AT&T Punches Up TV, Recedes On Wireline Broadband In Q4

Telco Completes U-verse Buildout At 30 Million Households
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AT&T's U-verse TV keeps zooming along with a net add of 208,000 subscribers to reach 3.8 million in service in the fourth quarter of 2011 -- although the telco dropped 636,000 legacy DSL connections -- and the company's wireless business continued to soar.

As of the end of 2011, AT&T said, it has substantially completed its U-verse deployment, which passes more than 30 million living units. U-verse revenue for full-year 2011 was $6.7 billion, up 15.9%. In the fourth quarter, consumer IP revenue represented 53.2% of $5.3 billion in wireline consumer revenues (up from 45% in the year-earlier quarter).

In Q4, U-verse-related revenue was up 44% from the year-earlier period, the sixth straight quarter of year-over-year revenue increases, AT&T chief financial officer John Stephens said on an earnings call with analysts Thursday.

"As we scale, U-verse margins continue to improve," Stephens said.

Overall U-verse penetration was 15.9% in the fourth quarter, and 25% across areas marketed to for 36 months or more. Average revenue per subscriber for U-verse triple-play customers was nearly $170, up 2.5% year over year. About 90% of TV subscribers take U-verse High Speed Internet and about half of new subscribers took AT&T U-verse Voice.

AT&T posted a 5% year-over-year drop in total consumer revenue connections in Q4, to 41.3 million, primarily due to declines in traditional voice access lines. The telco had 21.2 million voice connections, a 12.2% decline from the year-earlier period.

And while AT&T added 587,000 U-verse broadband customers in the quarter, that wasn't enough to offset losses of traditional, lower-speed DSL lines. Overall, the company lost 49,000 wireline broadband connections.

"[W]here broadband gains were offsetting access line losses a year ago, now broadband, too, is in decline," Sanford Bernstein senior analyst Craig Moffett wrote in a research note.

AT&T's satellite TV subscribers, through a reseller agreement with DirecTV and a legacy deal with Dish Network, stood at 1.77 million at the end of 2011, down 8.5% for the year.

Overall, for the quarter ended Dec. 31, 2011, AT&T posted revenue of $32.5 billion, up 3.6%. The reported a net loss of $6.7 billion for Q4, which included the one-time $4 billion payment to T-Mobile USA for the termination of AT&T's takeover bid.

On the wireless front, AT&T posted a net increase in total wireless subscribers of 2.5 million in the fourth quarter to reach 103.2 million in service. The telco delivered its best-ever smartphone sales quarter, moving a record 9.4 million smartphones; more than 7.6 million iPhones were activated in Q4, the majority of which were iPhone 4S.

Total wireless revenue, which includes equipment sales, was up 10% year over year to $16.7 billion, while wireless service revenue increased 4% percent, to $14.3 billion, in the last three months of the year.

Asked about the proposed spectrum deals between Verizon Wireless and Comcast, Time Warner Cable, Cox Communications and Bright House Networks, AT&T chairman and CEO Randall Stephenson said, "It seems like a logical transaction... We'll be watching as a very interested bystander" as an indication of what the FCC is willing to allow with respect to spectrum deals.

Stephenson said the FCC is scrutinizing even AT&T's small spectrum transactions very closely, making it difficult for the company to expand its wireless spectrum holdings.

"The FCC is intent on picking winners and losers rather than letting these markets work," Stephenson said on the earnings call.

AT&T's capital spending in 2011, including capitalized interest, was $20.3 billion -- flat with 2010; last year, the telco increased wireless-related capex by 6.4% year over year. AT&T expects capital expenditures to be about $20 billion in 2012.