Wednesday, July 20, 2011

AT&T Boosts CAPEX as Smartphones Drive Q2

Driven by mobile data, smartphone and U-verse, AT&T reported Q2 revenues of $31.5 billion, up more than $680 million, or 2.2 percent, versus the year-earlier quarter, marking the company's sixth consecutive quarter with a
year-over-year revenue increase. Profit declined to $0.60 diluted EPS, compared to $0.67 diluted EPS, versus the year-earlier period.

"Mobile broadband growth continues to be robust, and we are seeing encouraging signs in wireline revenues. This adds to our confidence as we look ahead. Mobile broadband with IP infrastructure and cloud services are transforming our industry and are creating unprecedented opportunity. AT&T is strongly positioned to lead in this new era," Stephenson said. "Our planned acquisition of T-Mobile USA will accelerate development of next-generation capabilities, and it will lay the groundwork for continued high-tech innovation for years to come," stated Randall Stephenson, AT&T chairman and chief executive officer.

With the upcoming LTE launch this summer, AT&T is increasing its CAPEX to the $20 billion for the year. Previously, the company expected capital expenditures in the low-to-mid $19 billion range.

Second-quarter 2011 cash from operating activities totaled $9.0 billion, and capital expenditures totaled $5.3 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $3.7 billion.

Some highlights from the company's earnings presentation:

  • a net gain in total wireless subscribers of 1.1 million, to reach 98.6 million in service

  • postpaid net adds of 331,000. Excluding the impacts of the Alltel and Centennial integration migrations, postpaid net adds were 504,000. Prepaid net adds were 137,000, connected device net adds were 379,000 and reseller net adds were 248,000.

  • a record quarter with branded computing subscribers, a new growth area for the company that includes tablets, aircards, MiFi devices, tethering plans and other data-only devices. AT&T added 545,000 of these devices to reach 4.0 million, nearly twice as many in service as a year ago. Most of those new subscribers were tablets, with 377,000 added in the quarter, of which 30 percent were postpaid.

  • total churn was 1.43 percent versus 1.29 percent in the second quarter of 2010 and 1.36 percent in the first quarter of 2011. Postpaid churn was 1.15 percent, compared to 1.01 percent in the year-ago second quarter and 1.18 percent in the first quarter of 2011. Excluding the impacts of the Alltel and Centennial migrations, postpaid churn of 1.06 percent for the quarter was relatively stable with 0.99 percent in the year-ago quarter and better than the 1.12 percent in the first quarter of 2011.

  • 5.6 million smartphones were sold, a second-quarter record and the third-highest quarter ever. Smartphone sales also increased more than 43 percent year over year. Sales of non-iPhone smartphones more than doubled year over year. Nearly 70 percent of postpaid device sales were smartphones.

  • 3.6 million iPhones were activated.

  • at the end of the quarter, 49.9 percent of AT&T's 68.4 million postpaid subscribers had smartphones, up from 35.8 percent a year earlier. The average ARPU for smartphones on AT&T's network is 1.8 times that of the company's non-smartphone devices. More than 85 percent of smartphone subscribers are on FamilyTalk or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.

  • total wireless revenues, which include equipment sales, were up 9.5 percent year over year to $15.6 billion. Wireless service revenues increased 7.4 percent, to $14.2 billion, in the second quarter.

  • wireless data revenues increased more than $1 billion, or 23.4 percent, from the year-earlier quarter to $5.4 billion. AT&T's postpaid wireless subscribers on monthly data plans increased by 19.5 percent over the past year.

  • total text messages carried on the AT&T network increased by 24 percent to 190.8 billion, and multimedia messages increased by 54 percent to 4.0 billion, compared to a year ago.

  • revenues from residential customers totaled $5.4 billion in the second quarter. Versus the second quarter of 2010, consumer wireline revenues increased 0.1 percent, the fourth consecutive quarter of year-over-year growth, and revenues also increased sequentially.

  • AT&T U-verse TV added 202,000 subscribers to reach 3.4 million in service.

  • ARPU for U-verse triple-play customers was $170, up 8.3 percent year over year.

  • AT&T's U-verse deployment now reaches 29 million living units. Companywide penetration of eligible living units is 15.5 percent, and overall penetration is 25.0 percent across areas marketed to for 36 months or more.

  • AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached 5.3 million at the end of the quarter, representing 21.5 percent of households served.

  • AT&T U-verse High Speed Internet delivered a second-quarter gain of 439,000 subscribers to reach a total of 4.1 million, helping offset losses from DSL.

  • At the end of the second quarter, AT&T had 16.5 million total wired consumer broadband connections, up 3.3 percent over the past year and down slightly from first-quarter 2011 levels largely due to seasonality. About 70 percent of consumers have a broadband plan of 3 Mbps or higher.

  • Consumer IP revenues now represent 49.2 percent of AT&T's wireline consumer revenues, up from 40.4 percent in the year-earlier quarter.

  • Increased AT&T U-verse penetration and a significant number of subscribers on triple- or quad-play options drove 21.9 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice) and 5.6 percent sequential growth. U-verse revenues grew 57.0 percent compared with the year-ago second quarter and 10.7 percent versus the first quarter of 2011.

  • Total business revenues were $9.3 billion, declining 0.3 percent sequentially and down 4.1 percent versus the year-earlier quarter.

  • Revenues from the new-generation capabilities that lead AT&T's most advanced business solutions — including Ethernet, VPNs, hosting, IP conferencing and application services — grew 19.4 percent versus the year-earlier quarter continuing strong trends in this area. This now represents a more than $5.5 billion annualized revenue stream.

  • Total business IP data revenues grew 8.8 percent versus the year-earlier second quarter, led by growth in VPN revenues. IP-based solutions allow customers to easily add managed services such as network security, cloud services and IP conferencing on top of their infrastructures. Total business data revenues grew 0.4 percent year over year and grew 0.9 percent sequentially.

A webcast is on the AT&T Investor site.