Topics:

AT&T Q3: Consumer, business IP drive up wireline revenues 2%

Increases in U-verse, Ethernet services help legacy revenue declines
Tools

AT&T (NYSE: T) on Wednesday reported that Q3 2012 wireline revenues were $14.8 billion, down 1.6 percent from Q3 2011 and down slightly sequentially due to expected declines in its legacy voice and data services business.

AT&T Q3 2012 investor presentation

Click here for selected slides from AT&T's investor presentation.

The telco's Q3 wireline operating expenses were $12.9 billion, down 2.1 percent from the same period a year ago. However, AT&T's wireline operating income rose 2.0 percent to $1.9 billion the third quarter of 2011.

As seen in previous quarters, the clear growth engine in AT&T's wireline portfolio is its IP network services. Ongoing adoption of higher speed U-verse broadband service helped drive an almost 10 percent increase in broadband data ARPU.

Here's a breakdown of AT&T's key wireline metrics:

  • Landline Losses: As expected, AT&T reported that traditional landline voice lines declined 7.9 percent, ending the quarter with a total of 31.9 million voice lines.

  • Broadband and Video: Consumer wireline revenue was up 2 percent versus the year-earlier period, which the telco said was the "strongest growth" it saw in "more than four years." Once again, its IP-based U-verse broadband data and IPTV are the stars of the consumer wireline portfolio. As of the end of the quarter, AT&T had 7.4 million total AT&T U-verse subscribers (TV and high speed Internet) in service. During the quarter it added almost 200,000 new U-verse TV subscribers and 613,000 new broadband Internet subscribers. Interestingly, broadband data ARPU rose almost 10 percent year over year with the majority of U-verse subscribers signing up for a 12 Mbps or higher speed package. About 90 percent of new U-verse TV customers took AT&T U-verse High Speed Internet in the third quarter and about three-fourths of AT&T U-verse TV subscribers has a triple- or quad-play option. These factors helped drive up ARPU to more than $170. However, overall broadband subscribers declined 0.5 percent to 16.4 million subscribers due to ongoing traditional DSL losses to U-verse and others migrating to cable.

  • Business Services: Like the consumer segment, AT&T's business services story is all about IP. However, business revenue declined 2.6 percent year-over-year and sequentially in the quarter to $9.1 billion. John Stephens, AT&T's CFO attributed the decline in business services revenue to slow government spending and companies not willing to spend more on services over concerns about tax policies. As seen in other quarters, ongoing declines in legacy products (i.e., Frame Relay and ATM) were offset by continued growth in strategic business services such as conferencing, Ethernet and IP/VPN. Strategic business services revenues grew 11.4 percent versus Q3 2011. Total business data revenues grew 0.6 percent year over year, continuing the transition from legacy data products to next-generation data services.

From an overall financial perspective, AT&T reported consolidated revenues totaled $31.5 billion, which were flat versus the same quarter a year ago, missing Wall Street analyst expectations. Analysts polled by Thomson Reuters I/B/E/S forecast revenues of $31.59 billion.

Taking out the divested Advertising Solutions business unit, AT&T's consolidated revenues grew 2.6 percent.

Regardless of missing Wall Street's expectations, Randall Stephenson, AT&T chairman and chief executive officer, remained upbeat about the service provider's outlook for the year. 

"Our strong performance allows us to increase our free cash flow guidance to $18 billion or higher this year, exceeding our previous outlook by $2 billion."

AT&T's stock was listed at $34.83, down $0.17, or 0.50 percent, on the New York Stock Exchange in late morning trading.

For more:
- see the earnings release
- here's FierceCable's coverage

Special report: Wireline telecom earnings in the third quarter

Editor's Corner: CLECs to ILECs: Don't hang up your copper networks!

Related articles:
AT&T to inject $9.5B into its pension plan
AT&T could bring U-verse to another 3M users, says analyst
AT&T leverages Fiserv for its walk-in wireline bill payment system
AT&T's decision on rural lines won't affect its credit profile, says Fitch