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AT&T beats earnings estimates, adds more subscribers

By Scott Moritz
Bloomberg News

AT&T Inc., the second-largest U.S. wireless carrier, reported third-quarter profit that exceeded estimates after adding subscribers and generating more revenue from smartphone data plans.

Earnings climbed to 66 cents a share, excluding one-time items, Dallas-based AT&T said Wednesday in a statement. Analysts had projected 65 cents on average, according to data compiled by Bloomberg. Sales rose 2.2 percent to $32.2 billion, in line with the average estimate.

AT&T’s fourth-generation LTE wireless network and its cable television U-verse fiber-optic system are helping fuel growth, said Randall Stephenson, the company’s chief executive officer. The company has operations in Akron.

AT&T said it added 363,000 contract wireless customers in the period, compared with 151,000 a year ago. Analysts had predicted 342,000, according to an average of nine estimates compiled by Bloomberg.

“We’re setting the standard for 4G LTE speeds and network reliability,” Stephenson said in the statement. “With these initiatives, we’re seeing excellent growth across our major platforms — mobility, U-verse and strategic business services.”

AT&T shares were little changed in extended trading after the report. The stock, up 4.7 percent this year, had risen 0.1 percent to $35.28 at the close in New York.

Third-quarter net income attributable to AT&T rose 4.9 percent to $3.81 billion, or 72 cents a share, from $3.64 billion, or 63 cents, a year earlier.

Even with the jump in subscribers, AT&T’s gains were dwarfed by Verizon’s 927,000 new contract users last quarter. Another competitor, T-Mobile US Inc., meanwhile, gained an estimated 401,000 monthly subscribers, according to an average of seven projections compiled by Bloomberg.

AT&T is facing renewed price competition from T-Mobile, a company it once attempted to acquire. That may be taking a toll on its customer growth, said Colby Synesael, an analyst with Cowen & Co. in New York.

“There’s a component of AT&T’s subscriber base that is shifting to T-Mobile based on price,” said Synesael, who has a neutral rating on AT&T and the equivalent of a buy on T-Mobile.

AT&T added 178,000 smartphone customers last quarter. That segment now represents 75 percent of the total users, up from 66 percent a year ago. The increase helps boost the amount customers spend on their monthly service plans because smartphones gobble up more data.

AT&T’s wireless service profit margin remained even with a year ago, at 42 percent. Analysts had predicted 41.3 percent. The average monthly wireless bill for contract customers was $66.20, in line with the average estimate.

AT&T’s land-line revenue declined 1 percent to $14.7 billion, hurt by slumping demand for traditional phone connections. The company added 265,000 U-verse TV customers, though, helping make up for land-line losses.

AT&T will raise $4.85 billion from a cell-tower deal with Crown Castle International Corp., announced earlier this week. The carrier agreed to sell or lease 9,700 towers to Crown Castle and lease back antenna space needed for its network.


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