AT&T profit declines as expenses rise

AT&Ts operating costs were higher, mainly in mobile operations, which was the main reason for the held back second-quarter profits at AT&T, the largest US telecoms group, which added a net 551,000 monthly contract customers in the quarter, up from 320,000 gained in the same period last year. Many of the contract customers added by AT&T, or around 400 000 of them came from tablets rather than phones. Mr. de la Vega, AT&T chief executive, said this was a positive development because tablet subscribers buy larger quantities of data.

AT&T is heavily investing in its 4G network based on LTE technology which has attracted more data traffic. The investments reduced mobile margins, but helped AT&T Mobility offset new competition from T-Mobile US which began selling Apple’s iPhone during the quarter. AT&T’s customer churn rate, a key measure of customer loyalty, increased to 1.02% from 0.97% a year ago, but declined from 1.04% in the previous quarter.

AT&T’s operating expenses were $26 billion compared with $24.8 billion a year earlier. Operating income was $6.1 billion compared with $6.8 billion, and operating margins declined to 19.1% compared with 21.6%. Revenues increased by 1.6% to $32.1 billion. Excluding revenues from the divested Advertising Solutions business unit, they grew by 2.6%. Total wireless revenue, including equipment sales, climbed 5.7% and wireless profit margin based on earnings before interest, tax, depreciation and amortization was 42.4% in the quarter compared with 45.8% for the same period in previous year.

Totally, AT&T reported a profit of $3.82 billion, down from $3.9 billion a year ago, but in line with analysts’ expectations. Per-share earnings increased to 71 cents from 66 cents a year ago, mainly reflecting an 8% reduction in shares outstanding. Excluding a gain related to a stock sale, adjusted profit for the latest period was 67 cents a share.

AT&T shares were up 0.65% yesterday and more than 6% on a year-to-date basis.