AT&T’s mega-merger with T-Mobile USA loomed large over its second-quarter earnings announcement this morning as investors questioned the company on whether the deal would be approved by regulators.
The company’s earnings were released one day after Sen. Herb Kohl (D-Wis.) asked regulators to block the merger, in addition to a decision from the FCC to push out a self-imposed deadline on its review of the deal to evaluate new economic evidence from AT&T presented in support of the deal.
Wayne Watts, general counsel for AT&T, handled several questions from analysts about the merger during the company’s earnings call this morning.
“While we still have work to do, we remain confident in our ability to convince the FCC and DOJ,” Watts said, citing support from governors in 26 states, members of Congress, the tech industry and unions. “We remain confident we will receive regulatory approval in a timely manner.”
Watts said AT&T still hoped to close its acquisition of T-Mobile in the first quarter of next year, but added that the company’s contract with Deutsche Telekom “does contain an extension for an additional six months,” bringing the review into the second and third quarter of next year.
Watts also dismissed Kohl’s opposition to the merger. “He’s not a final decision maker and there are certainly examples of where Senator Kohl has opposed transactions that were approved, and we believe that will be the case here.”
Analysts’ questions on the merger came amid AT&T’s release of its earnings results for the second quarter ended June 30.
The company’s profits dipped 10 percent year-over-year to $3.6 billion despite a 2.2 percent rise in sales, which hit $31.5 billion.
The effect of the end of AT&T’s iPhone exclusivity deal wasn’t clear. The company activated 3.6 million iPhones during the second quarter, up from 3.2 million last year. New subscribers accounted for nearly one-quarter of the new iPhone additions.
However, postpaid churn rose to 1.15 percent from 1.01 percent last year, and overall churn rose to 1.43 percent from 1.29 percent. The company’s net adds declined 30 percent, to about 1.1 million from 1.56 million last year.
AT&T added 331,000 net postpaid customers, 137,000 net prepaid customers and 379,000 new connected devices, in addition to 248,000 net new subscribers gleaned from reseller agreements.
The company reported continued strength with smartphones and tablets. AT&T sold 5.6 million smartphones during the second quarter, accounting for nearly 70 percent of its postpaid device sales. The company added 377,000 tablets during the quarter and 168,000 other data-only devices, including air cards and MiFi devices.
Company CFO John Stephens said just half of the company’s postpaid subscribers had smartphones “so we have some room to grow in that area.”
ARPU for AT&T’s smartphone customers is 1.8 times higher than that of its non-smartphone customers, Stephens said.
Postpaid ARPU grew on a year-over-year basis for the tenth consecutive month, rising 2 percent to $63.87. Postpaid data ARPU rose more than 16 percent to $24.57.
The company’s earnings had a muted effect on its stock price, which rose about 1 percent in morning trading on the New York Stock Exchange.