AT&T’s Focus on Wireless Segment Rakes in Higher Q4 Revenue and Profits

With Contribution from Raqueen Khan
Edited by Vani Rao

Expanding smartphone and U-verse user base plump up revenue

At&T LogoAT&T Inc. (NYSE:T), the largest phone company in the US, registered strong revenue growth of 3.1% in Q4 of FY2013, the highest in the past four quarters, on account of expanding smartphone base and increasing data usage. Also, the strong growth in its Wireless segment was driven by the network strength, which in turn contributed to the top line. AT&T recorded almost 566,000 net adds, including nearly 300,000 smartphone subscribers. However, the company was far behind Verizon Wireless which had 1.6 million subscriber additions, and T-Mobile US which had 869,000 additions. The company outgrew the consensus estimate for both revenue and net profit as shown in the exhibit below.

The key highlight in Q4 was revenue growth of nearly 3% on account of U-verse. The company added 630,000 U-verse broadband subscribers during Q4. As per the company, U-verse now represents more than 60% of the total broadband subscriber base. The subscribers of U-verse not only have a higher ARPU, but lower churn rate.

Source Bloomberg
Source Bloomberg

AT&T recorded stellar performance in terms of bottom line, mainly on account of a fall in selling, general and administrative expenses. Cost of services and sales also fell to large extent, reflecting a positive impact on the company’s profitability. The ARPU reflects an increasing trend during the past four quarters. Post-paid ARPU growth was strong.

ARPUAT&T seems to be continuously investing in capex, which will yield strong results in the long run. In Q4 FY2013, the company invested $5,379 million for upgrading its wireless and wireline networks as well as its ambitious European expansion plans. The company is expecting consolidated revenue growth of 2-3% based on the planned Leap acquisition in the coming quarter.

Industry Outlook

As seen, the US Telecom industry is investing massively in developing advanced 4G networks to facilitate data offerings. The players in this industry are now mainly focusing on network coverage and quality in a bid to garner more number of wireless customers. At the same time, the players are competing on pricing, technological innovation, and offering better customer services. The industry players are also looking at expanding the highly profitable smartphone user base over the next few months.

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