AT&T Q2 Net Down; 2009 Economic Rebound Unlikely
AT&T posted a 15 percent year-over-year drop in Q2 net income and isn’t anticipating an economic recovery this year, Chief Financial Officer Rick Lindner said on the company’s earnings call Thursday. The iPhone helped the carrier add 1.4 million subscribers.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
Economic indicators including employment rate and business formation remain weak, Lindner said. That fact affects AT&T’s business revenue, which fell 5.6 percent from a year earlier. The trend will carry over to the second half of 2009, Lindner said. The carrier ended the quarter with 79.6 million wireless users.
Many iPhone users had already been AT&T customers, and improvements in network performance and family plans will also affect subscriber retention, he said. AT&T activated 2.4 million iPhones in the quarter. Congress and the FCC are looking into carriers’ smartphone exclusivity deals. AT&T and Apple have agreed not to disclose plans for their exclusive, including whether it will be extended, Lindner said. The company may be studying what will happen after the exclusive ends, some analysts said.
Wireless churn fell to 1.1 percent. There are opportunities in the prepaid market, but AT&T wouldn’t do anything to cannibalize its core contract service, Lindner said. Wireline saw income fall 27.5 percent year-over-year, but the business is stabilizing, Lindner said. On the upside, AT&T added 248,000 U-verse TV subscribers in the period. The company is relying on its own TV service and a partnership with DirecTV to stave off competition from cable providers. The partnership is going well, Lindner said.
The carrier is stepping up capital expenditure. It expects to spend 35 to 50 percent more in the second half of this year than it did in the first. Wireless will be a high priority, Lindner said. He added that the company will continue to add 3G coverage and capacity and offer backhaul between cell sites and switches.
Meanwhile, AT&T has reached a tentative agreement with the Telecommunications International Union in wireline contract negotiations covering members of Local 103 in California, the union said. The agreement offers additional earnings potential through a new sales title and increased flexibility in scheduling time off. But negotiations are continuing in other regions where contracts expired April 4. They include East (CWA District 1), West (CWA District 9), Southwest (District 6) and Legacy T (CWA ComTech unit). In the Southeast region (CWA District 3) where the contract expires on August 8, negotiations are also ongoing. The IBEW core wireline contracts, for employees mostly in Illinois and northwestern Indiana, are also under negotiation (those contracts expired June 27). About 120,000 employees totaled are covered by the contracts.