additionally, Lindner said AT&T added 1.2 million net new subscribers, with three-quarters of that signing long-term contracts. Naturally, Apple’s iPhone played a significant role, as AT&T activated 1.6 million new iPhone accounts in the quarter.
“We are well positioned for the next wave of growth,” Lindner said. “We have our GSM platform, a great device lineup with the iPhone, the BlackBerry Bold, netbooks, and the third driver for wireless data is apps, which will come from thousands of developers around the world.”
The number of 3G devices on AT&T’s wireless network also more than doubled over the past year, the company said, adding that at the end of the first quarter, 40.8 percent of postpaid wireless subscribers had a 3G device, up from 19.5 percent one year earlier.
Also, the number of integrated devices on AT&T’s network has more than doubled over the past year, the company said.
Still, it’s not clear whether AT&T will be adding one more: a new, widely rumored iPhone, expected out this summer.
Lindner declined to provide any specifics on the possibility. “New product announcements, pricing, that falls to Apple to make those types of announcements,” he said. “But I would just reiterate, first, we continue to have a very good relationship with Apple, and second, we’re thrilled to have their product as part of our lineup. It’s a situation where the customer characteristics are strong.”
On the wireline front, voice revenue is down 5.4 percent, but the company added 359,000 broadband customers and 284,000 U-Verse TV customers. Lindner said revenue per household is actually up in this area.
Meanwhile, business revenue was down 4.4 percent, which he attributed to layoffs and the recession, but growth in IP-based data revenue helped to offset the decline.
Lindner said that wireline IP-based data revenue grew by 16.4 percent, based on the company’s “most advanced” offerings, plans and services including Ethernet, VPN and hosted IP conferencing.
It remains to be seen if other big players in the wireless industry will fare as well as AT&T, with Verizon Wireless (NYSE: VZ) scheduled to report earnings on April 27, Sprint Nextel (NYSE: S) on May 4 and Deutsche Telekom (NYSE: DT), which owns T-Mobile USA, slated for May 7.
