AT&T gains 186K broadband subs in Q1 2015, but overall adds down year-over-year

AT&T (NYSE: T) may still be adding more IP-based U-verse broadband subscribers, but the service provider's overall growth continues to slip as more cable operators take away market share.

Broadband was still a factor during the quarter for AT&T as the telco added 186,000 IP-based broadband net subscribers.

Speaking to investors during the first quarter 2016 earnings call, SVP and CFO John Stephens said that the carrier has continued to make progress migrating its existing DSL customer base to its IP-based broadband platform as a result of its Project VIP program.

"Our transition of our broadband subscriber base to IP is nearly complete," Stephens said. "Ninety-five percent of our broadband subscribers now have IP broadband and half of these customers chose higher speeds, which drive the 16 percent revenue growth in IP broadband."

Stephens said that it is also seeing more of its DirecTV customers purchase service bundles that include broadband services.

"The attachment rate of DirecTV sales with broadband has increased 50 percent since last summer," Stephens said. "In GigaPower areas the attach rate improvement is even greater."

However compelling the broadband additions were, the figure was down sequentially and year-over-year. In comparison, AT&T added 192,000 IP broadband subscribers during the fourth quarter of 2015 and 440,000 subscriber new U-verse subscribers it gained in the first quarter of 2015.

Fellow telco Verizon (NYSE: VZ) reported that it added 98,000 FiOS broadband customers during the quarter. While Verizon beat some predictions, overall broadband subscriber growth was also down from 99,000 in the fourth quarter 2015 and the 145,000 subscribers it added in the same period a year ago.

The decline in AT&T's overall additional broadband subscriber base continues a trend that was evident of all of the large telcos in 2015. According to Leichtman Research Group (LRG), AT&T, Verizon, CenturyLink (NYSE: CTL) and other top telcos lost about 185,000 subscribers in 2015.

Driven by sales of strategic services such as cloud and Ethernet, business services revenues showed positive results in the first quarter, rising 0.3 percent year-over-year.

Strategic business services revenues were $2.8 billion, up nearly $250 million. The service provider noted that strategic services are capturing legacy migrations and are now more than $11 billion in annualized revenues. However, equipment revenues were impacted by lower handset and equipment sales.

Stephens said that AT&T continues to see more of its business customers turn off legacy business services like ATM and migrate to higher speed Ethernet.

"Legacy data continues to migrate to our IP strategic business services and total wireline data grew slightly in the quarter and is now about 60 percent of wireline business revenues," Stephens said. "Driving that growth is strategic services where revenue grew by nearly $250 million over last year's quarter."

Specifically, AT&T's retail business services continued to see growth, but wholesale saw declines.

"Retail business revenues showed growth while our wholesale business is on plan even though revenues were pressured," Stephens said.

From an overall financial perspective, AT&T reported consolidated revenues of $40.5 billion, up 24 percent year-over-year from 2014 due primarily to the acquisition of DirecTV.  

Shares of AT&T closed at 38.09, down 12 cents, or 0.31 percent in Tuesday afternoon trading on the New York Stock Exchange.

For more:
- see the earnings release
- hear the earnings call (reg req.)

Special Report: Verizon and Frontier begin new transitions: Tracking wireline telecom earnings in Q1 2016

Related articles:
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Google Fiber's presence continues to force broadband pricing hand of AT&T, CenturyLink and Comcast
AT&T's strategic business revenues jump to $2.8B, but market softness has an impact

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