New tariffs weigh on AT&T's Q2 profit
Source: View: 249 Date: 2014-07-25

AT&T’s net profit took a hit in the second quarter as it pulled out all the stops to attract new wireless subscribers.

The U.S. telco’s Mobile Share Value plan, which lets customers share data between multiple devices, and its Next plan, customers pay for their device and service plans separately, proved popular in the three months to 30 June. The company added just over 1 million postpaid customers, its best performance in nearly five years, and postpaid churn came in at 0.86% compared to 1.02% a year earlier.

However, the transition to new tariff structures, coupled with aggressive promotional activity, meant its wireless operating margin contracted to 24.1% 27.1% in Q2 2013. Service revenue declined 1.4% to $15.1 billion and operating income fell to $4.3 billion $4.7 billion.

"Our move to simple pricing and no-device-subsidy plans is repositioning the wireless business model, resulting in our best postpaid net adds in nearly five years and our lowest-ever postpaid churn," said AT&T chief executive Randall Stephenson, in a statement late Wednesday.

AT&T’s impressive postpaid net additions were partially offset by a 405,000 net decline in prepaid customers and a 162,000 fall in reseller customers, leaving it with net adds of 634,000 and a wireless subscriber base of 116.6 million at the end of the quarter.

On the fixed-line side of the business, AT&T’s revenues were broadly flat at $14.6 billion. A slight increase in operating expenses resulted in a 12.9% decline in operating income to $1.4 billion. Wireline subscriptions fell by 465,000, driven by declining voice customers and a slight fall in broadband customers that was offset by a 190,000 gain in video customers.

Stephenson said AT&T’s planned acquisition of DirecTV "will improve our video position and our ability to bundle broadband, mobility and video services nationally".

Last month, AT&T sold its 8.27% stake in America Movil for $5.57 billion in a bid to improve its chances of gaining antitrust approval authorities in Latin America, DirecTV vies with America Movil in the pay TV market.

According to Reuters, AT&T’s CFO John Stephens said the telco on Wednesday received approval for the deal regulators in Brazil.

Meanwhile, AT&T’s second quarter group revenue came in at $32.6 billion, up $32.1 billion a year ago. Net income attributable to the company fell 7.2% to $3.5 billion.

AT&T reiterated its full-year guidance of revenue growth in the range of 5%, and free cash flow of around $11 billion.



Devott Publications
The Selection of the TOP Global Outsourcing Destinations – China TOP 15 (TGOD China TOP 15) Ended and Its Rankings and Research Reports are Now Available Worldwide