Robust tablet, connected-device growth counter phone defections
Tablets and connected devices continue to lead AT&T Mobility’s growth, with the mobile operator posting strong net additions across those two segments, but lost a quarter-million lucrative traditional phone customers.
AT&T reported that its mobile unit posted a robust 2.1 million new net connections during the second quarter, more than triple the 634,000 net additions posted during Q2 2014. This year’s growth was on the back of its connected devices, which include telematics and machine-to-machine products, accounting for more than 1.4 million of the total.
Among more traditional segments, AT&T Mobility posted 410,000 postpaid net additions, which was down 60% from the more than 1 million postpaid net additions posted last year and below analyst expectations of around 500,000 net additions. This year’s numbers were boosted by 659,000 tablet net additions, indicating the carrier lost 249,000 postpaid phone and smartphone customers during the quarter.
Prepaid activity showed marked improvement, with the carrier posting 331,000 net additions compared with a loss of 286,000 prepaid customers last year. The latest result indicated AT&T Mobility was finally seeing positive traction from its Cricket division.
Rounding out the growth picture was an improvement in losses attributed to resellers, which improved from a loss of 162,000 connections last year to a loss of 95,000 connections this year, and a gain of 36,000 customers through mergers and acquisitions, partitioned customers and other adjustments.
AT&T Mobility managed to nearly double the reported 1 million net additions posted by Verizon Wireless and match the 2.1 million net additions posted by smaller rival T-Mobile US. However, Verizon Wireless’ growth included gains in both tablets and smartphones, while T-Mobile US trumped both of its larger competitors in attracting more lucrative “phone” customers.
Highlighting AT&T Mobility’s postpaid challenges was a significant uptick in customer churn, which increased from just .86% last year to 1.01% this year. Overall churn did improve year-over-year from 1.47% to 1.31%.
The churn metrics aligned with comments from T-Mobile US CEO John Legere, who said during the quarter the carrier witnessed an increase in its porting ratio with AT&T Mobility from 1.8 to 1.9. By comparison, T-Mobile US said its Q2 porting ratio with Verizon Wireless dipped, while the ratio with Sprint remained flat.
The impact of consumers moving toward AT&T Mobility’s Next device-financing option was seen in the carrier’s average revenue per user results. Customers not on the Next plan witnessed a decline in monthly ARPU from $62.28 last year to $61.26 this year. When factoring in Next payments ARPU surged nearly $4 per month to $68.29.
Overall wireless revenue increased 2.1% year-over-year to $18.3 billion, with a slight dip in service revenue countered by an increase in equipment sales. This trend is part of an overall market switch away from device subsidies in exchange for lower service pricing. AT&T’s wireless business accounted for 55.5% of the company’s total revenue during the latest quarter, a slight increase from the 54.9% from the year-ago quarter.
Wireless operating expenses inched up just .2% year-over-year, dampened by a drop in wireless capital expenses that fell from $2.46 billion during Q2 2014, to $2.13 billion this year. This resulted in a nearly 9% increase in wireless segment income to $4.7 billion for the latest quarter. AT&T’s wireless segment operating margin also increased from 24.1% last year to 25.6% this year.
Despite the strong wireless growth, AT&T’s consolidated net income attributed to shareholders dropped 14.2% to $3 billion for the quarter, or a return of 58 cents per share.
At midyear, AT&T reported a 1% increase in head count compared with 2014, noting it had 250,730 total employees at the end of Q2.
Bored? Why not follow me on Twitter
