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AT&T Reports Robust Wireless Data Growth
Posted: 28-Jan-2009 [Source: AT&T]

[AT&T posted its fourth quarter and full-year results showing strong wireless subscriber gains and continued progress in key growth areas including wireless data services.]

Dallas -- -Full-year reported EPS of $2.16, up from $1.94 for 2007; full-year adjusted EPS of $2.81, compared with $2.76 for 2007 -Fourth-quarter reported EPS of $0.41 versus $0.51 for the year-earlier quarter; adjusted fourth-quarter EPS of $0.64 versus $0.71 -Fourth-quarter EPS reflects the success of AT&T’s iPhone 3G launch. Adjusted results exclude merger-related costs and a previously announced force reduction charge. In addition, both reported and adjusted fourth-quarter 2008 earnings include $0.07 of pressure from the company’s iPhone 3G initiative, hurricane-related expenses and foreign exchange impacts -2.1 million fourth-quarter net gain in wireless subscribers to reach 77.0 million in service, up 7.0 million over the past year -4.3 million iPhone 3G devices activated in the second half of 2008, including 1.9 million in the fourth quarter. Approximately 40 percent of iPhone activations were for customers new to AT&T. iPhone 3G continues to deliver high-value subscribers with significantly higher ARPU (average monthly revenues per subscriber) and lower churn than AT&T’s postpaid subscriber average

-Wireless postpaid subscriber ARPU growth of 3.9 percent versus the year-earlier quarter to $59.59; postpaid data ARPU up 35.7 percent versus the fourth quarter of 2007 and up 10.9 percent sequentially

-51.2 percent growth in wireless data revenues — reflecting rapid adoption of wireless integrated devices and increased usage of wireless Internet access, messaging and related services; AT&T’s wireless integrated devices in service more than doubled over the past year

-Strong ramp in AT&T U-verse TV subscribers, with a fourth-quarter net increase of 264,000, the company’s best quarterly gain to date, to reach more than 1 million in service; U-verse network deployment now reaches 17 million living units -14.2 percent fourth-quarter growth in wireline IP data revenues driven by rapid expansion in AT&T U-verse services and growth in business products such as Virtual Private Networks (VPNs) and managed Internet services

AT&T Inc. today reported fourth-quarter and full-year results highlighted by strong wireless subscriber gains and continued progress in key growth areas including wireless data services, IP-based services for businesses and AT&T U-verse TV. Growth in these areas more than offset expected economic pressures, primarily reflected in lower wireline voice revenues.

For the fourth quarter, AT&T’s revenues totaled $31.1 billion, net income was $2.4 billion and cash from operating activities totaled $10.9 billion. Full-year revenues totaled $124.0 billion, net income was $12.9 billion and cash from operating activities totaled $33.7 billion.

"Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company,” said Randall Stephenson, AT&T chairman and chief executive officer.

"During the past year, we took major steps to improve AT&T’s position for 2009 and beyond. The success of our iPhone 3G launch has driven wireless growth and helped redefine the wireless data space. Our AT&T U-verse TV service continues to ramp. We completed the world's largest deployment of the fastest Internet backbone technology across our U.S. network. We further expanded our industry-leading network capabilities and product sets for the business market.

“I am pleased to say that as we made these advances, we also delivered on our cost initiatives and returned substantial value to shareowners, including our 25th consecutive annual dividend increase, which was announced in December.

“Looking ahead, while we are cautious about the economic environment, AT&T is well positioned with a strong balance sheet and premier operational assets, and I am very confident in our ability to execute.”

Fourth-Quarter Reported Results

For the quarter ended Dec. 31, 2008, AT&T's consolidated revenues totaled $31.1 billion, up 2.4 percent versus reported results in the year-earlier quarter and up 2.2 percent compared with fourth-quarter 2007 pro forma revenues, which exclude merger-related accounting impacts on directory revenues.

Consolidated revenue growth was driven by 13.2 percent wireless growth and a 14.2 percent increase in wireline IP data revenues, which include AT&T U-verse services and business offerings such as VPNs and managed Internet services. Gains in these areas more than offset pressures from the macro-environment, including impacts on access lines and wireline voice usage.

Compared with results for the year-earlier quarter, AT&T's reported operating expenses for the fourth quarter of 2008 were $26.2 billion versus $24.9 billion; reported operating income was $4.9 billion versus $5.5 billion; and AT&T's reported operating income margin was 15.8 percent, compared with 18.1 percent.

AT&T's reported fourth-quarter 2008 net income totaled $2.4 billion versus $3.1 billion in the year-earlier quarter, and reported earnings per diluted share totaled $0.41, compared with $0.51 in the fourth quarter of 2007.

Wireless Operational Highlights

AT&T's fourth-quarter wireless growth was powered by strong subscriber gains and continued rapid growth in advanced data services, which drove solid improvement in postpaid ARPU. Highlights include the following:

-2.1 Million Net Gain in Wireless Subscribers. AT&T posted a fourth-quarter net gain in wireless subscribers of 2.1 million to reach 77.0 million in service, up 7.0 million over the past year. Retail postpaid net adds topped 1.3 million, up 13.9 percent versus results in the year-earlier quarter. Total monthly subscriber churn in the fourth quarter was 1.6 percent, down from 1.7 percent for both the preceding quarter and the year-earlier fourth quarter. Postpaid churn was 1.2 percent, flat versus results for the preceding quarter and the fourth quarter of 2007. -1.9 Million Apple iPhone 3G Activations. Postpaid subscriber growth reflects the dramatic success of iPhone 3G, which was launched in July 2008. AT&T\u2019s fourth-quarter iPhone 3G activations totaled 1.9 million, approximately 40 percent to customers who were new to AT&T, and the company\u2019s total iPhone activations over the last half of 2008 topped 4.3 million. AT&T's iPhone exclusive continues to deliver high-value subscribers with ARPU approximately 1.6 times higher and churn rates significantly lower than the company's overall postpaid subscriber base.

-Leadership in Integrated Devices . The iPhone and other integrated devices are key to AT&T's success in winning high-value subscribers. During the fourth quarter, nearly 60 percent of the company\u2019s postpaid net adds came from customers choosing an integrated device, and 24.9 percent of AT&T's postpaid wireless subscribers now have an integrated device, up from 13.0 percent one year earlier.

-51.2 Percent Wireless Data Revenue Growth. Powered by AT&T\u2019s premier wireless data network and its attractive device lineup, AT&T's wireless data revenues grew 51.2 percent versus the year-earlier fourth quarter to $3.1 billion. Wireless text messages on the AT&T network were nearly 80 billion in the fourth quarter, more than double the total for the year-earlier fourth quarter. Internet access revenues and multimedia message volumes also continued their robust growth. This marked AT&T's 12th consecutive quarter with wireless data revenue growth above 50 percent. Data represented 26.6 percent of AT&T's fourth-quarter wireless service revenues, up from 19.9 percent in the year-earlier quarter.

-Retail Postpaid Subscriber ARPU Up 3.9 Percent. Powered by strong growth in data services and broad adoption of integrated devices including the iPhone, AT&T continues to expand its industry-leading postpaid wireless subscriber ARPU. For the fourth quarter, total postpaid ARPU was $59.59, up 3.9 percent versus the year-earlier quarter. Postpaid data ARPU was $16.30, up $4.29 or 35.7 percent versus the fourth quarter of 2007, and up $1.60 or 10.9 percent sequentially. Total wireless subscriber ARPU was up 1.1 percent versus the fourth quarter of 2007.

-13.2 Percent Total Wireless Revenue Growth. Driven by subscriber gains and data growth, AT&T's total wireless revenues increased 13.2 percent to $12.9 billion, and wireless service revenues, which exclude handset and accessory sales, grew 13.3 percent to $11.5 billion. For the full year 2008, total wireless revenues were $49.3 billion, up $6.7 billion or 15.6 percent versus 2007 results.

-Sequential Wireless Margin Expansion. On a reported basis, fourth-quarter wireless operating expenses totaled $10.2 billion, operating income was $2.7 billion and AT&T's wireless operating income margin was 20.9 percent versus 17.0 percent in the year-earlier fourth quarter. On an adjusted basis, fourth-quarter wireless operating expenses totaled $9.7 billion, operating income was $3.2 billion and AT&T's wireless operating income margin was 24.6 percent versus 25.7 percent in the year-earlier fourth quarter.

Consistent with previously outlined expectations, the successful ramp of AT&T\u2019s iPhone 3G initiative helped drive a substantial sequential improvement in AT&T\u2019s wireless OIBDA margins. AT&T's fourth-quarter reported wireless OIBDA service margin was 35.8 percent, up from 33.5 percent in the third quarter of 2008 and 35.3 percent in the year-earlier quarter. In addition to operational improvements, year-over-year margin comparisons reflect approximately $450 million of pressure in the fourth quarter of 2008 associated with iPhone 3G and approximately $30 million of expenses due to hurricanes. Without the iPhone 3G and hurricane impacts, AT&T's fourth-quarter 2008 wireless OIBDA service margin would have been approximately 41 percent. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.)

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