US number two operator AT&T has increased its 2014 revenue guidance again, citing a strong contribution from its Next tariff which enables subscribers to trade up to a new smartphone before the end of their contracts.
Revenue growth will be in the five per cent range in 2014, it said (compared to a prior forecast of 4 per cent).
The company expects to report second-quarter sales of about 3.2 million AT&T Next smartphones, representing approximately one half of total sales. The plan was launched last summer.
By year-end, AT&T forecasts two-thirds of its postpaid smartphone base will be on the plan, which unbundles device and service payments. Currently, the figure is about half of the base.
However, while being positive for equipment revenues, the Next plan has the side effect of lowering service revenue and ARPU.
No service revenue growth is expected in Q2. And AT&T is forecasting second quarter wireless-service revenue Ebitda margins to come under pressure year-over-year because of momentum towards no-subsidy plans.
Wireless service Ebitda margins are expected to be over 40 per cent in each of the three remaining quarters of 2014.
The company reaffirmed full-year guidance for adjusted profit, margins, capex and free cashflow. It is scheduled to release its full second-quarter 2014 financial results on 23 July.