Tags: AT&T | shares | stock | verizon

AT&T Plummets as Sales Miss Estimates on Verizon Competition

Wednesday, 24 Apr 2013 10:14 AM

AT&T Inc., the largest U.S. phone company, dropped the most in almost three years after first-quarter revenue missed analysts’ estimates, dragged down by a sluggish landline business and competition with Verizon Wireless.

AT&T slid 5.8 percent to $36.75 at 9:48 a.m. in New York, the biggest intraday decline since May 2010. The stock had climbed 16 percent this year through Tuesday, compared with an 11 percent gain for the Standard & Poor’s 500 Index.

Sales dropped 1.5 percent to $31.4 billion, Dallas-based AT&T said in a statement. Analysts had projected $31.7 billion on average, according to data compiled by Bloomberg. Earnings climbed to 64 cents a share, excluding some items, matching the average estimate.

AT&T’s landline revenue declined 1.8 percent to $14.7 billion, hurt by sluggish demand for traditional phone connections — especially among business customers. While the company’s wireless division attracted more subscribers than expected last quarter, its growth was still dwarfed by that of Verizon. AT&T added 296,000 contract customers in the period, compared with Verizon’s 677,000.

“AT&T is still in catch-up mode relative to Verizon and the customer gains show it,” said Roger Entner, an analyst with Recon Analytics LLC in Dedham, Massachusetts.

AT&T sold 4.8 million iPhones last quarter, a mixed blessing for the carrier because of the resulting subsidy payments. Like most major U.S. carriers, AT&T offers steep discounts on the iPhone and other smartphones in exchange for a two-year contract. That may have made it more difficult for the company to exceed analysts’ profit estimates last quarter.

Payoff Needed

“Smartphones are expensive and subsidies are high,” said Todd Rethemeier, an analyst with Hudson Square Research in New York. He has a hold rating on the shares. “You want to see that the payoff of higher-spending customers is happening,” Rethemeier said.

The company did see a rise in its average revenue per user, or ARPU, for wireless customers — a sign that smartphone owners are paying more for wireless data. The ARPU for data use among monthly wireless subscribers increased 18 percent, AT&T said. Total subscriber ARPU, which includes high-margin but lower- revenue-generating tablets, rose 0.9 percent from a year ago.

The company’s wireless service margin, which leaves out items such as interest and taxes, was 43.2 percent, slightly above the 42.5 percent estimate. The company also added 365,000 tablet subscribers, up from 240,000 a year earlier.

LTE Network

In an effort to catch up to Verizon, the largest U.S. mobile-phone carrier, AT&T is upgrading its network to a technology called long-term evolution, or LTE. That effort is going well, AT&T Chief Financial Officer John Stephens said. The company is far enough along that it can cut capital spending in 2014 and 2015 to about $20 billion a year, from the $22 billion that was originally planned.

“By year-end, we will be nearly 90 percent complete with our LTE build-out,” Stephens said in an interview.

AT&T’s landline business had more success with consumers than business customers last quarter, the company said. It added 731,000 subscribers to its U-verse Internet service, marking AT&T’s biggest single quarterly gain. An additional 232,000 U- verse TV subscribers signed up for the service, exceeding the 200,000 projected by Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
InvestingAnalysis
AT&T Inc., the largest U.S. phone company, dropped the most in almost three years after first-quarter revenue missed analysts’ estimates, dragged down by a sluggish landline business and competition with Verizon Wireless.
AT&T,shares,stock,verizon
537
2013-14-24
Wednesday, 24 Apr 2013 10:14 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved