Wireless pressures weighed on AT&T’s earnings in Q3, as the return to unlimited and lower equipment revenue made their presence felt.
AT&T Mobility revenue dropped 4.3 per cent year-on-year to $17.4 billion, with service revenue down 2.8 per cent year-over-year to $14.5 billion as AT&T lost out on overage fees from heavy data users switching to its unlimited tariff.
In an earnings call, CFO John Stephens indicated service revenue is expected to even out going forward as data use increases across the board and lower tier customers buy up to unlimited.
Stephens explained the operator experienced 2 million fewer phone upgrades in Q3 2017 compared to the same period of 2016, which he said contributed to drops in both revenue and expenses. Wireless equipment revenue dropped 10.3 per cent to $2.9 billion and AT&T’s device upgrade rate plummeted to 3.9 per cent as part of a trend which also manifested at other US carriers, including Verizon and T-Mobile US, during the quarter.
AT&T reported post paid phone subscriber net losses of 97,000 (excluding migrations) and prepaid phone subscriber net additions of 227,000. However, BTIG analyst Walter Piecyk noted a closer look at the numbers inclusive of migrations showed a larger loss of 241,000 post paid smartphone, feature and other phones between Q2 and Q3. Sequentially, AT&T lost 340,000 post paid feature and other phones, but failed to close the gap with a gain of only 99,000 postpaid smartphones.
On the video side of the house, AT&T lost 385,000 traditional video subscribers year-on-year, but managed a 1.9 per cent boost in total video revenues thanks to strength in its satellite product. The company’s DirecTV Now mobile video product pulled in an additional 296,000 subscribers in the quarter. Stephens said the service now counts a total of 800,000 subscribers less than a year after launch.
AT&T is already working on the next generation of its DirecTV Now platform, which will include new features including cloud DVR, and plans to make it widely available early next year, he added.
At a group level, net profit attributable to the company stood at $3 billion in Q3 2017, down from $3.3 billion in the comparable 2016 quarter. Revenue of $39.7 billion was down from $40.9 billion in Q3 2016, though the company noted the 2017 figure was impacted by the impacts of natural disasters during the period.