Though all eyes were on AT&T’s freshly announced deal to acquire content giant Time Warner for $85.4 billion, the wireless carrier on Monday also posted less-than-stellar third quarter results.
For the previous three months, AT&T said it pulled in $18.2 billion in total wireless revenue. That figure was dead-on with Wells Fargo estimates, but marked a .7 percent decrease year over year to sliding service and equipment revenues, AT&T said.
The carrier also reported 268,000 postpaid phone losses, which was more than the 200,000 postpaid losses predicted by Wells Fargo. The figure was significantly higher than the 180,000 postpaid handset losses the carrier reported in its second quarter earnings report in July.
AT&T’s overall postpaid subscriber gains of 212,000 net additions fell short of the 300,000 net additions forecast by Wells Fargo. The carrier said it added 304,000 prepaid subscribers via its Cricket and GoPhone offerings, but that number dipped from 365,000 prepaid net additions in the second quarter.
AT&T said it also added 1.3 million connected devices in the quarter. The carrier said it had a total of 133 million wireless subscribers in service at the end of the third quarter.
Average revenues per user (ARPU) for postpaid phone-only also slid 1.9 percent from the prior year to $59.64, but postpaid churn improved from 1.16 percent the year before to 1.05 percent in the third quarter. Postpaid phone churn was .90 percent and total churn stood at 1.45 percent, AT&T said.
Overall, AT&T’s consolidated revenues were up 4.6 percent to $40.9 billion. The company said it added 323,000 satellite subscribers in the quarter but lost 326,000 U-verse TV subscribers. AT&T said total video net additions for the year are expected to decline slightly.
Wells Fargo Senior Analyst Jennifer Fritzsche on Monday said the results were a “little light.” But MoffettNathanson’s Craig Moffett was even less generous with his assessment, saying the report made clear “why AT&T had to do something.”
“AT&T’s decision to return to M&A so quickly suggests that things may be deteriorating faster than they had expected,” Moffett wrote. “That deterioration isn’t just in the DirecTV segment, where subscriber growth (net of losses at U-Verse) has been negative every quarter since the deal closed. Organic consolidated revenue growth has turned negative (shrinking by 1.1% in Q3), missing already low expectations, and although organic EBITDA growth is positive YoY (up an estimated 2.0% in Q3), it, too, missed consensus. Their broadband subscriber base is now shrinking. Perhaps most importantly, wireless trends have weakened dramatically over the past two years. Revenue growth in Consumer Mobility stands at -5.9%, and in Q3 they missed subscriber targets for post-paid, pre-paid, and branded phones. There are no easy answers for any of these issues.”
AT&T’s performance reflects similar pressure felt by rival Verizon, which lost 36,000 net postpaid phone subscribers and saw total wireless revenues drop 3.9 percent year over year to $22.1 billion in the third quarter. Like AT&T, Verizon has made a play to secure a strong content position, most recently evidenced by its decision to acquire troubled Internet giant Yahoo.
Other Q3 details
AT&T on Monday also delivered a slew of other metrics for its business, including the revelation that there are now approximately 6.7 million postpaid subscribers on its unlimited wireless plan in the third quarter. That figure was up from around 5 million subscribers by the end of the second quarter. AT&T said around half of its smartphone base is currently on its AT&T Next installment plan, with nearly 80 percent of postpaid smartphone subscribers on no-device-subsidy plans.
AT&T said 90 percent, or 58.7 million, of its postpaid phone subscribers were using smartphones as of the end of the third quarter. The carrier said 57.1 million connections were on its Mobile Share plans as of the end of the quarter, with an average of 3 devices per account. Around 40 percent of accounts were on a 15 gigabyte plan or larger, AT&T said.
The carrier reiterated it is planning to shut down its 2G network on or around January 1, 2017. The move will impact some four million 2G customers who were still on the network as of the close of the third quarter – including 2.8 million connected devices, 673,000 reseller, 335,000 postpaid and 210,000 prepaid subscribers. AT&T said it will continue its migration efforts in the coming quarter, but noted the shutdown is expected to impact its net addition and churn figures in the fourth quarter.
