AT&T: Solid Q2, Confident Merger Will Close Q2 2012

"We remain very confident that we can satisfy the DOJ and FCC that the merger should be and ultimately will be approved,” Watts said, saying the deal is the fastest way to address the network capacity constraints and spectrum shortages faced by AT&T. Although it would've been nice to see Varney stay until the transaction’s done, Varney’s departure won’t change the timing of the transaction, he said. Meanwhile, while Sen. Kohl’s opinion (CD July 21, p1) “deserves a great deal of respect,” he’s “not a final decision-maker,” Watts said. Kohl is chairman of the antitrust subcommittee. There are examples where Kohl has opposed transactions that were approved, he said: “We believe that will be the case here as well.” Regarding new appointments at the FCC for vacancies or soon-to-be vacancies, Watts said the administration appeared to be working hard to get those slots filled.

The operator’s Q2 earnings fell 10 percent from the same period last year due to increased operational and support costs. Increased expenses were in part related to recovery costs from storms and Alltel integration costs, Chief Financial Officer John Stephens said. Revenue rose 2.2 percent, marking the company’s sixth consecutive quarter with a year-over-year revenue increase. Led by increased wireless demand, AT&T now expects capital expenditures in the $20 billion range for full-year 2011. Previously, the company expected capital expenditure in the low-to-mid $19 billion range.

The total number of wireless subscribers rose by 1.1 million to reach 98.6 million. The carrier added 331,000 postpaid new customers during the quarter. Total churn was 1.43 percent vs. 1.29 percent in Q2 2010. The carrier added 5.6 million smartphones during the quarter. It also added a record 545,000 branded computing subscribers, with most of the growth from tablets. Much of the smartphone growth came from iPhone, with 3.6 million of the devices added to the network. Some 24 percent of the iPhone users were new to AT&T. The rollout of LTE will help AT&T sell more tablets combined with a wireless plan, Stephens said. A third of the tablets were sold on a postpaid basis during Q2, he noted, saying he’s very optimistic on revenue from tablet postpaid plans.

Total consumer wireline connections were 42.5 million, down from 43.1 million at the end of Q1. But U-verse TV added 202,000 subscribers, bringing its total customers to 3.4 million. U-verse broadband service added 439,000 customers to reach 4.1 million. The company now has 16.5 million broadband customers, including DSL subscribers, which is down slightly from the previous quarter.

"We would like to congratulate AT&T on another sterling quarter,” Public Knowledge President Gigi Sohn said, noting even the wireline business is showing recovery. But the only part of AT&T that’s not growing is the number of employees, she said. There are 13,586 fewer employees than there were in the same quarter a year ago, she said. “These numbers show the company has the resources to build out to rural areas if it wants to, and doesn’t need to engage in regulatory blackmail by saying that without spending $39 billion for T-Mobile then rural areas won’t get service. The numbers also show that those who think the takeover of T-Mobile will somehow create jobs should take a closer look at the reality of the situation.” A coalition of groups including Free Press, Consumers Union, The Center for Media Justice, New America Foundation, the Media Access Project and Public Knowledge, have sent every state attorney general a letter explaining why the merger would provide “little or no benefit while causing significant harm in the wireless marketplace.” They urged the attorneys general to scrutinize the facts closely.