It's maybe not that big a surprise, given the huge number of iPhones Apple moved this past quarter, but it's still a big number: AT&T activated 5.2 million iPhones this summer. That's nearly 70% of their entire integrated device activations.
About 24% of those customers were new to AT&T, meaning about 1.3 million people joining the carrier chose an iPhone. Which is half of the with 2.6 million new subscribers joining the fold, also a record for AT&T. Overall, four out of five devices AT&T sold came with some sort of data plan attached. And If you're wondering where the iPad shows up in all of this, it's counted under prepaid net subscriber additions, of which AT&T saw 321,000.
RECORD WIRELESS SALES, STRONG REVENUE AND EARNINGS
GROWTH HIGHLIGHT AT&T'S THIRD-QUARTER RESULTS
DALLAS, Oct. 21, 2010 - AT&T Inc. (NYSE:T) today reported third-quarter results highlighted by
growth in consolidated revenues, strong sales of integrated devices, gains in IP-based and strategic
business services, and disciplined execution on cost initiatives.
"This was a terrific mobile broadband quarter," said Randall Stephenson, AT&T chairman and chief
executive officer. "A record number of customers signed new two-year contracts and integrated device
sales outpaced our previous best by a wide margin. Wireless revenues continue to grow, churn is
reaching record low levels, and postpaid ARPU increased for the seventh straight quarter.
"These trends add to our momentum and confidence," Stephenson said. "Mobile broadband is the
industry's most powerful growth driver, and demand is in its early stages in both the consumer and
$2.08 diluted EPS compared to $0.54 diluted EPS in the third quarter of 2009; EPS of
$0.55, excluding $1.53 in one-time gains from a previously disclosed tax settlement and
the sale of Sterling Commerce
Consolidated revenues from continuing operations of $31.6 billion in the third quarter, up
$847 million, or 2.8 percent, versus the year-earlier period
11.4 percent growth in wireless revenues, with a 10.5 percent increase in wireless
Record wireless volumes, with more than 8 million postpaid integrated device sales
2.6 million increase in total wireless subscribers - the highest third-quarter net gain in
the company's history - to reach 92.8 million subscribers in service
Postpaid subscriber ARPU (average monthly revenues per subscriber) up 2.0 percent to
$62.84, the seventh consecutive quarter with a year-over-year increase
1.32 percent total wireless churn, best-ever third-quarter
30.5 percent growth in wireless data revenues, up $1.1 billion versus the year-earlier
First year-over-year growth in wireline consumer revenues in more than two years
30.0 percent growth in consumer IP data revenues, driven by AT&T U-verse® expansion
236,000 net gain in AT&T U-verse TV subscribers to reach 2.7 million in service, with
continued high broadband and voice attach rates
148,000 net gain in wireline broadband connections
15.4 percent growth in revenues from strategic business services such as Ethernet,
Virtual Private Networks (VPNs), hosting and application services
business segments. AT&T is well positioned for the opportunities ahead."
Third-Quarter Financial Results
(On August 27, 2010, AT&T completed its sale of Sterling Commerce to IBM for approximately
$1.4 billion in cash. Third-quarter comparisons are based on results from continuing operations, which
exclude results from Sterling Commerce in all periods.)
For the quarter ended September 30, 2010, AT&T's consolidated revenues totaled $31.6 billion, up
$847 million, or 2.8 percent, versus the year-earlier quarter, marking the company's third consecutive
quarter with a year-over-year revenue increase. Versus the second quarter of this year, consolidated
revenues were up $773 million, or 2.5 percent.
Compared with results for the third quarter of 2009, operating expenses were $26.1 billion versus
$25.4 billion; operating income was $5.5 billion, up from $5.4 billion; and AT&T's operating income
margin was stable at 17.3 percent, compared to 17.5 percent.
Third-quarter 2010 net income attributable to AT&T totaled $12.3 billion, or $2.08 per diluted share,
including $1.53 in one-time gains from a previously disclosed tax settlement and the sale of Sterling
Commerce. These results compare with reported net income attributable to AT&T of $3.2 billion,
or $0.54 per diluted share, in the third quarter of 2009. Excluding one-time gains, earnings grew
3.8 percent to $0.55 per diluted share, compared to $0.53 per diluted share in the year-earlier quarter.
Third-quarter 2010 cash from operating activities totaled $9.5 billion; capital expenditures totaled
$5.5 billion, including a nearly 64 percent increase in wireless-related capital investment versus the
year-earlier quarter, as AT&T aggressively deploys next-generation wireless broadband networks.
Free cash flow - cash from operating activities minus capital expenditures - totaled $4.0 billion.
Compared with results for the first three quarters of 2009, year to date through the third quarter,
cash from operating activities totaled $25.4 billion versus $25.4 billion; capital expenditures totaled
$13.7 billion versus $11.6 billion; and free cash flow totaled $11.6 billion versus $13.9 billion.
Wireless Operational Highlights
Led by a record quarter of integrated device sales, AT&T delivered solid third-quarter growth in its
wireless business, including double-digit wireless revenue gains. Highlights included:
Best-Ever Third-Quarter Subscriber Gain. AT&T posted a net gain in total wireless subscribers of
2.6 million, to reach 92.8 million in service. Third-quarter net add growth reflects rapid adoption of
smartphones, increases in prepaid subscribers and growth in a host of connected devices such as
eReaders, security systems, fleet management and global positioning systems in both the business
and consumer markets. Retail net adds for the quarter include postpaid net adds of 745,000 and
prepaid net adds of 321,000. Connected device net adds were 1.2 million, and reseller net adds were
Total Churn at Record Third-Quarter Level. Postpaid churn was 1.14 percent - matching the third-
quarter record set in 2009 - and total churn reached a best-ever third-quarter level of 1.32 percent
versus 1.42 percent in the third quarter of 2009.
Record Integrated Device Sales. More than 8 million postpaid integrated devices were activated
in the third quarter, the most quarterly activations ever. More than 80 percent of postpaid sales were
integrated devices. (Integrated devices are handsets with QWERTY or virtual keyboards in addition to
voice functionality and are a key driver of wireless data usage.)
At the end of the quarter, 57.3 percent of AT&T's 67.7 million postpaid subscribers had integrated
devices, up from 42.0 percent a year earlier. The average ARPU for integrated devices on AT&T's
network is 1.7 times that of the company's non-integrated device base. More than 80 percent of
integrated device subscribers are on FamilyTalk and/or business discount plans. Churn levels for these
plans continue to run below the company's postpaid base.
AT&T's third-quarter integrated device growth included 5.2 million iPhone activations, the most iPhone
activations ever in a quarter. This is 62 percent more than the previous quarterly record of 3.2 million
activated in the second quarter of 2010. Approximately 24 percent of those activations were for
customers who were new to AT&T.
Data Revenue Growth of 30.5 Percent. Wireless data revenues - from messaging, Internet access,
access to applications and related services - increased $1.1 billion, or 30.5 percent, from the year-
earlier quarter to $4.8 billion. AT&T wireless subscribers on data plans increased by 21.5 percent
over the past year. Versus the year-earlier quarter, total text messages carried on the AT&T network
increased about 34 percent to 161 billion and multimedia messages more than doubled to 2.8 billion.
Solid Postpaid ARPU Growth. Driven by strong data growth, postpaid subscriber ARPU increased
2.0 percent versus the year-earlier quarter to $62.84. This marked the seventh consecutive quarter
AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU reached $22.02,
up 19.5 percent versus the year-earlier quarter, and total postpaid subscriber revenues continued
recent trends, with double-digit growth, reflecting increases in both voice and data.
Double-Digit Wireless Revenue Growth. Wireless service revenues increased 10.5 percent to
$13.7 billion in the third quarter. Total wireless revenues, which include equipment sales, were up
11.4 percent year over year to $15.2 billion and increased 6.6 percent from the second quarter of 2010.
Wireless Margins. Wireless margins were impacted by increased operating costs associated with
the company's record quarter for integrated device activations. Absent the costs associated with
these additional activations, service margins would have been similar to the prior quarter of this year.
Operational execution and further growth in the company's high-quality integrated device subscribers
helped partially offset these costs. AT&T's wireless operating income margin was 23.1 percent versus
25.6 percent in the year-earlier quarter, and AT&T's wireless OIBDA service margin was 37.6 percent,
compared to 40.3 percent in the third quarter of 2009 (OIBDA service margin is operating income
before depreciation and amortization, divided by total service revenues). Third-quarter wireless
operating expenses totaled $11.7 billion, up 15.2 percent versus the year-earlier quarter, and wireless
operating income was $3.5 billion, up 0.2 percent year over year.
Wireline Operational Highlights
AT&T's third-quarter wireline results were highlighted by improving trends in revenues including the first
year-over-year growth in consumer revenues in more than two years, further expansion in AT&T
U-verse services, sustained growth in revenues from strategic business services and solid cost
management. Highlights included:
Growth in Wireline Consumer Revenues. Driven by strength in IP data services, in the third quarter,
total revenue from residential customers totaled $5.3 billion, up 0.2 percent from the third quarter of
2009, the first year-over-year growth in more than two years.
AT&T's Award-Winning U-verse Services Drive Consumer Growth. AT&T U-verse TV subscribers
increased by 236,000 in the quarter to reach 2.7 million. In the third quarter, the AT&T U-verse High
Speed Internet attach rate continued to run above 90 percent, and nearly 60 percent of subscribers
took AT&T U-verse Voice. More than three-fourths of AT&T U-verse TV subscribers have a triple- or
quad-play option from AT&T. ARPU for U-verse triple-play customers was about $160.
AT&T's U-verse deployment now reaches more than 26 million living units. Companywide penetration
of eligible living units is 14.1 percent, and across areas marketed to for 30 months or more, overall
penetration is more than 22 percent. AT&T's total video subscribers, which combine the company's
U-verse and bundled satellite customers, reached 4.7 million at the end of the quarter, representing
18.8 percent of households served.
Rebound in Broadband Subscriber Growth. Driven by strength in AT&T U-verse High Speed
Internet service, AT&T posted a 148,000 net gain in wireline broadband connections.
U-verse Revenues Exceed $1 Billion. Increased AT&T U-verse penetration drove 30.0 percent year-
over-year growth in consumer IP revenues (broadband, U-verse TV and U-verse Voice). U-verse
continues to drive a transformation in AT&T's consumer business, reflected by the fact that consumer
IP revenues now represent 42.6 percent of AT&T's wireline consumer revenues, up from 32.8 percent
in the year-earlier quarter. In the third quarter, AT&T U-verse revenues were $1.1 billion, 84.5 percent
higher than in the third quarter of 2009.
Consumer Connection Trends. In the third quarter, AT&T posted a decline in total consumer revenue
connections due primarily to expected declines in traditional voice access lines, partially offset by
increases in broadband, U-verse TV and VoIP (Voice over Internet Protocol) connections. Combined
wireline consumer TV and broadband connections increased by 343,000 in the third quarter and
1.3 million over the past four quarters. AT&T U-verse Voice connections increased by 166,000 in the
quarter and 759,000 over the past four quarters. Total consumer revenue connections at the end of the
third quarter were 43.7 million, compared with 45.7 million at the end of the third quarter of 2009 and
44.3 million at the end of the second quarter of 2010.
Further Signs of Stabilization in Business Markets. AT&T posted its best year-over-year business
revenue comparisons in six quarters - reflecting continued solid sales performance and continued
improvement in key economic metrics. Total business revenues were $9.5 billion, a decline of
3.9 percent versus the year-earlier quarter. Business service revenues, which exclude CPE, declined
3.7 percent year over year and decreased slightly sequentially, down 1.3 percent.
Business IP Revenues Continue Growth. Business IP data revenues grew 8.0 percent overall,
led by growth in VPN revenues. Global Enterprise Solutions IP data revenues grew 9.7 percent.
Approximately 70 percent of AT&T's frame customers have made the transition to IP-based solutions,
which allows them to easily add managed services such as network security, cloud services and IP
conferencing on top of their infrastructures.
15.4 Percent Growth in Strategic Business Services Revenues. Revenues from new-generation
capabilities that lead AT&T's most advanced business solutions - including Ethernet, VPNs, hosting,
IP conferencing and application services - grew 15.4 percent versus the year-earlier quarter and were
up 4.5 percent from the second quarter of 2010, continuing AT&T's strong trends in this category.
Wireline Results. Led by improved consumer and business customer trends, total wireline revenues
posted their smallest year-over-year decline in six quarters, down 3.0 percent, and down slightly
sequentially. Third-quarter revenues in AT&T's wireline segment totaled $15.3 billion versus
$15.7 billion in the year-earlier quarter. Third-quarter wireline operating expenses were $13.4 billion,
down 3.9 percent versus the third quarter of 2009 and down 0.6 percent sequentially. Wireline
operating income totaled $1.8 billion, compared to $1.8 billion in the third quarter of 2009 and
$1.9 billion in the second quarter of 2010. AT&T's third-quarter wireline operating income margin was
12.0 percent, compared with 11.2 percent in the year-earlier quarter and 12.2 percent in the second
quarter of 2010.