Citing strength in both its wireless and wireline businesses, AT&T reported Q1 2014 revenues of 32.5 billion, up 3.6 percent versus the year-earlier period, the company’s strongest growth in more than two years. Compared with results for the first quarter of 2013, operating expenses were $26.2 billion versus $25.4 billion; operating income was $6.3 billion compared to $5.9 billion; and operating income margin was 19.3 percent compared to 18.9 percent.
First-quarter 2014 net income attributable to AT&T totaled $3.7 billion, or $0.70 per diluted share, compared to $3.7 billion, or $0.67, in the year-ago quarter. Adjusting for $0.01 of Leap transaction-related costs, earnings per share was $0.71 compared to an adjusted $0.64 in the year-ago quarter, an increase of almost 11 percent.
“We have been working very deliberately to transform our business, and this quarter you really start to see the benefits,” said Randall Stephenson, AT&T chairman and CEO. “Customers really like the new mobility value proposition and are choosing to move off device subsidies to simpler pricing while at the same time, they are continuing to move to smartphones with larger data plans.
Some Wireless highlights for Q1 2014:
- Total wireless revenues, which include equipment sales, were up 7.0 percent year over year to $17.9 billion.
- Wireless operating expenses totaled $12.8 billion, up 6.6 percent versus the year-earlier quarter, and wireless operating income was $5.1 billion, up 8.1 percent year over year.
- Strongest First-Quarter Postpaid Net Adds in Five Years. AT&T added more than 1 million subscribers in the first quarter, with year-over-year improvements in every category.
- Total wireless subscribers increased by 1,062,000 in the quarter, led by 625,000 postpaid net adds and 693,000 connected device net adds.
- There was a net loss of 50,000 prepaid subscribers, due to declines in session-based tablets, and a net loss of 206,000 reseller subscribers, primarily due to losses in low-revenue 2G subscriber accounts. Prepaid net adds include first-quarter results from Leap Wireless only after AT&T acquired the company on March 13.
- Postpaid net adds include 311,000 smartphones. Total branded smartphone net adds (both postpaid and prepaid) were 566,000. Total branded tablet net adds were 313,000.
- Total churn was essentially stable at 1.39 percent compared to 1.38 percent in the year-ago quarter. Postpaid churn of 1.07 was down sequentially and up slightly compared to 1.04 percent in the year-ago quarter.
- AT&T added 1.1 million postpaid smartphones in the first quarter. At the end of the quarter, 78 percent, or 53.0 million, of AT&T's postpaid phone subscribers had smartphones, up from 72 percent, or 48.3 million, a year earlier.
- Smartphones accounted for 92 percent of postpaid phone sales in the quarter, a first-quarter record. AT&T’s ARPU for smartphones is about twice that of non-smartphone subscribers. At the end of the first quarter,
- 57 percent of AT&T’s postpaid smartphone customers used an LTE-capable device. The company sold 5.8 million smartphones in the quarter.
- At the end of the first quarter, 46 percent of Mobile Share accounts had 10 gigabyte or higher plans, up from 28 percent in the year-ago quarter and 27 percent in the fourth quarter of 2013. In total, about 81 percent, or 42.9 million, of postpaid smartphone subscribers are on usage-based data plans (tiered data and Mobile Share plans). This compares to 33.5 million a year ago.
Some Wireline highlights for Q1 2014:
- Total first-quarter wireline revenues were $14.6 billion, down 0.4 percent versus the year-earlier quarter. Wireline service revenues were up 0.1 percent year over year.
- Total U-verse revenues grew 29.0 percent year over year. First-quarter wireline operating expenses were $13.1 billion, up 0.9 percent versus the first quarter of 2013.
- AT&T’s wireline operating income totaled $1.5 billion, down 10.5 percent versus the first quarter of 2013. First-quarter wireline operating income margin was 10.0 percent versus 11.1 percent in the year-earlier quarter, primarily due to U-verse content price increases, declines in voice revenues, success-based growth and costs incurred as part of Project VIP.
- Revenues from residential customers totaled $5.7 billion, an increase of 4.3 percent versus the first quarter a year ago. This is the strongest consumer revenue growth since the introduction of U-verse eight years ago. Continued strong growth in consumer IP data services in the first quarter more than offset lower revenues from legacy voice and data products. U-verse, which includes TV, high speed Internet and voice over IP, now represents 59 percent of wireline consumer revenues, up from 48 percent in the year-earlier quarter. Consumer U-verse revenues grew 28.3 percent year over year.
- Total U-verse subscribers (TV and high speed Internet) reached 11.3 million in the first quarter. U-verse TV added 201,000 subscribers in the first quarter to reach 5.7 million in service. AT&T has more pay TV subscribers than any other telecommunications company.
- U-verse high speed Internet had a first-quarter net gain of 634,000 subscribers, to reach a total of 11.0 million. That marks seven consecutive quarters with U-verse broadband net adds of more than 600,000.
- Overall, total wireline broadband subscribers increased by 78,000.
- Total wireline broadband ARPU was up 9 percent year over year. Total U-verse high speed Internet subscribers now represent more than two-thirds of all wireline broadband subscribers, compared with 51 percent in the year-earlier quarter.
Some highlights for Strategic Business Services:
- Total revenues from business customers were $8.7 billion, down 2.7 percent versus the year-earlier quarter. Business service revenues declined 2.1 percent year over year.
- Overall, declines in legacy products were partially offset by continued double-digit growth in strategic business services. Revenues from these services, the next-generation capabilities that lead AT&T's most advanced business solutions — including VPN, Ethernet, cloud, hosting and other advanced IP services — grew 16.1 percent versus the year-earlier quarter. These services represent an annualized revenue stream of more than $9 billion and are more than 26 percent of wireline business revenues.
- During the first quarter, the company also added 64,000 business U-verse high speed broadband subscribers.
1Q14 - Investor slides