AT&T reported it lost 268,000 postpaid phone subscribers during the third quarter, which the company said was largely due to subscriber losses among those with lower-ARPU feature phones. However, the company also boasted of its “strong” U.S. wireless operating margin of 29.6 percent, and its “best-ever” U.S. wireless service EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of 50.1 percent.
AT&T’s third quarter earnings were released a few days ahead of schedule (the company had been scheduled to announce its third-quarter earnings Tuesday). The company released its earnings in conjunction with the announcement that it reached a deal to acquire Time Warner Inc. for $85.4 billion. If approved by regulators, that deal would give AT&T ownership of Time Warner’s vast content holdings, including HBO, CNN, TNT, TBS and Warner Bros. TV Studios and Warner Bros. Pictures.
Analysts offered a relatively muted reaction to AT&T’s third quarter performance. “Overall results were weak, with soft sub trends in wireless,” wrote the analysts with New Street Research in a note to investors released shortly after AT&T announced its third quarter results. “These results are supportive of our thesis that incumbents are disadvantaged in an environment with increased turnover following the iPhone launch. While the margin pressure was less than expected, it appears this was due to AT&T’s choice to lose more share than we had expected. With Verizon posting phone losses for the first time ever in a third quarter, and AT&T’s miss, TMUS and Sprint are set up for a strong set of results (Sprint preannounced better than expected sub trends last week).”
Others, however, offered a slightly more upbeat look at AT&T’s results. “Postpaid phone net adds of -268k were in-line with our estimate (-275k) and below consensus at -226k (note significantly stronger results from S/TMUS had driven pressure at VZ last week as well),” the analysts at Deutsche Bank wrote in a note to investors. “Of note, we believe fears around the impact of elevated iPhone 7 subsidies may have been overdone.”
In comparison, T-Mobile in September said it had added roughly 753,000 net postpaid phone adds thus far during the third quarter and an additional 650,000 net prepaid customer adds. And last week Sprint said it recorded 344,000 net postpaid additions during the quarter and 347,000 net postpaid phone adds.
Verizon lost 36,000 net postpaid phone subscribers during the third quarter, falling well short of the 92,000 net additions Wells Fargo Securities had predicted it would report.
Not surprisingly, AT&T reported ongoing sales of smartphones in its most recent quarter. Specifically, the carrier said it recorded 7 million branded smartphone gross adds and upgrades in the quarter, including 1.9 million from prepaid. The carrier said that 83 percent of all of its postpaid smartphone gross adds and upgrades selected its AT&T Next equipment installment plans. Interestingly, AT&T also said that it notched 595,000 BYOD (bring your own device) gross adds, “the second most ever,” the carrier said.
Overall, AT&T reported companywide revenues of $40.9 billion, up 4.6 percent, alongside net income attributable to AT&T rising 11.2 percent. The company said its cash from operations reached $11 billion during the quarter.
Here’s a breakdown of AT&T’s key quarterly metrics:
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