AT&T's U-verse successes help drive total wireline revenues to $14.6B
AT&T's (NYSE: T) U-verse continues to be the darling of the telco's wireline portfolio, helping to offset lower revenue from legacy voice and data products and increase residential customer revenues 3 percent to $5.7 billion.
U-verse, which includes broadband, TV and VoIP, now represents 62 percent of AT&T's wireline consumer revenues, up from 51 percent in Q2 2013. Consumer revenues also grew 24.5 percent year-over-year.
Ongoing U-verse growth helped drive up AT&T's total second quarter wireline revenues 0.2 percent sequentially to $14.6 billion. Total U-verse revenues grew 24.8 percent year-over-year.
The telco's Q2 wireline operating income margin was 9.7 percent vs. 11.1 percent in Q2 2013, a factor it says is related to an increase in U-verse content costs, declines in legacy services, success-based growth costs and expenses incurred as part of Project VIP.
Here's a breakdown of AT&T's key wireline metrics:
Broadband: AT&T added 488,000 subscribers to reach a total of 11.5 million. However, it lost 55,000 total wireline broadband subscribers due in part to what it said was seasonal trends. Total U-verse high-speed Internet subscribers now represent about 70 percent of all of AT&T's wireline broadband subscribers, compared with 55 percent in the year-earlier quarter. Customers continue to tune into higher speeds, with 61 percent of U-verse broadband subscribers paying for a plan delivering speeds of 12 Mbps or higher.
Video Services: The telco also continued to see the number of U-verse TV subscribers increase during the quarter with the addition of 190,000 new subscribers. As of the end of the quarter, AT&T had a total of 5.9 million U-verse TV subscribers.
One of the interesting facts of U-verse TV is that over 97 percent of customers subscribe to bundled services, and nearly two-thirds of AT&T U-verse TV subscribers take three or four services from AT&T. ARPU for U-verse triple-play customers continues to be more than $170. At the end of the quarter, U-verse TV penetration was more than 21 percent and U-verse broadband penetration was more than 20 percent.
During the carrier's earnings call, CFO John Stephens added that triple play customers "have significantly lower churn than standalone customers."
Business and wholesale: AT&T's total business revenues were $8.7 billion, down 2.9 percent versus the year-earlier quarter but stable sequentially. Overall business service revenues declined 2.3 percent year-over-year, but were flat vs. Q1 2014. However, AT&T Business Services reported that next-gen business services--including VPNs, Ethernet, cloud, Ethernet, U-verse and security services--grew 13.5 percent versus the year-earlier quarter.
Stephens said that the overall declines in business services "are on track with recent trends and the slow economy."
AT&T said that next-gen business services represent an annualized revenue stream of more than $9 billion and are more than 27 percent of wireline business revenues. During the second quarter, the company also added 55,000 business U-verse high-speed broadband subscribers.
While AT&T did not break out wholesale revenues, Stephens said that "wholesale revenues were again challenged by network grooming from some of our wireless customers."
In addition, the service provider said it passed more than 500,000 additional business customer locations with fiber since Project VIP was announced. AT&T said it now expects to build fiber services to more than 1 million business locations regardless of building size.
From an overall financial perspective, AT&T's consolidated revenues were $32.6 billion, up 1.6 percent year-over-year from the second quarter of 2013.
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