AT&T (NYSE: T) may boast healthy wireless numbers, but its dwindling landline customer base has become a cause for concern.
For the quarter ended September 30, 2010, AT&T’s consolidated revenues totaled $31.6 billion, up $847 million, or +2.8%, versus the year-earlier quarter. Operating income was $5.5 billion, up from $5.4 billion; and AT&T’s operating income margin was stable at 17.3%, compared to 17.5%. Third-quarter 2010 net income attributable to AT&T totaled $12.3 billion, or $2.08 per diluted share, including $1.53 in one-time gains from a previously disclosed tax settlement and the sale of Sterling Commerce. These results compare with reported net income attributable to AT&T of $3.2 billion, or $0.54 per diluted share, in the third quarter of 2009. Excluding one-time gains, earnings grew +3.8% to $0.55 per diluted share, compared to $0.53 per diluted share in the year-earlier.
AT&T posted a net gain in total wireless subscribers of 2.6 million, to reach 92.8 million in service. Third-quarter net add growth reflects rapid adoption of smartphones, increases in prepaid subscribers and growth in a host of connected devices such as eReaders, security systems, fleet management and global positioning systems in both the business and consumer markets.
AT&T’s third-quarter integrated device growth included 5.2 million iPhone activations, the most iPhone activations ever in a quarter. This is 62% more than the previous quarterly record of 3.2 million activated in the second quarter of 2010. Approximately 24% of those activations were for customers who were new to AT&T.
But, so much for wireless. The balance of the picture was much less bright.
AT&T U-verse TV subscribers increased by 236,000 in the quarter to reach 2.7 million. That means the service is still much smaller than any significant cable company and that the growth rate for U-verse is modest.
And, in the landline business, AT&T posted a decline in total consumer revenue connections due primarily to expected declines in traditional voice access lines, partially offset by increases in broadband, U-verse TV and VoIP (Voice over Internet Protocol) connections.
The numbers are even starker in the P&L. Wireless revenue rose +10.5% to $13.675 billion. But, landline revenue plummeted by -12.2% to $6.973 billion. Data revenue rose +7.4% to $6.298 billion.
AT&T’s growth businesses are doing little more than filling the hold made by the lose of residential landline customers.