AT&T Rolls Up 2.5 Million U-verse TV Subscribers
Telco Raises Earnings Outlook for Full-Year 2010
By Todd Spangler -- Multichannel News, 7/22/2010 8:59:33 AM
Among strong second-quarter results, AT&T grew U-verse TV subscribers 59% year over year to stand at 2.5 million at the end of June.
In the second quarter, AT&T's revenue from U-verse TV, Internet and voice services exceeded $1 billion for the first time -- more than twice the U-verse revenue in the second quarter of 2009.
Overall, the telco raised its earnings outlook for the full year 2010, citing "improved revenue trends and strong execution."
Where AT&T previously expected "stable-to-improved" earnings per share, and free cash flow flat with 2008 results, the company now expects "strong" earnings per share growth for full-year 2010 as well as improved consolidated operating income margins and free cash flow above 2008 levels.
In the second quarter, AT&T lost 93,000 wireline broadband subscribers, whereas Wall Street expected a gain of 59,000, to stand at 13.9 million digital subscriber line customers.If Verizon also posts a net loss on broadband for the quarter, that means cable is capturing "100% of the broadband flow share, something that has never happened before," Sanford Bernstein senior analyst Craig Moffett wrote in a research note. And for the telcos, he added, that's "a troubling sign of things to come."
AT&T CFO Rick Lindner, on a conference call with analyst Thursday, acknowledged broadband was "weaker" in the second quarter, attributing it partly to seasonality and to cable operators targeting non-U-verse areas with aggressive promotions.
But while AT&T is losing lower lower-ARPU (average revenue per unit) customers, it's gaining on U-verse. Total broadband ARPU was up 5% year over year and overall consumer wireline revenue per household is up over 7.5%, Lindner said.
"Not all revenue connections are created equal," he said.
U-verse TV subscribers increased by 209,000 in the quarter to reach 2.5 million. U-verse High Speed Internet attach rate continued to run above 90% in the period, with about two-thirds of subscribers taking U-verse Voice.
Average revenue per unit (ARPU) for U-verse triple play customers was nearly $160, up 13.8% year over year and up 6.8% from the first quarter of 2010.
Meanwhile, satellite connections -- via DirecTV and AT&T's now-expired reseller deal with Dish Network -- dropped 7% in the quarter, to 2.1 million.
AT&T's U-verse deployment now reaches 25 million living units, and the company is aiming to reach 30 million by the end of 2011. Companywide penetration of eligible living units is more than 13%, and across areas marketed to for 30 months or more, overall penetration is more than 22%.
Still, AT&T kept losing legacy phone lines at a double-digit rate. Retail consumer voice connections dropped 11.2% versus the year-ago quarter, to stand at 25.8 million as of June 30.
In total, AT&T's wireline consumer revenue connections at the end of the June quarter stood at 44.3 million, compared with 46.3 million at the end of the second quarter of 2009 and 45.0 million at the end of the first quarter of 2010. At the end of the second quarter, AT&T had 16 million total wired broadband connections, up 404,000 over the past year and down 92,000 from first-quarter 2010 levels.
Overall, AT&T posted revenue of $30.8 billion (up 0.6% year to year) with net income of $4.0 billion (up 25.9%). The net income included a one-time gain from the exchange of Telmex Internacional stock for shares of América Móvil; excluding that, earnings grew 13.0 percent to $0.61 per diluted share.
Despite a well-publicized antenna issue with Apple's iPhone 4 model, AT&T activated 3.2 million iPhones in the quarter -- the most quarterly iPhone activations ever. Approximately 27% of those activations were for customers who were new to AT&T, the telco said. For wireless overall, AT&T posted a net gain of 1.6 million subscribers in the period, to reach 90.1 million in service.
AT&T's total capital expenditures in the second quarter totaled $4.9 billion -- which included an almost 60% increase in wireless-related capital investment versus the year-earlier quarter -- up 21% versus $4.0 billion in Q2 2009.
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While I think that a 30% penetration is a reasonable goal for an overbuilder, there are two points to consider for this announcement:
1) Many of these passings have only been active for a few months. It will take time for U-verse to reach a stable penetration percentage.
2) AT&T already had most of the plant in place, so their CapEx was much less than in a traditional overbuild scenario.
Maybe U-verse won't succeed, but it's way too early to write the book on it.
Jeff Corbett - 10/7/2010 1:32:34 PM EDT -
AT&T U-Verse is available to 25 million homes. That means that 10% of the homes that can get U-Verse took it. Most commercial overbuilds get at least 30% of the homes they pass - they have to in order to have positive cash flow. Looks to me like U-Verse continues to be a failure.
Max Whitehat - 7/23/2010 9:41:48 AM EDT
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