AT&T added 240,000 more U-verse TV subscribers to its service in the third quarter, to stand at 1.816 million at the end of September. Although the telco continued to produce strong wireless gains it also shed 803,000 residential phone lines in the period.
Chief financial officer Rick Lindner, on AT&T's earnings call Thursday, said he expects revenue from U-verse services to exceed $2 billion this year. As the legacy services decline, he said, AT&T is taking cost out of those lines of business while increasing margins on new products.
For the IPTV service, AT&T's penetration of eligible living units was more than 12%. In areas marketed to for 24 months or more, overall penetration now exceeds 20%, according to the company.
AT&T's wireless segment continued to surge, with a 2.0 million net increase in total wireless subscribers - the highest third-quarter net gain in the company's history -- to reach 81.6 million. That included 3.2 million iPhone activations in the quarter, the highest to date.
Meanwhile, residential phone lines ended the quarter at 25.2 million, down 11.8% from a year ago, as revenue in the wireline segment fell 7.1% to $16.3 billion.
"The pattern is getting grindingly familiar. Wireless results were good... wireline results, not so much," Sanford Bernstein senior analyst Craig Moffett wrote in a research note. "And like so much of corporate America in this recession, solid earnings were the result of better-than-expected cost management against a deteriorating top line."
The U-verse network now passes more than 20 million living units. The telco said that U-verse TV's broadband attach rate continues to run "well above" 90%, and that its U-verse Voice attach rate continues to run above 60%. More than three-fourths of U-verse TV subscribers have a triple- or quad-play option from AT&T. The telco had 735,000 U-verse Voice subscribers at the end of the quarter, up from 104,000 in the year-ago period.
In the third quarter, AT&T's more advanced U-verse DSL broadband service had a net gain of 252,000 subscribers, which offset a decline in traditional DSL connections for a 90,000 net gain in wireline broadband connections. The telco had 13.55 million DSL subscribers as of the end of September,compared with 13.45 million three months prior.
AT&T lost 15,000 satellite subscribers in the period, ending the quarter with 2.195 million. The telco dropped its reseller deal with Dish Network as of January and now offers DirecTV service in areas where it has not deployed U-verse. AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, were 4.0 million at the end of the third quarter, representing 14.9% of households served.
Overall, AT&T's third-quarter revenue was $30.86 billion, compared with $31.34 billion in the year-earlier quarter. Net income was $3.19 billion, down 1.2% year over year.