Thursday, January 24, 2008

The AT&T leaves: Wireless strong; U-Verse buildout continues; Outlook in tact

by Larry Dignan

AT&T reported its fourth quarter earnings and the big takeaways are that wireless growth is strong and enterprise spending is chugging along.

AT&T’s earnings report garnered a little more attention this time around given that CEO Randall Stephenson rattled the markets with comments that consumers were struggling. AT&T did what it could to reverse that damage by reiterating its outlook for future years and touting successes.

Rest assured AT&T execs will be questioned about consumer spending on its conference call. By the numbers, AT&T reported earnings per share of 71 cents a share, or $4.3 billion, in line with Wall Street estimates. That earnings figure was adjusted for a few moving parts–notably the acquisition of BellSouth. On a net basis, AT&T had earnings of 51 cents a share, or $3.1 billion. AT&T’s fourth quarter revenue tally was $30.3 billion, up from $15.9 billion a year ago.

But those numbers only scratch the surface. AT&T is a massive company and the performance of its individual units are often more interesting.

A few “T” leaves to note:

The iPhone effect…

AT&T had a net fourth quarter gain of 2.7 million wireless subscribers–an impressive figure. Those gains were up 13.5 percent from the fourth quarter a year ago. AT&T said the gains were driven by retail additions (think iPhone subscribers). AT&T’s churn fell to 1.7 percent, down 10 basis points from a year ago. Post-paid churn was 1.2 percent. Meanwhile, AT&T’s fourth quarter wireless revenue was $11.4 billion, up 16.3 percent from a year ago. Wireless data services revenue jumped 57.5 percent from a year ago.


So what’s going on? Obviously, the iPhone has given AT&T some serious wireless momentum. The bet to partner with Apple appears to be paying off big time for AT&T even if the terms of the deal are likely to favor Steve Jobs & Co. The iPhone has given AT&T a little coolness. Since AT&T has partnered with Apple I’ve started to notice they have other cool phones in the lineup. That’s a subtle point that’s hard to quantify, but it’s real.


U-Verse rollout continues…still second fiddle to Verizon’s FiOS

AT&T’s U-verse video services ended 2007 with 231,000 subscribers, up from 126,000 a quarter ago. AT&T’s TV install rate was 12,000 a week. The company continues to expand. Broadband revenue grew 13.7 percent in the fourth quarter to $1.4 billion. Total broadband connections was 14.2 million. This investment is important for AT&T, but U-verse seems to be decidedly behind Verizon’s FiOS in development.

AT&T sees more than 1 million U-verse video subscribers by the end of 2008.

Enterprise demand is showing signs of life…

AT&T said its recurring enterprise service revenue was up 1.8 percent in the fourth quarter. Big deal you say? That growth is certainly better than the 3.5 percent decline in last year’s fourth quarter. IP data services is showed a 20.9 percent gain in revenue in the fourth quarter compared to a year ago. The company projected “positive growth in enterprise revenues throughout 2008 with line of sight to mid-single-digit enterprise revenue growth by 2010.”

Overall, AT&T’s report was solid. It’ll be an interesting tap dance listening to executives reconcile the consumer is on the skids comments from a few days ago with this report.

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