AT&T Mobility shrugged off talk of lost market share during the third quarter, posting strong wireless customer growth and robust financial metrics.
The carrier reported 989,000 net customer additions for the quarter, which was a 46% improvement compared with the 678,000 net customer additions posted last year. The most recent growth was led by the broad “connected devices” segment that witnesses a more than doubling in year-over-year growth to 719,000 net new connections during the latest quarter.
Traditional postpaid additions also saw a more than doubling in year-over-year growth to 363,000 net customer additions, while direct prepaid customer growth surged from 77,000 net additions last year to 192,000 net additions this year. The prepaid growth was bolstered by the addition of LTE-equipped devices to AT&T Mobility GoPhone offer and recently adjusted pricing plans.
The only segment to post a decline was AT&T Mobility’s reseller channel, which dropped from 137,000 net additions last year to a loss of 285,000 connections this year. AT&T pinned that decline on the loss of “low-revenue 2G subscriber accounts,” highlighted by an increase in reseller revenues despite the customer losses.
AT&T Mobility also added 587,000 customers through recent mergers and acquisitions, including the closing of its acquisition of Atlantic Tele-Network’s Alltel assets, which closed near the end of the third quarter.
Overall customer growth was inline with the nearly 1.1 million customers added by Verizon Wireless during the quarter, though AT&T Mobility fell significantly short of the more than 900,000 direct postpaid net customer additions posted by Verizon Wireless. That customer segment remains one of the most attractive due to high average revenues per user and low churn.
Helping to support customer growth was a slight decline in customer churn, which dipped from 1.34% during the third quarter of 2012 to 1.31% this year. That churn result was nearly identical to the 1.28% posted by Verizon Wireless and seemed to counter worries that AT&T Mobility was losing customer share to an aggressive T-Mobile US.
In addition to the strong growth, AT&T Mobility posted a bump in average revenue per user, which increased from $47.09 last year to $47.49 during the most recent quarter. Helping to push that growth is the continued surge in smartphone sales, which typically require more expensive rate plans and generally greater usage by consumers. AT&T Mobility said it added 1.2 million postpaid smartphone customers during the quarter and that it sold a Q3-record 6.7 million smartphones.
Also boosting ARPU is the continued strong adoption of AT&T Mobility’s Mobile Share plans, with the carrier reporting that 72% of its postpaid smartphone base were on a tiered data plan, an increase from 64% the previous year. The carrier added that 22% of its postpaid customer base has moved to a Mobile Share plan, with an average of three devices per account.
The strong customer and ARPU growth pushed overall wireless revenues up 5.1% year-over-year to $17.5 billion for the third quarter, with increases in data services and equipment sales offsetting a decline in voice and text revenues. Wireless expenses also increased 5.7% year-over-year, limiting total segment income to a 3.4% increase to $4.6 billion.
Wireless operating income margins dipped slightly year-over-year to 26.4%, though earnings before interest, taxes, depreciation and amortization margins came in ahead of expectations at 42%, though well below the 51.1% posted by Verizon Wireless.
Overall capital expenditures across AT&T increased 21% year-over-year to $5.9 billion, which was expected as the company is in the midst of its Project Velocity IP initiative that will see AT&T invest $14 billion in bolstering its broadband services over a three-year period. $8 billion of that investment is scheduled to be spread across its wireless operations. AT&T earlier this week sold off 9,700 towers to Crown Castle for $4.85 billion in a move to help fund its Project VIP plans.
AT&T also increased its head count 2.3% year-over-year to a total of 246,740 employees at the end of the third quarter.
The pressure is on
AT&T Mobility’s strong quarter, in connection with the robust results from Verizon Wireless, place greater pressure on their smaller rivals who have yet to post Q3 results. Most analysts expect T-Mobile US to again show strong growth, following up a break-out second quarter where the No. 4 operator led its larger rivals in overall customer growth.
That would leave Sprint as the most likely nationwide operator to show strains during the latest quarter, a notion backed by the carrier’s own admission that it will be challenged to add customers through the remainder of the year. How challenged remains to be seen as Sprint is not set to report Q3 results until Oct. 30.
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