January 28, 2014 11:58 pm

AT&T boosted by mobile data services

Strong demand for mobile data services and expanded wireless margins helped AT&T, the largest US telecoms group, report solid fourth-quarter results, but relatively modest mobile subscriber gains reflected the impact of increased competition.

The results came the day after AT&T damped speculation it would launch a bid for Britain’s Vodafone in the next six months, and after US rival Verizon completes its acquisition of Vodafone’s stake in Verizon Wireless.

In the short term, AT&T is expected to focus on its domestic market and in particular on expanding the market for smartphones by persuading customers who still own older-style “feature phones” to trade up.

AT&T added 1.2m postpaid smartphone accounts during the fourth quarter and said that at the end of the period 77 per cent, or 51.9m, of its monthly contract customers had smartphones, up from 70 per cent a year earlier.

Mobile data revenues rose to $5.7bn, up 16.8 per cent from the year ago period, while total wireless revenues grew a modest 4.5 per cent to $18.4bn. Wireless margins in the quarter expanded to 21.4 per cent compared with 14.5 per cent a year ago, in part reflecting slower smartphone growth.

It reported fourth-quarter net income of $6.9bn*, or $1.31 a share, as operating revenues rose 1.8 per cent from a year ago to $33bn. It was a big turnround from a year ago when it recorded a $3.8bn quarterly loss due to charges related to its failed takeover of T-Mobile USA, pension costs and expenses related to subsidising iPhones.

Weaker smartphones sales growth, particularly of premium models like Apple’s iPhone and Samsung’s Galaxy devices, was reflected earlier this week when Apple reported iPhone sales that missed analysts' expectations sending the shares tumbling more than 8 per cent.

AT&T’s mobile unit added 566,000 postpaid wireless subscribers in the fourth quarter, including 299,000 smartphones. In contrast, Verizon Wireless, the largest US mobile operator, added 1.7m retail net connections in the fourth quarter, including 1.6m retail postpaid net connections.

Earlier this month T-Mobile US, which has shaken up the US mobile market with a series of pricing and other moves under its “un-carrier strategy” over the past year, said it added 1.645m net customers in the latest quarter including 869,000 retail postpaid subscribers.

Asked about the competition during a conference call with analysts, Randall Stephenson, AT&T’s chief executive, said there was “a lot of noise in the market”.

He said AT&T would continue to respond to competitive moves. “You have to be aggressive in the market and to have your ear to the ground and listen to what consumer want, but you [also] have to have good network quality to compete.”

AT&T is nearing the completion of the rollout of its 4G wireless network based on LTE technology and Mr Stephenson’s comments reflect his conviction that consumers will choose their mobile operator based on the reach and quality of their mobile networks.

Outside its mobile business, AT&T’s revenues from fixed lines fell 1.4 per cent to $14.7bn* in the quarter. But the decline in fixed line revenues is slowing because the loss of traditional phone lines is being offset by the growth of its U-verse IPTV and broadband business. U-verse revenues grew 27.9 per cent year over year.

* These figures have been corrected from the original article.

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