AT&T boosted by smartphone sales

AT&T, the largest US telecommunications group by revenues, reported solid first-quarter earnings driven by smartphone sales and higher mobile data revenues, but mobile subscriber growth slowed, reflecting increasing market saturation.

AT&T's mobile unit added a net 187,000 monthly contract customers during the quarter, significantly fewer than the 500,000 added by rival Verizon Wireless. AT&T's total wireless subscribers including prepaid and connected device subscribers increased by 726,000 in the first quarter to reach 103.9m.

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Overall first-quarter net income increased to $3.6bn, or $0.60 a share, up from $3.4bn, or $0.57 a share, in the year-earlier quarter. AT&T's consolidated revenues totalled $31.8bn, up $575m or 1.8 per cent on the year.

Led by mobile data growth in the first quarter, AT&T delivered strong smartphone and branded computing device sales with solid data revenue growth, lower postpaid churn and expanding margins.

"We continue to capitalise on our terrific momentum in mobile internet," said Randall Stephenson, AT&T's chief executive. "Smartphone and branded computing device sales continue to set a record pace, mobile data revenues were up nearly 20 per cent, and we achieved this growth with expanding margins. These results add confidence in our outlook for the year."

Total wireless revenues, which include equipment sales, in AT&T's mobile division were up 5.4 per cent year over year to $16.1bn and wireless data revenues increased by more than $1bn, reflecting continuing strong smartphone sales. Mobile operating income was $4.4bn, up 11.3 per cent year over year.

AT&T sold 5.5m smartphones in the quarter, exceeding a first-quarter sales record set last year. Smartphones represented more than 78 per cent of postpaid device sales. At the end of the quarter, 59.3 per cent, or 41.2m, of AT&T's postpaid subscribers had smartphones, up from 46.2 per cent or 31.5m a year earlier.

Both Android and iPhone device sales remain strong. AT&T activated 4.3m iPhones during the quarter with 21 per cent new to AT&T.

The company noted that average revenue per user for smartphones is 90 per cent higher than for non-smartphone subscribers and churn levels for these subscribers - a key measure of customer loyalty - are significantly lower than for other postpaid subscribers.

While smartphones typically carry much higher subsidies than other handsets, mobile margins grew significantly, driven by improved operating efficiencies. AT&T's first-quarter wireless operating income margin was 27.2 per cent versus 25.8 per cent in the same quarter a year ago.

AT&T's fixed telecoms operations reported operating income of $1.8bn, 2.4 per cent higher than the first quarter of 2011 and down 1.2 per cent compared to the fourth quarter of 2011.

However, revenues from AT&T's strategic business services - advanced telecoms services for corporate customers including Ethernet, virtual private networks, hosting, IP conferencing and application services - grew by 19 per cent compared with the year-earlier quarter, continuing strong trends in this area and now represent a $6.2bn annualised revenue stream.

Total business data revenue growth accelerated to 4.2 per cent from a year ago, the strongest showing in four years. Meanwhile revenues from residential customers totalled $5bn, up 1 per cent from a year ago driven largely by AT&T's fibre optic U-verse services.

The total number of subscribers to AT&T's U-verse TV and high-speed internet service grew to 6.2m. AT&T U-verse TV added 200,000 subscribers to reach 4m in service.