AT&T income hit by Sandy, pensions and smartphone subsidies

AT&T income hit by Sandy, pensions and smartphone subsidies

18 JAN 2013

AT&T’s revenue in the fourth quarter of 2012 will be hit by a $10 billion pension charge, Superstorm Sandy repair costs and subsidy payments for higher-than-expected smartphone sales.

The US number-two operator said the pension charge is connected to an actuarial loss of around $12 billion, which was partially offset by a $1.9 billion asset gain.

Despite this gain the company lowered its expected long-term rate of return due to uncertainty around the securities markets and US economy.

Pacific Crest Securities analyst Michael Bowen told Reuters that the news was “not a real huge negative, but a little bit sobering” as the company said its obligations are larger than it initially thought.

AT&T said that it would record a $175 million reduction in operating income due to the costs of repairing its network in the northeast US after it was damaged by Superstorm Sandy. The costs were expected to be $125-150 million.

The operator added that the higher-than expected sales of smartphones, including the iPhone, will hit profits. This is due to the subsidies the operator pays on devices to provide customers on long-term contracts with discounts.

AT&T sold 10.2 million smartphones in the period, giving it a total of 26.9 million smartphone sales for 2012.

The company is due to release its fourth-quarter results on 24 January.


Tim Ferguson

Tim joined Mobile World Live in August 2011 and works across all channels, with a particular focus on apps. He came to the GSMA with five years of tech journalism experience, having started his career as a reporter... More

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