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

However, when compared to the year ago third quarter, adjusted wireless EBITDA service margins actually expanded to 4 to 3.1. As the solid performance given our strong postpaid and smartphones that adds, as well as record third quarter gross adds and upgrade.

Wireline margins were pressured by increasing content costs and transformation expenses, lower legacy revenues also contributed to the pressure. But this pressure was partially offset by growth in consumer revenues, gains and strategic business services and solid execution or in cost initiatives.

Now let’s move to cash flow, our summaries on slide 12. In the first nine months of the year cash from operation totaled $25.6 billion and $8.7 for the quarter. Capital expenditures were 17 billion and $5.2 for the quarter.

And free cash flow before dividends is $8.6 billion and $3.5 billion for the quarter. We did monetize about $500 million of Next receivables in the quarter as there continues to be great interest from financial institutions and additional tranches in the future are possible.

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Net dept to adjusted EBITDA was 1.7 and our credit rating continues to be among the best in the industry. In terms of uses of the cash, dividend payments year-to-date totaled $7.2 billion and we continue to be opportunistic with our share buyback program.

Our asset sales strengthened our balance sheet and cash position, when you will include the $1.9 billion in short term investments, we had $4.3 billion of cash at the end of the third quarter. We also to expect to close the sale of our wireline asset in Connecticut and the Frontier this Friday, which will enhance our cash position with $2 billion in proceeds.

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Let me close with the quick summary of the quarter on slide 13. We continue to make progress with our business transformation in this quarter throughout this year. That includes the repositioning of our postpaid base of the subsidy model.

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Total share counts continue to grow and of our 57% of our gross adds and upgrades to the quarter were either AT&T next or BYOD. At the same time we continue to see strong total and postpaid net adds with low postpaid churn in a very challenging environment.

We also continue to rationalize our business portfolio. This includes completing the sales of the América Móvil equity interest, closing Connecticut wirelines property transactions two months earlier than we had expected, and exiting select low margin wireline wholesale businesses.

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This rationalization as well the impact of more BYOD devices than we had expected and fewer net AT&T net gross adds and upgrades will impact revenues. The company now expects full year consolidated revenue growth in the 3% to 4% range.

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Even with this change we expect that Next rates will increase for the rest of the year and continued strong BYOD will help with margins even with traditional fourth quarter holiday pressure.

So overall we continue to have confidence in our strategy and our ability to compete in this challenging environment.

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With that Tony, let’s go at and take some questions.

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Question-and-Answer Session

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