AT&T Q1 results edge Verizon, but both impacted by Sprint, T-Mobile US
AT&T posted first quarter financial results showing a continued diversified approach to its mobile operations that are being impacted by an aggressive market.
The telecom giant said its AT&T Mobility division added 1.2 million net connections during the first quarter, which was ahead of the 1.06 million added during the same period last year, but down sequentially. AT&T Mobility ended the first quarter with nearly 121.8 million total connections on its network.
The latest growth figures included 441,000 postpaid net additions, which was down both year-over-year and sequentially, but slightly ahead of what the carrier had previously forecast. The postpaid growth was on the back of tablet devices, which numbered 711,000 net additions for the quarter, indicating a net loss in traditional phone connections. AT&T recently stated it would begin including “session-based” tablets into its postpaid tablet numbers instead of its previous practice of including them in its prepaid results.
Direct prepaid net additions increased both year-over-year and sequentially to 98,000 customers, showing progress in the carrier’s integration of its Cricket Wireless division. AT&T said it was on track to shutter Cricket’s legacy CDMA network by the end of this year, moving those spectrum assets to its LTE-based network, noting 90% of current Cricket customers were now on AT&T’s GSM-based network. AT&T did warn that migrating that final 10% could prove more difficult and result in increased churn.
Connected devices provided another strong quarter of growth as the carrier posted 945,000 net additions, which was down slightly from the previous quarter, but nearly double year-over-year. The connected device growth included 700,000 connected car net additions, which has been a growing focus for the carrier. One weakness for the carrier was its reseller channels, which lost 266,000 connections during the quarter, which was its poorest showing in more than one year.
AT&T Mobility rival Verizon Wireless earlier this week reported 377,000 direct net additions for the first quarter, which was down 31% from the same period last year. Verizon Wireless’ downfall was its prepaid business, which lost 188,000 connections during the quarter, which company management said were likely moving towards less expensive postpaid plans from rivals.
AT&T Mobility’s customer numbers were mostly inline with forecasts, while Verizon Wireless came in a bit light, results that analysts said were impacted by another strong quarter expected from T-Mobile US as well as some positive news from Sprint. Those two operators have aggressively targeted their larger rivals – as well as each other – with new promotions targeting existing customers looking to churn.
Customer churn was a mixed bag as postpaid churn was down from 1.07% during the first quarter of 2014 to an AT&T-claimed industry low 1.02% this year. However, overall churn ticked up slightly to 1.4%.
Consumer spending continued to show fluctuations due to increased adoption of AT&T Mobility’s Next device financing offer, which trades lower service pricing for customers paying full price for their mobile devices. Overall wireless service average revenue per user plunged $5.20 year-over-year to $40.78, though postpaid ARPU when factoring in monthly device payments fell a more modest $1.25 to $66.14.
Despite a dip in spending, AT&T Mobility’s larger customer base helped boost wireless revenues from $17.9 billion during the first quarter of 2014 to nearly $18.2 billion this year. AT&T Mobility accounted for 55.8% of AT&T’s total revenues during the first quarter, up slightly from 55% last year.
However, a larger increase in wireless expenses dropped segment income from $5 billion last year to $4.4 billion this year. The increased expenses came despite wireless-related capital expenditures plunging from $3.1 billion during the first quarter of last year to less than $1.9 billion this year.
AT&T’s overall net income also dipped from $3.7 billion last year to $3.2 billion this year, while company wide capex dropped from $5.7 billion during the first quarter of 2014 to $3.8 billion this year. Much of that decline was attributed to the near completion of AT&T’s Project Velocity IP program that was announced in late 2012.
AT&T noted it ended the first quarter 250,790 total employees, which was 7,000 more employees than at the beginning of the quarter. The company recently said it would take a $130 million charge in the first quarter tied to nearly 3,000 employees electing to retire by March 31. AT&T said the one-time charge was related to voluntary retirements that were offered to employee that included terms allowing for lump sum distributions and “enhanced payments.”
AT&T’s management also said it continues to expect the contentious DirecTV acquisition to close by mid-year, increasing its forecast “synergy” savings from the $48.5 billion deal from $1.6 billion to $2.5 billion three years after the deal closes.
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