Wireless Growth Drives AT&T Profit

Sprint’s loss has certainly been AT&T’s gain. The San Antonio, Texas-based carrier reported its fourth-quarter results this morning, saying its profits more than doubled to $3.14 billion thanks to strong wireless growth that helped push sales to $30.3 billion.

AT&T (T) saw its wireless revenue hit $11.4 billion in the latest three-month period, driven primarily by data use and new customer adds — the number of wireless subscribers totaled 70.1 million by the end of the qaurter. Much of the credit for the $2 billion in wireless data revenue goes to the iPhone, as 40 percent of those buying iPhones are new AT&T customers. Smart phone subscribers, including the iPhone buyers, also tend to have double the ARPU of AT&T’s average wireless user.


In total AT&T added 2.7 million new wireless subscribers during the fourth quarter. But for those tempted to credit all of AT&T’s success in wireless data to the iPhone, consider that 9 million smart phones and devices are using AT&T’s 3G network, rather than the 2.5G EDGE network on which the 2.3 million AT&T iPhones run.

In other high-end services, AT&T saw its U-Verse subscribers almost double over the third quarter, to 231,000 from 126,000. Speaking on the conference call, AT&T CFO Rick Linder said the churn on U-Verse is comparable to churn rates for the company overall, but said he expects that number to level out at about 2 percent in the coming year. The U-Verse platform includes high-speed data and video services.

Broadband growth slowed in the fourth quarter, with 396,000 new customer adds compared with 499,000 for the third quarter. For the full-year 2007 period, 14.2 million customers received service, up 16.4 percent from from a year ago. However, revenue from those services were up only 13.7 percent year-over-year, at $1.4 billion. The economic weakness that’s expected in the coming year will likely continue to cause slower broadband adoption, Linder said in the conference call.

It may also cause a few hangups in the company’s wireline voice services as customers stop paying their bills. Although Linder said he expected wireless to be a defensive service through any economic turmoil, I do think revenue associated with media packages and downloads might dip. While businesses may pay for smart phones, if it comes down to paying AT&T or paying rent, I’m sure some of the consumer users might start to question their data plans.

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