AT&T Wireless Margins Sustained Despite Shift to Tiered Data Plans, Says CFO
Strong sales of iPads and e-readers will boost AT&T’s Q4 performance and the company expects continued growth in its broadband and U-verse product lines, said AT&T Chief Financial Officer Rick Linder Tuesday. Linder expects margins for AT&T’s wireless products to increase this quarter, he told a UBS investor conference. “Across the business I feel good about the momentum we are seeing.” Last quarter, AT&T added and retained more wireless customers than it had in any previous Q3, primarily due to the release of Apple’s iPhone4 handsets (CD Oct 22 p6), he said.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
AT&T’s shift to usage-based pricing was “probably one of the more difficult decisions we made,” said Linder. The company has not seen any significant impacts on revenue per user or a shift to lower usage patterns of data, he said. The CFO said there are “7 million or so” AT&T users on the usage-based data pricing plans.
"When you sit down and talk to customers about usage-based pricing and you ask them about it, the first thing they're gonna say is ‘we don’t like it,'” Linder acknowledged. “They are afraid of getting hit with a big bill,” he said. “The problem is long term, that in an environment in wireless where traffic growth is exploding and where spectrum and technology itself is limited, it’s [all you can eat pricing] not a sustainable model."
AT&T may have lost some revenue from customers who migrated to a cheaper service plan, but Linder said the biggest impact was a shift in consumer habits. “It does make customers more conscious about the amount of data they are using,” he said. “And it has incented them to use Wi-Fi, for example, when it is available."
Linder largely sidestepped any questions about the rumored end of iPhone exclusivity in early 2011, saying only “at some point, as it does with all exclusive arrangements, exclusive arrangements end.” Linder emphasized AT&T’s strategy for maintaining a strong device line-up and a focus on evolving the company’s wireless network. Consumers can expect to see AT&T complete the software upgrade to HSPA+, continue to roll out backhaul networks and begin to launch LTE markets at a steady pace in 2011, said Linder. The company will focus on getting the infrastructure, network software and devices working together so it can roll out LTE “at a pace where we'll be able to learn from, and have some of the early software issues and other issues that will come up, behind us,” he said. Last week, Chief Technology Officer John Donovan wrote a blog entry that emphasized the equal importance of 3G and 4G in the short term. “It will take a long time for LTE to be deployed broadly,” said Donovan. “The best mobile broadband experience is based on consistent speed."
Linder seemed to echo that yesterday, saying the company’s software upgrade to HSPA 7.2 and HSPA+ would enhance the company’s expected debut of LTE in mid-2011. “It gives us a better transition for customers because it’s all within the same technology family, we don’t have to build dual technology devices and the devices will all be backwards compatible,” said Linder. “When [customers] are outside of the LTE footprint they will still have a very good experience in HSPA+.”