AT&T on Cusp of Return to Growth in Wireline Segment

By Gary Kim July 22, 2011

One of the interesting observations one might make about AT&T’s second quarter earnings results, despite its typical focus on the strategically-important wireless business segments, is a shift in wired network performance. AT&T Management Discusses Q2 2011 Results. After lagging or flat results for years, AT&T has seen growing fixed-line revenues for four straight quarters, and might now be on the cusp of achieving actual revenue growth from the wireline business. 

As you might expect, voice revenue is not behind the performance. Over the last year, consumer voice, which had contributed 23 percent of total revenue, in the latest quarter contributed just 20 percent of total AT&T revenue. But the wireline segment includes other revenue sources. U-verse video now seems to be contributing substantially to AT&T fixed-line revenue growth.

“We almost had sequential revenue growth this quarter,” said John Stephens, AT&T CFO. That would be a significant development, given the pressure on fixed-line revenue over the last decade. Of course, the important observation here is where the growth seems to be concentrated. Video and broadband subscriptions are the biggest contributors, and video seems to be the key factor. 

Compared to Verizon, AT&T historically has relied more heavily on consumer revenues, and that pattern continues. If this quarter’s results are any indication, we should be looking to increasing contributions from video services, which might be the most-important driver of revenue change for AT&T. 

The wholesale business, Ethernet, network integration segments are improving as well, though the magnitude of the revenue contribution is relatively slight, overall. AT&T also does not attribute any meaningful contribution from an improving economy. ”We have not assumed a significant return to, or significant growth in the economy, either in employment or in GDP growth,” said Stephens. 

The revenue outlook does not seem to be driven by some fundamental shift in the consumer customer segment. Voice continues to slip, video and broadband continue to grow. 

Looked at by revenue source, consumer IP data now represents about half of total consumer revenues. That includes video and broadband access, of course. That is no surprise. But the possible return to actual growth in wireline revenue would be a fulfillment of the notion that video and broadband are the major sources of consumer fixed-line revenue contribution, going forward. 

Something similar has been happening at cable companies as well, which now are seeing lessening contributions from legacy video. Broadband and consumer voice now are substantial revenue contributors, but the important revenue growth opportunities are shifting to business customer products.  

Keeping matters in perspective, wireless now represents half of total AT&T revenues. Wireless grew four percent, year over year, while fixed line voice dropped three percent, year over year. But a return to revenue growth in the fixed line segment would be significant. 

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2011, taking place Sept. 13-15, 2011, in Austin, Texas. ITEXPO offers an educational program to help corporate decision makers select the right IP-based voice, video, fax and unified communications solutions to improve their operations. It’s also where service providers learn how to profitably roll out the services their subscribers are clamoring for – and where resellers can learn about new growth opportunities. To register, click here.

Gary Kim is a contributing editor for TechZone360. To read more of Gary’s articles, please visit his columnist page.

Edited by Jennifer Russell

Contributing Editor

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