Earnings: AT&T Q1, Revenues Up 11.2 Percent, Telecom Italia Bid Off

AT&T has released its first quarter results (net income was $2.8 billion, up from $1.4 billion in the first quarter of 2006)…the wireless aspects:

Total revenues for AT&T Wireless grew 11.2 percent in the first quarter to $10.0 billion, while service revenues, which exclude revenues from sales of handsets and accessories, grew to $9.1 billion, up 13.5 percent versus the year-earlier quarter. The company increased its customer base by 1.2 million subscribers in the first quarter (churn was down to 1.3 percent per month) to now have 62.2 million customers, an 11.5 percent increase on the first quarter in 2006. More than 70 percent of the Q1 additions were retail and more than 80 percent of those were postpaid. The gross subscriber additions were 4.3 million, down from 4.7 million for the previous year.

The company showed strong wireless data growth, with data revenue increasing 66.8 percent year-on-year to $1.5 billion, or 15 percent of total mobile revenue. The growth was driven by strong increases in both consumer and business data usage including increased messaging, browsing, downloads, media bundles, laptop connectivity, smart phone connectivity and enterprise vertical market solutions. AT&T Wireless had more than 33 million active data users in the first quarter (just over half of its total mobile customers), up by 30 percent year-on-year, and the company delivered nearly 230 million MMS and 14 billion SMS.

Mobile ARPU in the first quarter of this year was $49.21, a 1.4 percent increase year-on-year, and data ARPU increased by 51 percent to $7.88.

AT&T’s reported wireless operating income for the first quarter was $1.5 billion, up 88.5 percent from $808 million in the year-earlier period. Before merger-related costs, first-quarter wireless operating income was $2.5 billion, up 81.7 percent from $1.4 billion in the year-earlier quarter.

UPDATE FROM THE EARNINGS CALL:
AT&T CFO Rick Lindner said a couple of interesting things during the earnings call. Concerning the growth in data, he said: “If you went back a year ago, I think we would have said data growth was almost entirely due to text messaging. What we are seeing today is increasingly data growth is coming from other sources. It is coming from customers buying media bundles. In other words, they are buying a bundled service that allows them a large number of text messages, multimedia messages and Internet browsing capabilities. It is coming from customers that are adopting email services, like Blackberry, on their mobile devices and it is coming from customers that are buying data-only packages for their laptops or data-only PDA devices. I would have said at one point in time data growth would expand to be maybe 20 percent of total ARPU. I am not certain that it won’t expand beyond that based on the trends we are seeing.”

He also said that the bid for Telecom Italia (which was a joint bid made with America Movil) has been called off. “As we got into the transaction and we did some due diligence and got further into it, we decided it was in the right fit for us and wasn’t the right thing for our shareowners, and so we have declined to move forward with it,” said Lindner.

Release | Earnings Call Transcript

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