AT&T stands to make hundreds of millions from an increased fee on its wireless bills, an industry analyst reported this week.
BTIG’s Walter Piecyk wrote in a note to investors that the carrier more than doubled the “administrative fee” on its monthly bills from 76 cents to $1.99 during the first half of the year.
The company introduced the fee in 2013 to, it said, defray costs to deliver calls to other carriers and rent and maintain cell sites. The charge increased from its initial 61 cents to 76 cents as of early this year, but AT&T raised the fee to $1.26 in April and to $1.99 in June, Piecyk wrote.
The increase, he added, would effectively raise prices by about $1.23 per bill on at least 85 percent of the carrier’s 64.5 million postpaid phone lines. That would translate to $800 million in additional revenue and a boost of about $1 to AT&T’s average revenue per user.
Piecyk noted that 2013 — when the fee was introduced — was the last time AT&T disclosed an increase in postpaid ARPU.
“We doubt there are any avoidable incremental costs associated with this additional revenue, meaning that it should be additive to annual wireless EBITDA run rate of $28 billion,” Piecyk wrote.
The increase reportedly does not apply to the carrier’s prepaid customers.
His note suggested that the additional revenue could fund $10 billion of the company’s debt —after its acquisition of Time Warner raised net debt by more than $60 billion — or help AT&T build out its FirstNet emergency response network.
An AT&T official responded in a statement to CNET that the fee is standard “across the wireless industry” and “helps cover costs we incur for items like cell site maintenance and interconnection between carriers.”
Piecyk also wrote that the increase could represent a “marketing opportunity” for T-Mobile, which is seeking a massive merger with Sprint and has sought to remove taxes and fees from its quoted rates.
Filed Under: Carriers
