AT&T rides wireless to 22% bump in Q1 profits

AT&T's iPhone deal with Apple looks better every day for the nation's No. 1 telco, which today announced Q1 profits jumped 22 percent over a year ago, driven by a 1.3 million increase in wireless users and helped by cost savings from its continuing integration of BellSouth. 

"We delivered an excellent first quarter and a solid start to the year," said Randall Stephenson, AT&T chairman and CEO. "Revenue growth continues to ramp, we have good momentum across key growth areas, major cost initiatives are on track, and our operational results reinforce the confidence we have in our outlook."

AT&T, like most telcos, has been losing residential landlines to cable and wireless companies as consumers increasingly turn to VoIP and wireless options. It dropped 1.6 million residential lines in 2007. But AT&T has-with the help of its exclusive partnership with Apple-been able to replace the lost business with an even more profitable one. And, since cutting iPhone prices in September, just three months after the icon's June launch, AT&T has slowly begun to take market share from Verizon. Apple is expected to release a 3G iPhone in June, which is sure to reinvigorate iPhone hysteria, pushing it into more enterprise apps as well. AT&T also said it will spend $7 billion over the next five years to beef up its network so it can offer faster Internet speed and better television services. Its U-verse service has added 148,000 customers and is now at 379,000 users, nearly 40 percent of the way to its goal of 1 million users by year end. 

"AT&T's goal is to innovate and lead in a communications world driven by mobility and interactivity," Stephenson said. "To that end … we are also taking important steps to expand our networks and product sets to drive continued growth in wireless, broadband and IP-based services."

Earlier this year, AT&T paid more than $6.6 billion for C-block spectrum it says will allow it to offer faster download speeds on wireless phones by 2011 or 2012.

"The future of wireless has never been more promising," Stephenson said. "I am very pleased that through our transaction with Aloha Partners and our successful bids in the recently completed auction, we have assembled the industry's premier, high-quality wireless spectrum position. This spectrum will provide a terrific foundation for new wireless and integrated services, and it significantly advances AT&T's long-term growth potential."

AT&T's 2006 buy of BellSouth for $86 billion gave it residential business in 22 states and full ownership of the wireless business it shared with BellSouth. It planned to cut 10,000 jobs after the purchase to streamline operations and reduce redundancy. Last week, it announced 4,650 job cuts, mostly among managers, as it reconfigured its workforce away from landline business toward wireless and Internet.

By the numbers:

• 57 cents reported earnings per diluted share, up 26.7 percent versus 45 cents a year ago;
• 74 cents adjusted earnings per diluted share, up 13.8 percent from 65 cents in the first quarter of 2007;
• $30.7 billion in consolidated revenues, up 6.1 percent versus reported results for the year-earlier first quarter and up 4.6 percent versus first-quarter 2007 revenues adjusted for directory accounting impacts;
• 18.3 percent increase in wireless revenues;
• 57.3 percent increase in wireless data revenues from areas such as Internet access, messaging and media bundles;
• 13.2 percent growth in broadband revenues;
• 491,000 net gain in broadband connections in the quarter to reach 14.6 million in service
• Further step up in enterprise customer growth, with total enterprise revenues up 1.2 percent and enterprise service revenues up 2.1 percent, led by a 22.9 percent increase in revenues from IP-based data services
• Continued ramp in AT&T U-verse TV subscriber totals, with a first-quarter net gain of 148,000 to reach 379,000 in service; on track to reach target of more than 1 million subscribers by year-end 2008

For more:
- Check out AT&T's complete earnings report [1]

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