AT&T expects a significant shift in its revenue stream from consumer mobile to business services, TV, broadband and international projects. In its quarterly earnings report, AT&T said its recent acquisitions in Mexico and its pending acquisition of DIRECTV will diversify the company and expand its range.
“Over the last year, we’ve made several moves to significantly transform our business for the future” said Randall Stephenson, AT&T chairman and CEO. “Our transactions with DIRECTV and Mexican wireless companies Iusacell and Nextel Mexico will make us a very different company. We’ll be unique in the industry because we’ll be able to offer integrated capabilities across a diversified base of services, customers, geographies and technology platforms. After we close DIRECTV, our largest revenue stream will come from business-related accounts, followed by U.S. TV and broadband, U.S. consumer mobility and then international mobility and TV.
“We ended the year substantially complete with our Project VIP network initiative and with most of our postpaid smartphone customers off of device subsidy plans. As a result, our full-year performance saw record-low postpaid customer churn and best-ever wireless service margins – all in a highly competitive wireless market.”
On the financial front, AT&T reported Q4 2014 revenue of $34.4 billion, up 3.8 percent versus the year-earlier period and up 4.5 percent when adjusting for the sale of Connecticut wireline properties. Due to non-cash charges, loss of $0.77 per share in the fourth quarter compared to $1.31 diluted EPS in the year-ago quarter. Excluding significant items, EPS was $0.55 versus $0.53 a year ago, up 3.8 percent.
Some highlights for the quarter:
WIRELESS
- Total wireless revenues were up 7.7 percent year over year to $19.9 billion.
- Fourth-quarter wireless operating expenses totaled $16.6 billion, up 14.8 percent versus the year-earlier quarter, largely due to higher equipment costs from record gross adds and upgrades and costs associated with the company’s acquisition of Leap Wireless.
- Wireless operating income was $3.2 billion, down 18.1 percent year over year largely due to increased volumes and Leap integration costs. Fourth-quarter 2014 service revenue comparisons included impacts from strong customer adoption of Mobile Share Value plans, partially offset by increased revenues from Leap.
- The continued adoption of AT&T Next and Mobile Share Value plans is reflected in a year-over-year reduction in postpaid service ARPU (average revenues per user). Phone-only postpaid ARPU decreased 10.7 percent versus the year-earlier quarter. Phone-only postpaid ARPU with AT&T Next monthly billings decreased 4.1 percent year over year, but increased 0.4 percent sequentially. The strong adoption of Mobile Share Value plans also is impacting service revenues.
- AT&T posted a fourth-quarter net increase in total wireless subscribers of 1.9 million, led by gains in postpaid and connected devices.
- AT&T added 854,000 postpaid subscribers, up both year over year and sequentially.
- Connected device net adds were 1,296,000, including about 800,000 connected cars.
- At the end of the quarter, 83 percent, or 56.8 million, of AT&T’s postpaid phone subscribers had smartphones, up from 77 percent, or 51.9 million, a year earlier. AT&T’s ARPU for smartphones is about twice that of non-smartphone subscribers.
- At the end of the fourth quarter, 75 percent of AT&T’s postpaid smartphone customers had an LTE-capable device.
- At the end of the fourth quarter, half of Mobile Share accounts had 10 gigabyte or larger data plans, up from 27 percent in the year-ago quarter.
WIRELINE
- Total fourth-quarter wireline revenues were $14.6 billion, down 1.0 percent versus the year-earlier quarter and down slightly versus the third quarter of 2014.
- Total revenues from business customers were $8.6 billion, down 2.8 percent versus the year-earlier quarter. When adjusting for the sale of the company’s Connecticut wireline properties, total revenues declined 1.8 percent year over year.
- Overall, declines in legacy products were partially offset by continued double-digit growth in strategic business services. Revenues from these services, the next-generation capabilities that lead AT&T’s most advanced business solutions — including VPNs, Ethernet, cloud, hosting, IP conferencing, VoIP, MIS over Ethernet, U-verse and security services — grew 13.8 percent versus the year-earlier quarter and grew 14.3 when adjusting for the sale of Connecticut wireline properties. These services represent an annualized revenue stream of more than $10 billion and were nearly 30 percent of wireline business revenues in the fourth quarter. During the quarter, the company also added 31,000 U-verse high speed broadband business subscribers.
- Revenues from residential customers totaled $5.6 billion, an increase of 0.1 percent versus the fourth quarter a year ago. When adjusted for the sale of the Connecticut wireline operations, revenue growth was 2.4 percent. Continued strong growth in consumer IP data services in the fourth quarter more than offset lower revenues from legacy voice and data products.
- U-verse, which includes high speed Internet, TV and Voice over IP, now represents 67 percent of wireline consumer revenues, up from 57 percent in the year-earlier quarter. Adjusted consumer U-verse revenues grew 21.1 percent year over year.
- U-verse high speed Internet had a fourth-quarter net gain of 405,000 subscribers, for a total of 12.2 million.
- U-verse TV added 73,000 subscribers in the fourth quarter for nearly 6 million in service at the end of the fourth quarter after adjusting for the sale of the Connecticut operations.
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