AT&T Widens Profit Margins with Solid Q1 Performance

By Beecher Tuttle April 24, 2012

AT&T reported better-than-expected first quarter earnings on Tuesday, powered mainly by a strong customer retention rate and a decline in iPhone sales.

Ironically, a dip in iPhone activations actually yields a short-term boost in profit margins, as carriers are forced to pay Apple a large upfront sum for the handset and then make the money back over the duration of a two-year contract. Like rival Verizon, AT&T saw its margins shrink in Q4 of 2011 when it activated a record 7.6 million iPhones.

Selling only 4.3 million iPhones in the first quarter of 2012, AT&T saw its net income increase to $3.58 billion, or 60 cents per share – up from $3.4 billion, or 57 cents per share, a year earlier. Analysts polled by Bloomberg and Thomson Reuters expected earnings to fall in line with last year's totals.

AT&T's most impressive metric may be its average revenue per contract customer (ARPU), which increased 1.7 percent from a year earlier to $64.46. Similar to its competitors, AT&T has added service fees and additional upgrade costs to slow ARPU declines that have occurred over the last two years.

"Rising ARPU means the carriers are able to increase data pricing, which is good for the industry," Walter Piecyk, an analyst at BTIG, told Bloomberg.

AT&T added 726,000 customers in the first quarter, 25 percent of whom were more highly sought-after contract subscribers. In contrast, 68 percent of Verizon's 734,000 customer additions in Q1 were contract subscribers.

The Dallas-based carrier is trying to keep pace with Verizon's 4G LTE deployments, which have helped entice a number of new non-iPhone contract subscribers to call Verizon their carrier. Verizon claims its 4G footprint to be six times the size of its closest U.S. competitor.

AT&T's consolidated revenue increased nearly 2 percent to $31.8 billion. The carrier also lowered its churn rate from 1.2 percent to 1.1 percent in the first three months of the year. AT&T shares are up more than 3 percent on the day.




Edited by Braden Becker

TechZone360 Contributor

SHARE THIS ARTICLE
Related Articles

6 Challenges of 5G, and the 9 Pillars of Assurance Strategy

By: Special Guest    9/17/2018

To make 5G possible, everything will change. The 5G network will involve new antennas and chipsets, new architectures, new KPIs, new vendors, cloud di…

Read More

Putting the Flow into Workflow, Paessler and Briefery Help Businesses Operate Better

By: Cynthia S. Artin    9/14/2018

The digital transformation of business is generating a lot of value, through more automation, more intelligence, and ultimately more efficiency.

Read More

From Mainframe to Open Frameworks, Linux Foundation Fuels Up with Rocket Software

By: Special Guest    9/6/2018

Last week, at the Open Source Summit, hosted by The Linux Foundation, the Open Mainframe Project gave birth to Zowe, introduced a new open source soft…

Read More

Unified Office Takes a Trip to the Dentist Office

By: Cynthia S. Artin    9/6/2018

Not many of us love going to see the dentist, and one company working across unified voice, productivity and even IoT systems is out to make the exper…

Read More

AIOps Outfit Moogsoft Launches Observe

By: Paula Bernier    8/30/2018

Moogsoft Observe advances the capabilities of AIOps to help IT teams better manage their services and applications in the face of a massive proliferat…

Read More