AT&T’s wireless growth falls short, but financials remain strong

AT&T Inc.’s wireless division, Cingular Wireless, posted mixed first quarter results with customer growth coming in below expectations but churn and average revenue per user exceeding forecasts.
The country’s largest wireless carrier said it added just shy of 1.2 million customers during the quarter, which was an 18-percent jump compared with the first quarter of 2006 but short of analyst estimates of around 1.3 million net additions. The carrier noted that more than 70 percent of net additions were through its retail channels, with 80 percent of direct customer additions on postpaid plans. Cingular ended the quarter with 62.2 million customers on its network.
Analysts were expecting stronger customer growth from AT&T as smaller rival Sprint Nextel Corp. has been hemorrhaging customers over the past several quarters. Some claimed AT&T’s inability to gain those customers shows it is losing market share to Verizon Wireless.
Despite the carrier’s customer-growth shortfall, customer churn dropped from 1.9 percent during the first quarter of 2006 to 1.7 percent this year-numbers that almost offset a drop in AT&T’s gross customer additions from 4.7 million in 2006 to 4.3 million customers this year. AT&T noted that its postpaid churn dropped from 1.6 percent last year to 1.3 percent this year, but added that its churn levels were still being pressured by a number of factors including the carrier’s ongoing migration of customers from its legacy TDMA network and its transition from multiple prepaid systems to a single platform.
Customer ARPU also improved 1.5 percent year-over-year from $48.48 during the first quarter of 2006 to $49.21 this year. AT&T attributed the growth to continued wireless data uptake with data ARPU surging 51 percent to $7.88 in the first quarter.
The strong ARPU growth helped propel wireless revenues more than 11 percent to $10 billion during the first quarter compared with $9 billion posted in the first quarter of 2006. Wireless services made up about one-third of AT&T’s total revenues for the first quarter. Wireless income jumped more than 91 percent year-over-year to $1.5 billion.
AT&T’s stock was relatively unchanged by the news at around $40 per share.