IPhone Launch Helps AT&T’s 2nd Quarter
A strong iPhone launch, more U-verse IPTV deployment and BellSouth integration savings gave AT&T its ninth straight quarter of double digit growth in earnings per share, the company said Tuesday. AT&T had $29.5 billion revenue and $2.9 billion profit in the second quarter. Earnings per share were 70 cents, up 12 cents from a year earlier. AT&T Chief Financial Officer Rick Lidner reported the company’s second quarter results in a Tuesday conference call. He steered clear of political issues involving the 700 MHz auction and an International Trade Commission ban on Qualcomm chips.
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AT&T saved $1.9 million the first half of 2007 from its merger with BellSouth, Lidner said. Rebranding and staff consolidations are on track; the company completed migration of BellSouth mass market traffic a quarter ahead of schedule, he said.
Wireless growth doubled in a year, Lidner said. AT&T added 1.5 million subscribers in the quarter and has 6.4 million more than a year earlier. The recent quarter’s increase can be largely attributed to the strong iPhone launch, Lidner said. AT&T activated about 146,000 iPhones, 46 percent of them for new customers, he said. Demand for the Apple device remains high, and store traffic is above historical levels, he said. Lidner said AT&T expects to maintain its relationship with Apple for “years to come.” The iPhone launch also broadened the appeal of mobile data, helping increase AT&T wireless data revenue 66.9 percent, Lidner said. Data brought 17.3 percent of AT&T total service revenue in the second quarter, up from 11.9 percent a year earlier. Lidner said he expects data to fuel wireless revenue, especially as more customers buy 3G phones that support richer media.
AT&T’s wireless churn was down. Postpaid monthly churn and total monthly churn down an average of 0.1% from the previous quarter. Those declines resulted largely from the company’s continuing to switch customers from TDMA to GSM, he said. More than half of AT&T TDMA subscribers are wholesale; AT&T expects to complete the switch in first quarter 2008, he said.
AT&T saw significant growth in its bundled satellite and IPTV video businesses, Lidner said. AT&T added 200,000 video subscribers in the quarter. The company has 1.9 million subscribers total, up 615,000 from last year. AT&T’s IPTV U- verse service, available in 23 metro areas, signed 38,000 subscribers, making 51,000 total. The company expects to do 10,000 installations a week by year end, Lidner said. AT&T is working on IPTV plans for the BellSouth region, and it expects to build out to 50 55 percent of the market, Lidner said. AT&T will make its first deployment in the region this year, he said. AT&T continues to cut its U-verse installation time, which varies with the technician’s experience and the wiring found; an experienced technician can install the service in four hours, Lidner said.
The decline of AT&T’s enterprise business slowed to 0.9 percent in the quarter from 3.1 percent first quarter and 5.1% fall in second quarter 2006, AT&T said. The improvement was driven by growth in Virtual Private Networks, data transport, managed Internet and hosting services, as well as a flattening of point of sale pricing, Lidner said.
AT&T completed a planned $10 billion repurchase of shares in early July, ahead of schedule, Lidner said. AT&T plans to buy back 125 million more shares but does not expect to be done by year-end, he said.
AT&T avoided political issues in its second quarter call. Lidner declined to comment about AT&T’s 700 MHz auction plans, and said the company won’t talk about its auction strategy prior to the auction. Lidner also declined to comment on a recent Verizon settlement with Broadcom, intended to bypass the International Trade Commission ban on Qualcomm chips. “AT&T is looking at a number of options and hasn’t reached a resolution,” he said.