AT&T kept the U-verse TV train chugging along, reaching 549,000 customers for the cable-competitive IPTV service at the end of the second quarter, although the telco continued to post significant losses in its traditional access-line business and saw weak growth in broadband.
For the quarter ended June 30, AT&T had a net gain of 170,000 U-verse TV subscribers. The company said its U-verse network deployment is on schedule – with service currently available to 11 million households in 53 markets -- and reiterated expectations of tallying more than 1 million IPTV subscribers by the end of 2008.
AT&T chief financial officer Rick Lindner, in a call Wednesday with analysts, said U-verse TV has achieved more than 10% penetration in established markets.
“U-verse is also demonstrating it has pull-through in voice,” Lindner said, pointing to improvement in access-line retention in areas where U-verse has been available 12 months.
AT&T lost 5.2 million switched access lines in the past year, down 8.1% from the year-ago period, ending the second quarter with 58.9 million (including consumer, business and wholesale lines).
Meanwhile, AT&T added 46,000 broadband subscribers in the second quarter, to sit at 14.7 million as of the end of June.
Asked about competition from cable for business customers, Lindner said that while MSOs now have rolled out voice service in just about all of the telco’s markets, “up to this point, to us [the effect] looks pretty small.”
In AT&T’s markets, Lindner estimated, cable operators have 2% to 2.5% voice share and broadband share of around 20% of the business segment.
In a research note Wednesday, Sanford Bernstein senior analyst Craig Moffett called AT&T’s wireline results “weak,” although he noted margins in the unit were better than expected. He continues to rate the telco’s stock “outperform.”
Moffett wrote that AT&T’s weak broadband results potentially foreshadow slow broadband results at cable as well, but added, “When the ink is dry on the quarter, it is very likely that the cable industry will have achieved its [highest] share of broadband net additions ever. As we have long argued, cable is surely and not-so-slowly winning the broadband wars.”
Over all, for the quarter ended June 30, AT&T’s consolidated revenues were $30.9 billion. Operating income was $6.6 billion, up 33% from $4.9 billion in the year-ago period. Net income was $3.8 billion, up from $2.9 billion in the year-earlier quarter.
Financial results were buoyed by 15.8% growth in wireless revenues, to $12.0 billion, adding 1.3 million subscribers in the period. Moffett noted AT&T experienced good growth even before the introduction earlier this month of Apple’s new lower-priced iPhone.
On the earnings call, Lindner called attention to the change in the telco’s relationship with Yahoo, which provides portal services to AT&T’s wireline broadband subscribers. Under the new arrangement, AT&T no longer pays monthly portal fees and receives a reduced level of shared-advertising revenues from Yahoo, according to the telephone company.