AT&T's Stephens: Hope to have decision on rural wireline assets by end of the year

Tools

AT&T (NYSE: T) senior executive VP and CFO John Stephens said on Thursday during the Bank of America 2012 Media, Communications & Entertainment Conference in Beverly Hills that the telco they could have a solution for what to do with its rural wireline assets by the end of the year.

John Stephens, AT&T

Stephens (Image source: AT&T)

"With regard to our wireline business, particularly some of the non-urban wireline access lines, the process is ongoing," Stephens said. "There's been a lot written about what to expect or whether things have changed, but I pull us back to the beginning of year (when) we thought it would take 18-24 months to do a full evaluation and we shortened that time frame to 12-18 months and we're hopeful to have something done by the end of the year."

What's fueled rumors about the fate of AT&T's rural lines was its failed move to buy T-Mobile. When the deal was announced, the service provider hoped that the purchase would help it solve its rural broadband problem with wireless service.

"The challenge is broadband resolution for those non-urban areas," Stephens said. "We had a proposed transaction last year that was not approved that would have provided us that, and we have to go back to evaluating that capability."

A sale of its rural lines would not be far-fetched, as fellow RBOC Verizon (NYSE: VZ) sold its rural lines in 14 states to Frontier Communications (Nasdaq: FTR) in 2010 and its New England lines to FairPoint (Nasdaq: FRP) in 2008.  

However, it appears that AT&T is also considering next-gen DSLAM technology as an option to service rural customers. In May, CEO Randall Stephenson said during a JPMorgan Chase & Co. call with investors that AT&T would leverage IP DSLAMS to offer a higher speed DSL service.  

 "If you look at what happened with us in the first six months of 2012 with 1.3 million high speed broadband lines through our U-verse platform or our IP DSLAM platform, you see we can compete effectively in that marketplace," Stephens said. "You have to start taking that into account as well as the tax implications, the labor implications, and the regulatory implications."

Broadband service overall continues to be a major driver in AT&T's consumer wireline revenue mix. On a year-over-year basis, consumer broadband revenues are up 10 percent.

During the second quarter, the carrier added 155,000 new U-verse TV subscribers and 553,000 U-verse broadband subscribers, helping to offset the 96,000 traditional DSL subscribers it lost.

Although the loss of traditional subscribers--due to defecting to cable or migrating to a higher speed service--has become an ongoing reality for AT&T, Stephens said that revenues are actually rising.  

"If you look at our customer counts, they were flattish because of the loss of DSL, but the U-verse broadband and the IP DSLAM products come with greater speeds and allow for greater ARPUs," Stephens said. "We are growing revenues in that space even though the customer counts net out."     

Another major factor in AT&T's broadband equation is IPTV, where the average revenue per user (ARPU) reached $170 a month thanks to customers who bundle IPTV with broadband and voice services as part of a triple play package.  

In addition to its looking at what to do with its rural lines, the service provider has been evaluating what lines of business it needs to exit or to sell a large stake to another player.

In May, AT&T completed the sale of a 53 percent stake in its Yellow Pages business, which is known as AT&T Advertising Solutions and AT&T Interactive, to Cerberus Capital. As part of that deal it retains a 47 percent stake in the venture equity interest in the new YP Holdings LLC venture.

"We believe that was a good solid transaction and get that focus on our business and was a first step review of assets," Stephens said.

For more:
- see the webcast

Special report: Q2 roundup: ILECs wade through legacy-to-IP migration

Related articles:
AT&T's Q2 wireline growth driven by U-verse, next-gen business services
U-verse drives AT&T wireline business
AT&T, CWA hammer out tentative wireline labor agreements
Report calls AT&T, Verizon top U.S. 'investment heroes'
AT&T, IBEW agree on 1-year contract extension, CWA negotiations ongoing