AT&T U-verse revenues rise 28 percent to $3.1B, subscribers top 10 million

AT&T's (NYSE: T) wireline revenue continues to benefit from the growth of U-verse, and the third quarter was no different. Driven by an uptick in both residential and SMB subscribers, Q3 2013 U-verse revenue rose 28.1 percent to $3.1 billion.

In addition, U-verse achieved its first month of $1 billion in revenue.

U-verse, which includes TV, broadband Internet and VoIP, now represents 54 percent of the telco's wireline consumer revenues, up from 43 percent in Q2 2012. Consumer U-verse revenues grew 27.2 percent year over year and were up 4.7 percent vs. the second quarter of 2013.

"U-verse is the fastest growing part of our business," said John Stephens, CFO of AT&T, during the Q3 earnings call. "We had our first billion dollar revenue growth in the third quarter and this seven year old startup is now a $12 billion annualized revenue stream, growing at more than 28 percent."

Here's a breakdown of AT&T's key wireline metrics:

Consumer wireline: Consumer wireline revenue grew 2.4 percent year-over-year to $5.6 billion. Overall Q3 wireline revenues were $14.7 billion, down 1 percent vs. the year-earlier quarter and 0.7 percent sequentially. As seen in previous quarters, the ongoing growth of IP-based data services offset declines in voice and legacy service revenues. Consumer U-verse revenues grew 27.2 percent year over year and were up 4.7 percent vs. Q2 2013.

Broadband and video: AT&T reported gains in both U-verse broadband and U-verse TV subscribers. As of the end of the quarter, AT&T had a total of 10 million U-verse subscribers in service. It added 655,000 net U-verse broadband subscribers to reach a total of 9.7 million, up 37 percent from Q3 2012. The company said that total U-verse high speed Internet subscribers now represent 59 percent of all wireline broadband subscribers compared with 43 percent in the year-earlier quarter. However, it did lose 26,000 wireline broadband subscribers during the quarter.

On the broadband expansion front, the service provider is upping broadband speeds via their 45 Mbps tier. It also began offering its fiber to the home (FTTH) services in Austin. 

"We have continued to roll out new markets, but we already offer those speeds in every region to almost two-thirds of our U-verse base," Stephens said, adding that "we are moving ahead with plans for 75 Mbps and faster."

Interestingly, consumers continue to purchase higher speeds. Nearly 60 percent of U-verse broadband subscribers have signed up for a 12 Mbps or higher speed tier. In addition, over 90 percent of new U-verse TV customers took a U-verse Internet subscription.

U-verse TV also fared well in the third quarter. The telco added 265,000 new U-verse TV subscribers, which it said was the "second-highest net add quarter ever and best quarter in almost five years." What's interesting about U-verse is that nearly 70 percent of the TV subscribers are subscribing to at least three or four services. Consumer ARPU for U-verse triple play customers continues to be more than $170 a month.

Business services: Due to strong economic headwinds, AT&T's business services revenues declined 0.9 percent sequentially to $8.8 billion. As seen in previous quarters, declines in legacy services such as Frame Relay and ATM were partially offset by double-digit growth in strategic business services. Next-gen business services, which include Ethernet and IP VPN, grew 15.7 percent vs. Q2 2013. These services represent an $8.6 billion annualized revenue stream and make up more than 24 percent of wireline business revenues. The telco also added a record 97,000 business U-verse high speed broadband subscribers.

"Obviously, there's a challenging economic environment for business services, but at the same time we're seeing growth in productivity services such as data, cloud and mobility," Stephens said.

He added that "our U-verse broadband is making noise in the small business space with record gains of almost 100,000 new high speed data broadband subscribers in the third quarter, which is quite an achievement in this tough economy."  

From an overall financial standpoint, AT&T reported consolidated revenues of $32.2 billion, up 2.2 percent year over year. Operating expenses were $26.0 billion versus $25.4 billion.

Shares of AT&T were listed at $35.28, up 0.05, or 0.14 percent, at the end of trading Wednesday on the New York Stock Exchange.

For more:
- see the release
- here's a link to the earnings webcast
- and FierceWireless' take

Earnings summary: Wireline telecom earnings in the third quarter of 2013

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