Home » AT&T (T) Q3 2014 Results – Earnings Call Transcript

AT&T (T) Q3 2014 Results – Earnings Call Transcript

And year-to-date we’ve added more than 2.4 million postpaid subscribers which also doubled last year’s pace. Another key point with our postpaid net adds is that we are adding these customers while maintaining high credit standards. These are rock solid high quality, new subscribers. These net adds exclude any migrations from our prepaid segment.

Connected devices also had a strong quarter as we started to see significant impact of the connected car with nearly 1.3 million connected devices were added in the quarter including more than half a million cars.

Churn turned in another strong quarter, in fact it was our best ever third quarter postpaid churn that follows our best ever churn in the second quarter and churn from Mobile Share Value and AT&T Next customers is even lower.

Total Churn for the quarter was up slightly to 1.3%, 1.36% reflecting a larger prepaid base with the March acquisition of Cricket. These are solid results in a challenging environment. We saw our competitive intensity pickup in an iPhone launch quarter with all major carriers now offering the iPhone and we expect that to continue as we move into the holiday sales period in the fourth quarter.

But we believe strongly in the quality of our network, our award winning customer service and the value proposition we offer customers. Our results so far this year show we are on the right track and we are looking to finish the year strong.

Now let’s look at revenue and ARPU on slide seven. We continue to see a shift in wireless revenues as customers sign up for Mobile Share Value plans and away from the traditional subsidy model. Total wireless revenues for the quarter were up nearly 5%, service revenues were stable year-over-year and equivalent revenues were up more than 40%. A take rate for AT&T Next was about the same as last quarter, about half of gross adds and upgrades. We also saw an increasing number of subscribers bringing their own device to our network, about 460,000 or 7% of smartphone gross adds were bring your own device or BYOD. That’s more than four times what we saw in the year ago third quarter and more than 1 million BYODs customers year-to-date.

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We continue to have a large base of customers on discounted Mobile Share Value plans who have yet to migrate to Next. About 20% of our smartphone base is on Next, but about 52% of smartphone subscribers are on the non subsidy pricing. This means that there are about 20 million potential Next customers we expect to upgrade, that’s up from 17 million at the end of the second quarter.

Next take rates continue to be strong in company-owned stores nearly all are more than 90% of our Mobile Share Value customers with pre Next pricing or choosing AT&T Next when they upgrade in company owned stores. They all come without a customer choice, customers can choose the plan that is best for them and that’s great for us, and right now most customers are choosing to go off the subsidy mile when they upgrade or add a new line.

Also in the quarter, we continue to see customer’s buy up larger data plans and more interested in device insurance. This is helping drive revenue. Now let’s look at postpaid ARPUs. The expected trends we talked about last quarter are happening as more customers take AT&T Next. Phone-only service ARPU is down year-over-year but up sequentially. When you add a Next doings you get a better view of what an average customer pays us each month.

Phone-only ARPU with Next billings improved sequentially by 2%. The average monthly Next billings were about $29 per month driving our ARPU with Next higher. As the Next base grows, so does the impact on billings. We also continue to see strong growth in data billings, those details are on slide eight.

Wireless data billings increased by nearly 24% in the quarter. This was due to the increasing number of devices on the network and customers choosing 10 gigabit plans or larger. More than half of all Mobile Share accounts are on these plans. During the quarter, we added more than 2 million Mobile Share accounts giving us 16.7 million in total, that’s three times as many as we had a year ago. And we averaged about three connections per Mobile Share accounts or nearly 47 million connections in total. That’s roughly 60% of our overall postpaid base.

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Smartphone sales continue to be strong; in fact, we had 6.9 million smartphone gross adds and upgrades. That’s a third quarter record. And it would have been even higher without inventory constraints.

We added $1.2 million subscribers to our smartphone base including about including 500,000 smartphone net adds. Most our sales continue to be smartphones, about 91% of the flow share.

About two-thirds of our postpaid smartphone base use LTE phones. As you know, LTE devices provide the best customer experience, while also being the most efficient on our networks.

Let’s now look at our wireline results, starting with consumer on slide nine. U-verse hit two subscriber milestones in a quarter. First, we now have more than 12 million high-speed broadband subscribers, after adding more than 600,000 in the quarter.

U-verse broadband is now 73% of our total broadband base and 75% in the consumer broadband base, that’s up 70% in the last two years, that’s help to drive total postpaid – that help drive total positive broadband net adds in the quarter.

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