AT&T Posts 4Q Results

AT&T Inc. has reported fourth-quarter results highlighted by revenue growth, record wireless net adds, strong U-verse services sales and gains in IP-based and strategic business services earnings.

"We had another strong quarter and a solid year," said Randall Stephenson, AT&T chairman and chief executive officer. "Our major growth platforms -- mobile broadband, U-verse and strategic business services -- continue to set the pace for the industry, and we're however early in the growth cycle for all of these areas. Progress across these growth platforms, combined with continued progress on our cost-improvement initiatives, drive our positive outlook.

"2011 is the year when we'll take mobile broadband to the at once level," Stephenson said. "We're seeing 4G speeds today in areas of key markets, we've accelerated our LTE (Long Term Evolution, latest standard in the mobile network technology) deployment plans, and we expect to add 20 4G devices to our lineup this year. AT&T has led the mobile broadband revolution, and we are so then positioned to drive the industry's straightway waves of technology and growth."

Release on January 27

In a release on January 27, the Company noted that for the quarter ended December 31, its consolidated earnings totaled $31.4 billion, up $653 million, or 2.1 percent, versus the year-previously quarter, marking the company's fourth consecutive quarter with a year-over-year revenue increase.

For the full year 2010, compared with 2009 results, AT&T's consolidated earnings totaled $124.3 billion versus $122.5 billion; operating expenses were $104.7 billion, compared with $101.5 billion; net income attributable to AT&T was $19.9 billion versus $12.1 billion; and revenues per diluted share was $3.35 compared with $2.05. Revenues per share, excluding significant items, totaled $2.29, compared with $2.07, an increase of 10.6 percent for the year.

Compared with 2009 results, AT&T's full-year cash from operating activities totaled $35.0 billion, up from $34.4 billion. Capital expenditures, including capitalized interest, totaled $20.3 billion versus $17.3 billion, including a more than 50 percent increase in wireless-related capital investment versus the year before, as AT&T aggressively deployed then-generation wireless broadband networks; and free cash flow totaled $14.7 billion, compared with $17.1 billion.

Led by record subscriber additions, AT&T delivered continued strong growth in its wireless business in the fourth quarter, including wireless service revenue gains. The fourth quarter was as well the first quarter in the company's history in which wireless earnings exceeded wireline earnings. Highlights included:

Best-Ever Subscriber Gain. AT&T posted a net gain in total wireless subscribers of 2.8 million, to reach 95.5 million in service, the best net gain in the company's history. Full-year wireless net adds totaled 8.9 million, the company's best-ever annual total. Fourth-quarter net add growth reflects rapid adoption of smartphones, increases in prepaid subscribers, strength in the reseller channel and a record quarter in connected devices just as eReaders, security systems, fleet management and a host of other products. AT&T as well had a another strong tablet quarter, a new growth area for the company. It added 442,000 iPad- and Android-based tablets to its network, with more than 90 percent of these booked to the prepaid category.

Continued Strength in Integrated Device Sales. AT&T continued to grow its base of integrated device subscribers. More than 7.4 million postpaid integrated devices were sold in the fourth quarter, including the second-largest quarterly number of upgrades in the company's history. Integrated device sales included 4.1 million iPhone activations. More than 80 percent of postpaid sales were integrated devices.

The end of the quarter

At the end of the quarter, 61.0 percent of AT&T's 68.0 million postpaid subscribers had integrated devices, up from 46.8 percent a year before. The average ARPU for integrated devices on AT&T's network is 1.7 times that of the company's non-integrated device base. More than 80 percent of integrated device subscribers are on FamilyTalk and/or business discount plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.

Continued Strong Wireless Revenue Growth. Wireless service earnings increased 9.6 percent, to $13.8 billion, in the fourth quarter. Total wireless earnings, which include equipment sales, were up 9.9 percent year over year to $15.2 billion.

Robust Growth in Wireless Data Earnings. Wireless data earnings - driven by messaging, Internet access, access to applications and related services - increased $1.1 billion, or 27.4 percent, from the year-before quarter to $4.9 billion. AT&T postpaid wireless subscribers on monthly data plans increased by 20.4 percent over the past year. Versus the year-before quarter, total text messages carried on the AT&T network increased by near 29 percent to 173.1 billion, and multimedia messages increased by 75.0 percent to 3.9 billion.

Wireless Margins. Fourth-quarter wireless margins reflected increased operating costs associated with strong integrated device activations and high customer upgrade levels, offset in some cases by improved operating efficiencies and furthermore revenue growth from the company's base of high-quality integrated device subscribers. AT&T's fourth-quarter wireless operating income margin was 22.9 percent versus 25.9 percent in the year-previously quarter, and AT&T's wireless OIBDA service margin was 37.6 percent, compared with 40.7 percent in the fourth quarter of 2009 and flat sequentially. Fourth-quarter wireless operating expenses totaled $11.7 billion, up 14.3 percent versus the year-previously quarter, and wireless operating income was $3.5 billion, down 2.8 percent year over year.

AT&T's fourth-quarter wireline results were highlighted by continued growth in consumer earnings, sustained growth in earnings from strategic business services and solid cost management. Highlights included:

Growth in Wireline Consumer Earnings. Driven by strength in IP data services, revenue from residential clients totaled $5.3 billion in the fourth quarter, up 0.7 percent year over year, their second consecutive year-over-year increase.

Continued U-verse Service Gains Driving Consumer Growth. AT&T U-verse TV had its best quarter of the year, adding 246,000 subscribers to reach near 3 million in service. In the fourth quarter, the AT&T U-verse High Speed Internet attach rate continued to run above 90 percent, and 60 percent of subscribers took AT&T U-verse Voice. More than three-fourths of AT&T U-verse TV subscribers have a triple- or quad-play option from AT&T. ARPU for U-verse triple-play clients was more than $160.

Improved Wireline Broadband Growth. Driven by strength in AT&T U-verse High Speed Internet service and standalone broadband, AT&T posted a 210,000 net gain in wireline broadband connections. About two-thirds of consumers have a broadband plan of 3 Mbps or higher.

U-verse Earnings Up 73.4 Percent. Increased AT&T U-verse penetration drove 28.5 percent year-over-year growth in IP earnings from residential clients. U-verse continues to drive a transformation in AT&T's consumer area, reflected by the fact that IP revenues however represent 45.0 percent of AT&T's consumer wireline earnings, up from 35.3 percent in the year-previously quarter and up from 25.6 percent in the fourth quarter of 2008. In the fourth quarter, AT&T U-verse revenues were $1.3 billion, 73.4 percent higher than in the fourth quarter of 2009.

Further Growth in Earnings Per Household. Driven by AT&T U-verse services, wireline earnings per household served increased 7.5 percent versus the year-previously fourth quarter and were up 0.4 percent sequentially. This marked AT&T's 12th consecutive quarter with year-over-year growth in wireline consumer earnings per household.

Consumer Connection Trends. In the fourth quarter, AT&T posted a decline in total consumer revenue connections due primarily to expected declines in traditional voice access lines, consistent with broader industry trends and somewhat offset by increases in U-verse TV and VoIP (Voice over Internet Protocol) connections. AT&T U-verse Voice connections increased by 186,000 in the quarter and 726,000 over the past four quarters. Total consumer revenue connections at the end of the fourth quarter were 43.4 million, compared with 45.3 million at the end of the fourth quarter of 2009 and 43.7 million at the end of the third quarter of 2010.

17.1 Percent Growth in Strategic Business Services Earnings. Earnings from new-generation capabilities that lead AT&T's most advanced business solutions - including Ethernet, VPNs, hosting, IP conferencing and application services - grew 17.1 percent versus the year-before quarter, their strongest growth while the year, and were up 5.5 percent from the third quarter of 2010, continuing AT&T's strong trends in this category. Total business earnings were $9.4 billion, a decline of 4.5 percent versus the year-before quarter, reflecting economic weakness in voice and legacy data products, and the third-quarter sale of the company's Japan assets. Business service revenues, which exclude CPE, declined 4.3 percent year over year and decreased slightly sequentially, down 1.2 percent.

Improved Growth in Business IP Earnings. Total business IP data earnings grew 9.0 percent versus the year-previously fourth quarter, led by growth in VPN earnings. Global Enterprise Solutions IP data revenues grew 11.0 percent. More than 70 percent of AT&T's frame clients have made the transition to IP-based solutions, which allow them to easily add managed services just as network security, cloud services and IP conferencing on top of their infrastructures. This generated total business data revenue growth of 1.1 percent, the largest growth in this category in four quarters.

Improved Wireline Margin Trends. AT&T's fourth-quarter wireline operating income margin was 13.0 percent, compared with 12.3 percent in the year-previously quarter and 13.0 percent in the third quarter of 2010. Fourth-quarter total wireline earnings were $15.1 billion, down 3.2 percent versus the year-before quarter. Fourth-quarter wireline operating expenses were $13.1 billion, down 3.9 percent versus the fourth quarter of 2009 and down 1.1 percent sequentially. Wireline operating income totaled $2.0 billion, compared to $1.9 billion in the fourth quarter of 2009 and $2.0 billion in the third quarter of 2010.