AT&T Blames Storms, Tech Upgrade For Lighter U-verse TV Adds


AT&T had to "pull back on some installations" of U-verse TV in the third quarter of 2011 because of a U-verse technology upgrade and to repair damage from storms that swept through its wireline service areas, chief financial officer John Stephens said on the telco's earnings call Thursday.

The company added 176,000 IPTV subscribers in the third quarter of 2011, reaching 3.6 million total, which was below Wall Street consensus estimates of 215,000 net adds and well off its pace in recent quarters.

Two storms, Hurricane Irene and Tropical Storm Lee, struck large parts of the U.S. in the course of two weeks in late August and early September.

AT&T expects U-verse TV subscriber additions to improve in the fourth quarter. "Sales remain strong," Stephens said, adding that the video service has 25% penetration in areas marketed to for 36 months or more.

The telco's wireline IP data revenue, which includes U-verse and legacy DSL broadband, now represents an annualized revenue stream of almost $11 billion, and was up 19% year over year for the third quarter, Stephens added. IP data services now account for 50.9% of wireline consumer revenue, or about $2.7 billion for Q3 2011.

Asked about the U-verse technology upgrade, AT&T executives were cagey. Ralph de la Vega, president and CEO of AT&T Mobility and Consumer Markets, said the U-verse upgrade will provide "new connectivity options" for customers to connect smartphones and tablets to the TV service to access additional video content.

"You're going to see us now roll out new features in the next two or three months of how to connect your smartphone to your U-verse TV, connect your iPad, watch complementary content, all kinds of new connectivity options that are going to become available now that the platform has been upgraded," de la Vega said.

Stephens also noted that AT&T this week launched the ability for U-verse TV customers to use social TV apps that integrate the telco's TV and wireless platforms. "Our goal is to take the best video experience and make it even better," he said.

While overall wireline revenue of $15 billion was down 2.2% versus the year-earlier quarter, Stephens pointed to some bright spots. Those included the fact that wireline segment revenue was up sequentially for the first time in three years and that broadband for small businesses grew for the first time in two years.

"I'm thrilled about our total wireline business," he said. "The growth was not dramatic. I don't think anyone would have expected it to be dramatic in this economic environment."

On wireline broadband, AT&T has had great success with U-verse High-Speed Internet. In the third quarter, it added 504,000 subscribers -- more than double the TV additions. But AT&T also lost 501,000 legacy DSL customers.

"With traditional DSL still outnumbering fiber-based broadband for the telcos by a 3:1 margin in the U.S., the cable companies will continue to win the broadband wars," Sanford Bernstein senior analyst Craig Moffett wrote in a research note.

For non-U-verse areas, AT&T is looking for LTE 4G to provide a high-speed data option. The telco launched LTE in the third quarter and expects to cover 15 cities by end of year serving 70 million POPs by end of year. Boston and Washington, D.C., are the next cities slated for LTE, de la Vega said.

AT&T also plans to introduce new LTE handsets in the fourth quarter, in what executives predicted would be a stellar one for wireless devices sales. Through Tuesday, de la Vega said, the telco sold more than 1 million iPhone 4S smartphones. "We expect the fourth quarter to be one of our strongest for smartphone sales ever," he said.