AT&T third-quarter results showed net losses in traditional postpaid smartphone connections
AT&T reported strong third-quarter results for its mobile division, including more than 2.5 million new connections on its network and continued signs of shifting revenue streams
Boosted by robust growth in connected devices as well as increases across all segments, AT&T Mobility managed to post a 25% year-over-year increase in net connection additions for the third quarter, and looks set to lead the industry in reported growth for the latest quarter. AT&T Mobility ended the quarter with 126.4 million total connections on its network.
AT&T had previously stated it expected to post more than 2 million net connections to its mobile division for Q3.
Connected devices accounted for nearly two-thirds of the latest growth and showed strong sequential and year-over-year increases. Direct prepaid net additions were the next largest contributor, posting 466,000 net additions for the quarter, which was a strong turn around from the loss of 46,000 prepaid customers last year and showed continued success in integrating the Leap Wireless assets. AT&T Mobility’s reseller partners contributed 156,000 net additions for the latest quarter, which was nearly double last year’s growth.
One downside to AT&T Mobility’s latest growth was the continuing drop in direct postpaid growth, which came in at 289,000 net additions for the quarter. The numbers were about one-third of what AT&T Mobility recorded last year, and when including the 622,000 net connections from tablet devices, actually showed a loss of higher-valued postpaid smartphone customers.
By comparison, AT&T Mobility rival Verizon Wireless earlier this week said it added nearly 1.3 million direct postpaid customers during the latest quarter, which were also heavily influenced by tablets. Smaller rival T-Mobile US previously stated it expects to post around 1 million direct postpaid net additions to go along with 2.1 million total net connection additions for the third quarter.
AT&T Mobility’s positive prepaid growth results were backed by an overall drop in customer churn, which dipped slightly year-over-year to 1.33% for the third quarter. Postpaid churn, on the other hand, witnessed a more significant increase, surging from .99% last year to 1.16% in the latest quarter.
Highlighting the continuing shift in revenues due to a de-emphasis on device subsidies, average service revenue per user continued to slide, hitting $40.19 per month during the third quarter. But, when factoring in monthly device payments tied to the carrier’s Next payment plan, overall average revenue per user increased $3.19 year-over-year to $68.82.
The offsetting service and device revenues played out in AT&T Mobility’s overall operating revenues, which were flat year-over-year. A drop in segment expenses allowed AT&T Mobility to post a 14.2% increase in income to $5.4 billion for the quarter. Service margins also showed strong growth, surging from 43.1% last year to 49.4% for the latest quarter, which the carrier said was boosted by continued customer adoption of its Next device payment option and operational efficiencies in its Cricket Wireless prepaid operations.
Bigger picture, AT&T reported an 18.6% increase in consolidated revenues for Q3, toping out at more than $39 billion for the three months, which the carrier attributed to its recent acquisition of DirecTV. Operating expenses witnessed a larger percentage increase, which combined with tax-related expenses to drop net income attributed to shareholders 4.3% year-over-year to $3 billion.
AT&T management increased full-year expectations for earnings per share to be in the range of $2.68 to $2.74, and for in excess of $15 billion in free cash flow.
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