AT&T posted higher revenue and profit in the second quarter, with gains in its mobile unit offsetting flat wireline revenue.
The company gained 632,000 wireless subscribers and saw its mobile data revenue rise almost 20 percent. On the wireline side, the U-Verse high-speed TV and broadband service now accounts for a majority of consumer revenue, AT&T said.
AT&T's revenue grew 1.6 percent from a year earlier to US$32.1 billion. Not counting the company's former Advertising Solutions division, which was sold off in the past year, revenue was up 2.6 percent, AT&T said. Profit grew 7.6 percent to $0.71 per share, or $0.67 excluding one-time items. Both results roughly matched the expectations of analysts surveyed by Thomson Financial.
Tablets accounted for a large part of the company's net subscriber gains in mobile. Its postpaid net additions included 398,000 tablets, the company said. Meanwhile, 88 percent of AT&T's postpaid phone sales were smartphones.
Mobile competition in the U.S. is heating up, especially in the weeks since the end of the quarter, with T-Mobile USA introducing new types of subscriber plans and a rejuvenated Sprint sitting on more spectrum than either AT&T or Verizon. AT&T is making its own move in the ongoing consolidation of the industry with a plan to buy Leap Wireless, operator of the Cricket prepaid brand.
AT&T is on track to meet its guidance for revenue growth, earnings, cash flow and margins for the full year, CFO John Stephens said on a conference call following the report.
Mobile subscribers are consuming growing amounts of data, making AT&T optimistic about increases in monthly bills. Data usage per smartphone grew 50 percent in the first quarter, and customers are buying bigger data allowances as they sign up for shared data plans and add other devices, especially tablets, AT&T said. More than 20 percent of users on shared mobile data plans choose a 10GB monthly cap, Stevens said.
"I feel really good that we have prospects to continue to grow usage and to get customers to buy bigger buckets in the future," said Ralph de la Vega, president and CEO of AT&T Mobility.
The company also expects to bring in more revenue from its Wireless Home Phone service, which allows users to connect their landline phones to AT&T's mobile network. AT&T will announce in the next few days that it is adding a data option to that service, which should drive up monthly revenue from it, de la Vega said.
AT&T plans to use the Leap Wireless acquisition to expand its prepaid business and take advantage of growth in that market, the executives said.
"We believe that Leap is going to provide us the opportunity to expand services to customers in a segment of the mobility market that is now underserved," Stevens said.
AT&T plans to keep the Cricket brand and distribution channels, de la Vega said. "That will fuel our entry into a nationwide prepaid offering," he said. The Leap deal still needs to gain regulatory approval.
The company is optimistic that its recently announced Next program, which lets subscribers trade in their phones every year, will be popular and profitable. AT&T conducted extensive market research before launching the plan and heard that customers wanted to get new phones more frequently, de la Vega said. AT&T announced Next just days after T-Mobile announced a similar service.