the biggest U.S. phone company, reported fourth-quarter subscriber gains that exceeded some analysts’ estimates, helped by Apple Inc.’s iPhone and devices like e-readers.
About 2.7 million net new wireless customers signed up last quarter, the Dallas-based company said today in a statement. The carrier activated 3.1 million iPhones. Smartphone users typically generated about 80 percent more revenue than the average customer, AT&T said.
AT&T may build on its success with the iPhone, for which it has exclusive rights in the U.S., by teaming up with Apple for its new tablet device, the iPad. AT&T and rival Verizon Wireless are offering wireless service for a broader variety of devices, such as e-readers and netbook computers, to compensate for slowing growth in mobile-phone customers.
“Just like the iPhone really spurred innovation in the smartphone space, I would think the iPad is going to do the same for e-readers,” said Todd Rethemeier, a New York-based analyst at Hudson Square Research, who advises investors to buy AT&T.
Apple said yesterday that AT&T would provide wireless service for some models of the iPad, which has a touch-screen keyboard and a 9.7-inch (25-centimeter) display for viewing Web pages and online books. AT&T also sells Amazon.com Inc.’s Kindle and the Barnes & Noble Inc. Nook e-readers, putting 1 million “emerging devices” on its network last quarter.
Share Performance
The device won’t be subsidized by AT&T, like the iPhone, and customers will have to prepay for the data plans, making it relatively cheap to acquire new customers, Chief Financial Officer Rick Lindner said in a conference call today. The company also isn’t sharing the tablet computer’s service revenue with Apple.
Net income advanced to 51 cents a share, matching the average estimate of analysts in a Bloomberg survey. Sales fell less than 1 percent to $30.9 billion, also meeting estimates.
Total subscriber gains beat Verizon Wireless’s 2.2 million additions and exceeded the 1.8 million estimate of Hudson Square’s Rethemeier. AT&T gained 910,000 contract subscribers in the quarter, compared with the 1 million that Wells Fargo & Co. analyst Jennifer Fritzsche and Deutsche Bank Securities Inc. analyst Brett Feldman forecast.
AT&T fell 8 cents, or 0.3 percent, to $25.54 at 4 p.m. in New York Stock Exchange composite trading. That compares with a 0.9 percent drop for the Standard & Poor’s 500 Telecommunication Services Index.
New Subscribers
The company added 248,000 U-verse television customers and 267,000 Internet subscribers. The company’s TV connections for the service almost doubled last year.
AT&T said revenue will be “stable” this year and per- share earnings may improve. The company’s capital spending will be $18 billion to $19 billion this year, compared with $17.3 billion in 2009.
Sales in the fixed-line division declined 5.3 percent. AT&T has relied on growth in its wireless division, which makes up more than 40 percent of sales, to compensate for shrinking ranks of fixed-line customers. The company also is coping with declining sales to businesses, which have cut fixed phone lines as they lay off employees.
Apple’s iPhone has helped add millions of customers at AT&T since the smartphone came out in 2007. That also has led to decreasing customer satisfaction, as traffic from the iPhone and similar devices overloaded parts of AT&T’s network.
Network Upgrade
Wireless chief Ralph de la Vega has pledged to upgrade the network in areas where the surge in iPhone traffic has hurt service quality. New York and San Francisco’s networks are performing below AT&T’s standards, he said last month. Apple Chief Operating Officer Tim Cook said this week that his company is satisfied with AT&T’s plans supports the carrier.
AT&T said today that customers should see “significant improvement” in the two areas in the next few months as the company bulks up its network infrastructure.
“They may well be successful addressing the network congestion issues,” said Craig Moffett, a New York-based Sanford C. Bernstein analyst who rates AT&T “market perform” and doesn’t own the shares. “How do you fix the lingering perception that AT&T is an inferior network? It may be that they can address the reality much more easily than they can address the perception.”
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AT&T Fourth-Quarter Subscriber Gains Top Some Estimates
Source: Bloomberg
Date: 01/28/2010
