AT&T’s Randall Stephenson says his company will be very different when it reports next.
“This is going to be a very different company,” Stephenson said during a fourth quarter earnings call that was broadcast online. Stephenson was talking about the diversification of AT&T’s revenue stream through its pickup of DirectTV, as well as recent acquisitions of wireless players in Mexico.
“We will be the only company with mobile Internet spanning both countries,” Stephenson said of the company expanding into Mexico. “We have the makings for strong and very viable Mexico strategy. We like these assets. We think these assets are sufficient to go in there and compete and take share.“
When asked whether AT&T might be considering moving into the Canadian wireless market, Stephenson said he had enough on his plate. “On Canada, I think right now we have about as much as a company can handle,” he said.
Aside from moving into different geographies, Stephenson stressed that AT&T’s DirecTV acquisition will allow it to deliver video content across devices.
“We’re looking at multiple channels and channel lineups that we’ll be able to deliver to our wireless subscribers,” Stephenson said. “Stay tuned…this is of high priority to us.”
Stephenson made the comments as both AT&T and Verizon are under pressure to find new revenue streams. AT&T’s fourth quarter subscriber numbers leaned heavily on tablets, which have picked up the slack as smartphones reach saturation. AT&T added 854,000 net postpaid subscribers, a 51 percent increase over the same quarter last year. AT&T added just 148,000 net postpaid smartphones and 969,000 postpaid tablets in the quarter.
For reference, Verizon added about 600,000 smartphones and 1.4 million tablets in the fourth quarter.
Continuing with the diversification theme, AT&T highlighted connected device net adds of 1,296,000, including about 800,000 connected cars.
As expected given the competitive environment created by T-Mobile and Sprint and the usual holiday pressure, AT&T’s churn was up 1.22 percent. That’s compared to an all-time best of 1.1 percent in the same quarter last year.
Total wireless revenues were up 7.7 percent annually to $19.9 billion. Wireless equipment revenues increased 72.3 percent to $4.8 billion, as AT&T’s Next equipment installment plans saw a 58 percent take rate in the quarter. Wireless service revenues were down 3.7 percent to $15.1 billion.
Fourth-quarter wireless operating expenses totaled $16.6 billion, up 14.8 percent versus the year-earlier quarter, largely due to higher equipment costs from record gross adds and upgrades and costs associated with the company’s acquisition of Leap Wireless. Wireless operating income was $3.2 billion, down 18.1 percent year over year largely due to increased volumes and Leap integration costs.
As expected, wireless margins were impacted by strong seasonal gross adds and upgrades, adoption of Mobile Share Value plans and continued investment in new services. AT&T’s reported fourth-quarter wireless operating income margin was 16.3 percent versus 21.4 percent in the year-earlier quarter. Wireless EBITDA margin was 26.4 percent compared to 31.8 percent in the fourth quarter of 2013.
When asked about the FCC’s push to reclassify Internet service providers (ISPs) as public utilities under Title II, Stephenson said there has to be a middle way, noting that he was in favor of bill introduced by Congress that would give the FCC authority regulate certain principles of net neutrality.
Stephenson said AT&T would update more specific guidance once the DirecTV purchase is approved. That said, he expected capital expenditures to be in the $18 billion range and earnings per share growth to be in the low single digits.
Shares of AT&T were up 1.83 percent to $33.41 in afterhours trading.
