Profit Down, But New Business Services, Smartphone Sales Help Pace AT&T

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AT&T‘s profit ($3.65 billion) fell a little more than 1 percent last quarter, but revenue ($32.5 billion) was up 3.6 percent from Q1 2013 – the company’s best growth in two years – on the back of strong wireless numbers.

“We have been working very deliberately to transform our business, and this quarter you really start to see the benefits,” said Randall Stephenson, AT&T chairman and CEO. “Customers really like the new mobility value proposition and are choosing to move off device subsidies to simpler pricing while at the same time, they are continuing to move to smartphones with larger data plans.

Breaking it down, wireless revenue was up 7 percent year over year, to $17.9 billion. The carrier says its AT&T Next device-upgrade plan, and the increasing number of lower-ARPU but high-margin tablet sales pushed the number higher. In addition, the company’s net postpaid additions (625,000) in the first quarter were its best in five years. The gain was offset slightly by a net loss of 50,000 prepaid subscribers. AT&T, which last quarter closed on its purchase of Leap Wireless dba Cricket Communications, hopes to beef up its prepaid offering in the months ahead.

AT&T said smartphone sales continued to be strong. The company added 1.1 million new postpaid smartphones (both upgrades and new subscribers). Smartphones now account for 92 percent of the carrier’s postpaid phone sales.

Churn was 1.07 percent, down from the previous quarter, but up slightly from the first quarter of 2013.

The total number of U-verse subscribers (TV and high-speed Internet) reached 11.3 million last quarter. U-verse TV added 201,000 subscribers in the first quarter to reach 5.7 million in service. AT&T says it has more pay TV subscribers than any other telecommunications company. U-verse high speed Internet had a first-quarter net gain of 634,000 subscribers, to reach a total of 11 million.

Total revenue from business customers was down 2.7 percent, to $8.7 billion, and business-service revenue declined 2.1 percent from the year-ago quarter. But what the company calls its “strategic” business services – next-generation, advanced solutions such as VPN, Ethernet, cloud and hosting – grew 16.1 percent from Q1 2013. These services represent an annualized revenue stream of more than $9 billion and are now more than 26 percent of wireline business revenues. During the first quarter, AT&T also added 64,000 business U-verse high speed broadband subscribers.  

Follow senior online managing editor @Craig_Galbraith on Twitter.

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