AT&T (NYSE: T) may be seeing continued growth with new consumer IP-based services like U-verse, but that growth wasn't enough to stall a 3.2 percent revenue decline in its Q2 wireline unit's results.
During the second quarter, total wireline revenues were $14.9 billion, down 3.2 percent versus Q2 2010 but stable sequentially. Wireline operating expenses were $13 billion, down 3.1 percent versus the second quarter of 2010 and down 1.8 percent sequentially.
However, AT&T's $2 billion in wireline operating income, while down from Q2 2010, was up from $1.7 billion it reported in Q1 2011.
Here's a breakdown of the other AT&T wireline segment metrics:
Consumer wireline services: Inside the consumer segment, the key drivers of AT&T's wireline growth were its broadband data and U-verse IPTV products. During the quarter, AT&T added 202,000 U-verse subscribers to reach 3.4 million in service. AT&T U-verse broadband data attach rates continued to run above 90 percent and 55 percent of new subscribers took AT&T U-verse Voice. Three-fourths of AT&T U-verse TV subscribers now subscribe to a triple- or quad-play service package.
Landline loss: As expected, consumer voice lines declined from 44.3 million at the end of the second quarter of 2010 and 43.1 million at the end of the first quarter of 2011 to 42.5 million. However, increased U-verse penetration and more residential subscribers signing up for triple- or quad-play options drove IP revenues up 21.9 percent year-over-year. As of the end of Q2, AT&T had 16.5 million total wireline consumer broadband connections, up 3.3 percent over 2010, but slightly down from Q1 2011 due to seasonality.
Business services: Like the consumer segment, AT&T's business unit growth continues to be driven by IP-based services. For the quarter, total business revenues were $9.3 billion, down 0.3 percent sequentially and down 4.1 percent versus Q2 2010. AT&T attributes the year-over-year decline to slow voice and legacy data products like Frame Relay. However, there were some bright spots as next-gen services--including Ethernet, VPNs, hosting, IP conferencing and applications--grew 19.4 percent.
Despite a decline in wireline revenues, AT&T overall reported consolidated revenues of $31.5 billion, up more than $680 million, or 2.2 percent, versus the same quarter in 2010. This marks the service provider's sixth consecutive quarter with a year-over-year increase.
At the same time, AT&T's operating income margin was 19.6 percent, while operating expenses were $25.3 billion versus $24.7 billion and operating income was $6.2 billion, up from $6.1 billion.
Special Report: Wireline in the second quarter 2011
Grading the top 10 wireline service providers in Q1 2011
AT&T wireline results in Q1 reflect strong returns on consumer broadband, IP business services