Driven by an increasing number of iPhone users, double-digit increases in revenues from IP-based and strategic business services, and further AT&T U-verse TV subscriber gains, AT&T reported Q1 revenue of $30.6 billion, net income attributable of $3.1 billion, diluted earnings per share of $0.53, and cash from operating activities of $7.9 billion. Compared with results for the year-earlier quarter, AT&T’s operating expenses for the first quarter of 2009 were $24.8 billion versus $24.8 billion; operating income was $5.7 billion versus $6.0 billion; and AT&T’s operating income margin was 18.8 percent, compared with 19.5 percent.
“I am particularly pleased with the success of our iPhone 3G initiative, which has driven strong high-end customer growth and delivered financial benefits ahead of our original outlook. Business and consumer expectations for mobility are on the rise, wireless innovation is flourishing and the opportunities ahead are substantial,” stated Randall Stephenson, AT&T chairman and chief executive officer.
Some highlights for the quarter:
- Postpaid Subscriber Gains. AT&T posted solid organic wireless subscriber gains in the first quarter, driven by a significant step up in retail postpaid net subscriber additions, which were 24.1 percent higher than in the year-earlier quarter. Versus results for the first quarter of 2008, postpaid gross adds totaled 3.0 million, up 9.2 percent; postpaid churn was stable at 1.2 percent; and postpaid net adds totaled 875,000, up from 705,000. This marked AT&T’s third consecutive quarter of double-digit year-over-year improvement in postpaid net adds. Total wireless subscribers increased by 1.2 million in the first quarter to reach 78.2 million in service, up 6.9 million over the past year.
- 38.6 Percent Wireless Data Revenue Growth— wireless data revenues increased by $884 million, or 38.6 percent, versus the year-earlier first quarter to $3.2 billion. Data represented 27.2 percent of AT&T’s first-quarter wireless service revenues, up from 21.5 percent in the year-earlier quarter and 16.0 percent in the first quarter of 2007. Wireless text messages on the AT&T network totaled more than 94 billion in the first quarter, more than double the total for the year-earlier quarter. Internet access and media bundle revenues also continued their solid growth.
- More Than 1.6 Million Apple iPhone 3G Activations — In the first quarter, AT&T’s iPhone 3G activations totaled more than 1.6 million, more than 40 percent of them for customers who were new to the company. AT&T’s U.S. iPhone exclusive continues to deliver subscribers with ARPUs that are approximately 1.6 times higher and churn rates that are significantly lower than the company’s overall postpaid subscriber base.
- Strength in Integrated Devices. In the first quarter, integrated devices accounted for more than 100 percent of the company’s postpaid net adds, reflecting strength in new customer sales. Over the past year, the number of integrated devices on AT&T’s network more than doubled, and at the end of the first quarter, 31.7 percent of AT&T’s 61.0 million postpaid subscribers had integrated devices.
- 3G — The number of 3G devices on AT&T’s wireless network also more than doubled over the past year, and at the end of the first quarter, 40.8 percent of AT&T’s postpaid wireless subscribers had a 3G device, up from 19.5 percent one year earlier.
- Continued Retail Postpaid Subscriber ARPU Growth. Postpaid data ARPU was $16.48 in the first quarter, up $3.48 or 26.8 percent versus the year-earlier period. Total postpaid ARPU increased 2.1 percent versus the year-earlier first quarter to $59.21. This marked the ninth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU.
- 40.9 Percent Wireless OIBDA Service Margin Versus results for the year-earlier first quarter, wireless operating expenses totaled $9.5 billion, up 7.3 percent, and operating income was $3.3 billion, up 13.0 percent. AT&T’s wireless operating income margin was 26.0 percent, up from 25.0 percent in the year-earlier quarter and 20.9 percent in the fourth quarter of 2008. AT&T’s first-quarter wireless OIBDA service margin was 40.9 percent, compared with 41.7 percent in the year-earlier period, and up 510 basis points from 35.8 percent in the fourth quarter of 2008.
Wireline Operational Highlights
- U-verse Growth. AT&T U-verse TV subscribers in service increased by 284,000 in the first quarter — up from 148,000 added in the year-earlier first quarter and 264,000 in the fourth quarter of 2008 — to reach 1.3 million in service. AT&T U-verse TV continues to reach mid-teens penetration in areas marketed to for at least 18 months, and nearly 50 percent of AT&T U-verse TV subscribers take one of the two largest video packages. AT&T’s total video subscribers, which combine the company’s U-verse and bundled satellite customers, reached 3.5 million at the end of the first quarter, representing 12.6 percent of households served.
- Broadband Net Adds AT&T U-verse TV’s high broadband attach rate, greater than 90 percent in the first quarter, combined with strong growth in stand-alone broadband bundles to drive a substantial sequential improvement in broadband net adds. Total broadband connections, which include wireline subscribers and wireless customers with 3G LaptopConnect cards, increased by 471,000 in the first quarter to reach 16.7 million in service. AT&T’s wired broadband connections increased by 359,000 in the first quarter versus 236,000 in the preceding quarter.
- Consumer Revenue Connections. Combined, wireline consumer broadband and TV connections increased by 673,000 in the first quarter and 1.7 million over the past year. AT&T had 46.8 million total consumer connections at the end of the first quarter of 2009, compared with 49.3 million at the end of the first quarter of 2008 and 47.0 million at the end of the fourth quarter of 2008.
- Revenues Per Household. Driven by increased U-verse and broadband penetration, wireline revenues per household were up 2.0 percent versus the year-earlier quarter. This marked AT&T’s fifth consecutive quarter of year-over-year growth in consumer wireline revenues per household. Total first-quarter wireline consumer revenues were $5.4 billion, compared with $5.8 billion in the year-earlier quarter, as declining voice revenues more than offset growth in video and broadband.
- 16.4 Percent Growth in Wireline IP Data Revenues. AT&T posted its sixth consecutive quarter of mid-teens growth in total wireline IP data revenues, driven by expansion in AT&T U-verse services and growth in business products such as VPNs and managed Internet services. Consumer IP data revenues, from AT&T U-verse and broadband services, grew 23.0 percent, and business IP data revenues grew 10.5 percent. IP services now account for 46.8 percent of AT&T’s total wireline data revenues, up from 42.3 percent in the year-earlier first quarter and 37.9 percent in the first quarter of 2007.
- 19.6 Percent Business Strategic Revenue Growth. Revenues from the new-generation capabilities that lead AT&T’s most advanced solutions — including Ethernet, VPNs, hosting, IP conferencing and applications services — grew 19.6 percent year over year, continuing strong trends for this category over recent quarters. Progress in these product areas reflects the strength of AT&T’s network and its advanced product sets for business customers. Total first-quarter wireline business revenues — which include results from enterprise, wholesale, government, education, medical and small/midsize customers — were $10.7 billion versus $11.2 billion in the year-earlier quarter, reflecting economic impacts on both retail and wholesale customers, primarily from voice products and CPE.
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