AT&T Wireless Services Inc. announced record revenue growth in the first quarter, adding 378,000 customers and surpassing 10 million total customers.
AT&T Corp. said it was raising its revenue growth target for the wireless division to more than 20 percent for 1999. While revenue increased 40 percent in the quarter, adjusted for the sale of the company’s messaging division in October, the carrier’s EBITDA (earnings before interest, taxes, depreciation and amortization) less other income was flat year-over-year.
“All of the margin deterioration year on year can be explained by the additional investment we are making in new customers and digital migration,” said AT&T Wireless Chief Executive Officer Dan Hesse.
Average revenue per user increased 15 percent in the first quarter, reaching $60.60 per month. Revenue growth of $446 million far exceeded the growth in off-network roaming costs, said Hesse. Analysts have been concerned about the impact of off-network roaming costs since the carrier introduced a digital one-rate plan that eliminates long-distance and roaming fees nationwide. Off-network roaming charges and higher costs of wireless handsets primarily were to blame for its parent company’s overall network and communications services expenses, which increased 3.6 percent year-over-year.
“Our huge ARPU improvement would allow us to improve margins rather than keeping them flat if we could more effectively curtail the growth of off-net expenses driven by the success of Digital One Rate and extended home area offers,” said Hesse. “Now we are aggressively targeting these costs.”
Hesse said AT&T Wireless will increase its footprint more aggressively through building out new 1900 MHz markets, acquisitions and affiliate carriers. The company also plans to continue to negotiate better reciprocal roaming agreements leveraging its intelligent roaming capability-the ability to move minutes from carrier to carrier in a given market.
Hesse said AT&T Wireless supports more than 1 million Digital One Rate customers, of which 80 percent are new users. More than 60 percent of the carrier’s customers are digital subscribers, and AT&T Wireless expects more than 80 percent of its customers to use digital service by the end of the year.
AT&T announced that first-quarter operation profits for the AT&T common stock group were $1 per share on a diluted basis before the company’s recently completed three-for-two stock split and excluding the impact of its merger with Tele-Communications Inc.
