For the first quarter ending March 31, the carrier posted net income up 97.1% to $2.85bn from $1.44bn in the year-ago quarter. Sales rose 83.9% to $28.97bn from $15.76bn in the year-ago quarter. The year-ago figures do not include the BellSouth acquisition.
We had an outstanding start to the year, said CEO Edward Whitacre. Merger integration is on track, volumes continues to be solid, and we expanded margins in both wireless and wireline.
Whitacre has reason to be pleased at the success of merger integration, which realized $900m in cost savings during the quarter. This was made up of $300m of savings from the BellSouth acquisition, which gave AT&T full control of its mobile operation Cingular, which has since been rebranded AT&T, reducing marketing costs. Meanwhile, the AT&T-SBC merger contributed $600m in cost reductions.
The Wireline (fixed-line) division at AT&T accounted for the bulk of total group revenues with sales of $18bn in the quarter, versus $14.4bn a year earlier. However, this growth included the impact from the BellSouth deal, and AT&T lost 285,000 consumer lines across its regional operations as users continued to discard home lines.
AT&T said it benefited from accelerated broadband and video growth. Its video connections, including its U-verse IPTV service and bundled satellite television service, signed up 187,000 new users during the quarter and it said it is adding customers at a rate of 2,000 per week.
AT&T also recorded 691,000 high-speed internet adds in the quarter, up 2.3 million over the past year. It said online gaming and video are biggest two of the biggest drivers of this uptake.
AT&T said it is the largest ISP in the US with a total of 12.9 million customers. Over 42% of its DSL lines are over 3MB/ps.
In the other major division, wireless revenues rose 11.2% to $10bn, as it added 1.2 million customers during the quarter to increase its total wireless customer base to 62.2 million. The markets had been expecting 1.5 million adds during the quarter, leaving to some concerns that is losing ground to second placed Verizon Wireless.
Yet ARPU levels rose 1.4% to $49.21 year-over-year, thanks to the increasing amount of data usage, as wireless customers looked to download more content onto handsets.
The carrier cited the contributions from media bundles (integrated SMS, Multimedia SMS, email) and data access, which it said complement its traditional SMS service that made up the bulk of revenues for data usage.
Postpaid churn decreased to 1.3%, AT&T’s lowest ever level. Total churn declined to 1.7%, which reflected the high churn levels on the prepaid side.
Chief financial officer Rick Lindner was clear about the very high levels of anticipation being generated by the forthcoming arrival of Apple’s iPhone. AT&T is the exclusive distributor for this device, which will be launched in June in the US. We are getting more and more excited by it, said Lindner. He also tried to explain AT&T’s puzzling move to attempt to acquire a one-third stake in the holding company of Italian carrier Telecom Italia earlier this month.
Telecom Italia was an opportunity worth looking at, he said. What attracted us was the opportunity to work with a company that has a strong network presence in Italy and Europe, and that was our main interest in that asset. It was worth a look, but as we did some due diligence and got further into the transaction, we decided it was not a deal for us.
During the quarter AT&T also accelerated a share buyback plan, and announced it would complete $10bn of share repurchases by the third quarter, instead of the end of the year.
Shares in the carrier fell 1.28% to $39.26 yesterday on the New York Stock Exchange, mostly because while the profits were impressive enough, overall sales and wireless customer growth missed some market expectations.
