AT&T Inc., the biggest U.S. phone company, reported third-quarter profit that beat analysts’ estimates as the iPhone helped attract a record number of new customers.
Net income amounted to 54 cents a share, beating the 50- cent average of estimates compiled by Bloomberg. Sales fell 1.6 percent to $30.9 billion, AT&T said today in a statement. AT&T added 2 million wireless users, the biggest third-quarter figure in its history, with 1.4 million signing up for contracts.
AT&T has kept adding wireless users by focusing on Web- equipped devices like Apple Inc.’s iPhone, the top-selling U.S. consumer smart phone in the second quarter. Most of the company’s new contract subscribers were iPhone users, said Chris Larsen, a New York-based analyst at Piper Jaffray Cos.
“Wireless sales overall were strong,” said Larsen, who rates AT&T “overweight” and doesn’t own the shares. “What happened? They sold the iPhone.”
Net income fell 1.2 percent to $3.19 billion from $3.23 billion, or 55 cents a share, a year earlier. Leaving out a 3- cent-per-share tax-related benefit and a 2-cent expense for severance costs, earnings would have been 53 cents.
AT&T, led by Chief Executive Officer Randall Stephenson, rose 16 cents to $26.10 in New York Stock Exchange composite trading at 4 p.m. The carrier trails Verizon Wireless in mobile- phone subscribers.
Revenue Forecast
AT&T’s revenue in 2009 will fall “slightly below” last year’s $124 billion, Chief Financial Officer Rick Lindner said today on a conference call.
Customer turnover, or churn, dropped to a record low of 1.43 percent from 1.69 percent a year earlier. Turnover on long- term contracts fell to 1.17 percent from 1.22 percent. The iPhone probably helped reduce churn, along with AT&T’s own long- term strategy to improve retention, Larsen said.
Customers who use smart phones such as the iPhone typically spend 80 percent more than the average customer per month, AT&T has said. The company’s wireless unit accounted for about half of operating profit last year. AT&T has been the exclusive carrier for the iPhone in the U.S. since its debut in 2007.
AT&T will continue to expand its wireless business even if it loses the exclusive contract to sell the iPhone in the U.S., said Ralph de la Vega, president and CEO of AT&T’s consumer and wireless businesses, on the conference call. The company is improving its network to offer faster speeds than other carriers, which will make the iPhone perform better with AT&T than with competitors, he said.
Michael Coe, an AT&T spokesman, declined to say when AT&T may lose its exclusivity agreement. Rick Franklin, an analyst at Edward Jones & Co. in St. Louis, said in August that the deal may end as soon as 2011.
U-Verse Subscribers
AT&T is also working with manufacturers to introduce handsets using Google Inc.’s Android software, de la Vega said. The devices may take advantage of the ability of AT&T’s network to handle voice and data transmissions simultaneously, he said.
AT&T added 240,000 net new U-Verse TV subscribers last quarter, bringing its total to 1.8 million. The company is relying on U-Verse service, which provides video over phone lines, to persuade land-line clients not to switch to cable-TV carriers that offer voice service. Sales from the U-verse technology, including video, voice and Internet revenue, will exceed $2 billion this year, Lindner said today.
AT&T’s 2 million wireless customer additions beat Larsen’s 1.7 million prediction. The company also activated 3.2 million iPhones, with almost 40 percent of users new to AT&T.
Revenue from data subscribers grew 34 percent to $3.6 billion. Wireline revenue fell 7.1 percent to $16.3 billion, accounting for more than half of sales.
AT&T plans to spend as much as $18 billion this year on its network, partly on making its third-generation network twice as fast. Verizon Wireless is upgrading by switching to new technology called long-term evolution, designed to let customers access the Internet and data features at high speeds. Verizon plans to make it available in some markets next year.
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AT&T Profit Tops Estimates on IPhone Customers, TV
Source: Bloomberg
Date: 10/22/2009
