Wednesday, July 23, 2008

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Wireless, Data Drive Good AT&T Quarter

AT&T this morning reported a 30-percent jump in net profits coupled with wireless-data revenues surging 52 percent as wireless subscriber totals climbed and landline use continued its historic plunge.

The only slight negative was a minor shortfall in overall income, as AT&T reported $30.9 billion in revenue, up 4.7 percent year over year but slightly short of some analysts' estimates that averaged around $31.2 billion. Second-quarter 2008 net income totaled $3.8 billion, up from $2.9 billion year over year, and earnings per diluted share were $0.63, up from $0.47 in the second quarter of 2007.

The big news was wireless revenues up 15.8 percent to $12 billion in the quarter, of which wireless data accounted for $2.5 million, a handsome 52-percent surge over the quarter a year earlier. Total wireless subscriber growth was 1.33 million, down 123,000 versus results in the second quarter of 2007 and up 38,000 compared with the first quarter of this year. The numbers were attributed to a pause in iPhone sales, as the second generation of the devices were readied for market. And, AT&T added, in the current quarter, the handsets literally are flying off the shelf at twice the expected rate.

Still, those numbers were enough to cause some joy at Verizon Wireless, which yesterday afternoon had staged a pre-emptive publicity attack on AT&T by pre-releasing its new subscriber totals, which it says topped 1.5 million in the quarter, a bit better than most had expected. Verizon won't report its financial results for another week, and its performance is sure to be closely compared with those from AT&T. One closely watched metric will be Verizon's churn rate - AT&T says its postpaid churn rate was down by 0.1 percent to 1.1 percent, the lowest in its history.

On the wireline side, the good news was all broadband, both on the enterprise and consumer sides. Landlines, in contrast, were a disaster, as total switched access lines fell a steep 8 percent (993,000) to end the quarter at 58.9 million. In comparison, AT&T had lost 1.6 million lines for all four quarters of last year.

Enterprise IP data revenues grew by 18.4 percent, AT&T says, although total enterprise revenues in the second quarter were down 1 percent to $4.7 billion. Regional business data revenues grew 5.2 percent, led by robust growth in Ethernet services; and 13.7-percent growth in IP data services, including double-digit gains in managed Internet, VPN and hosting services.

On the consumer side, AT&T notes its U-verse IPTV "continued its strong ramp" during the second quarter, with a net subscriber gain of 170,000; some 549,000 customers now are onboard. However, it added only 46,000 broadband connections in the quarter, a number considered quite weak and, reflecting the landline voice service defections, its total of triple-play subscribers to voice, data and TV fell to 48.4 million, down from 49.5 million at the end of the second quarter of 2007.