AT&T forecasts uptick in IP broadband net adds in Q3

AT&T (NYSE: T) said it expects to report positive IP broadband net additions in the third quarter, while U-verse TV customers will drop.

In a filing with the Securities and Exchange Commission, AT&T said that it "expects to report positive U.S. DIRECTV net adds in the third quarter and positive IP broadband net adds."

At the same time, it predicts that "U-verse TV subscribers are expected to decline as the Company continues to focus on satellite and high-value subscribers."

Beginning in the fourth quarter of 2014, AT&T started to see that its move to pursue more profitable customers, those with low-churn rates, cut into its overall U-verse TV rates.  

However, the telco continues to see gains on the U-verse broadband side, a trend that continued into the second quarter as it converted more of its legacy DSL customers to IP-based U-verse, driving over 90 percent of IP-eligible subscribers to U-verse IP Internet. This was up from the 80 percent it reported in the first-quarter of 2015.

During the second quarter, AT&T added 240,000 IP broadband customers. As of the end of that period, it said it had less than 1 million eligible DSL subscribers left to transition to the IP-based platform. Overall broadband subscribers declined by 136,000 in the quarter as it lost DSL subscribers that upgraded service to the IP-based service or that churned to a cable operator.   

Besides IP-based U-verse service, AT&T continues to expand its 1 Gbps FTTH GigaPower service into new markets, including most recently Northern Indiana, Orlando and two Texas cities. While the company has not revealed how many subscribers it has for the service, it did say during the second quarter earnings call that it was seeing positive subscriber take rates it is seeing thus far in the markets where it is delivering the service.

Despite the progress it has made with IP-based broadband and GigaPower, cable operators came ahead of AT&T and fellow ILEC Verizon in second quarter broadband race. A Leichtman Research Group report revealed that cable added nearly 510,000 broadband subscribers during the period.

AT&T and Verizon (NYSE: VZ) collectively added a total of 313,000 new broadband subscribers via U-verse and FiOS, but reported a net loss of 474,000 DSL subscribers. Verizon's second quarter 2015 overall FiOS broadband additions of 72,000 trailed the 139,000 FiOS connections added in second-quarter 2014, while AT&T's second quarter 2015 broadband adds were down from the 488,000 subscribers it gained in the second-quarter 2014.

AT&T also reiterated its guidance for full-year adjusted earnings per share, double-digit revenue growth and continued consolidated margin expansion. Additionally, the telco said it expects capital spending to increase from second-quarter levels and free cash flow to be greater than $4.5 billion for the quarter.

AT&T is scheduled to report its full third-quarter results Oct. 22.

For more:
- see this SEC filing

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