AT&T results beat Wall Street, shares rise after hours

By Reuters

Jan 28, 2015 02:17 AM EST

AT&T Inc (T.N) on Tuesday posted a quarterly net loss that was slightly slimmer than Wall Street expected, as its mobile device deals attracted more customers, but its users switched to other networks at a higher rate.

AT&T shares rose about 2 percent in after-hours trading after closing at $32.81 on the New York Stock Exchange.

The second-largest U.S. wireless carrier posted a net loss of $4 billion, or 77 cents per share, in the fourth quarter, compared with net income $6.9 billion, or $1.31 per share, a year ago. The loss was partly the result of $10 billion in charges related to pension and retiree benefit plans that it had announced this month.

Excluding items, AT&T earned 55 cents per share, beating analysts' forecasts by a penny.

The company said postpaid churn, or the rate of customer defections, rose to 1.22 percent and average revenue per phone user declined 10.7 percent from a year earlier.

While postpaid churn had risen since last year, it was comparable to 2012, AT&T executives told analysts on an earnings call. Both 2012 and 2014 saw the launch of numbered Apple phones, the iPhone 5 and iPhone 6, they added.

Faced with intense competition and promotional activity, wireless carriers have moved from two-year contract plans to equipment financing plans, which reduce service fees and eliminate subsidies for devices.

"Equipment sales were 13 percent better than consensus but service revenues which is really their real business were 2.7 percent light in wireless," Craig Moffett, an analyst at MoffettNathanson said.

Such no-subsidy plans along with aggressive price cuts to tackle competition from rivals including T-Mobile (TMUS.N) and Sprint(S.N) have squeezed margins. AT&T's wireless profit margins, excluding certain items, narrowed to 36.7 percent from 42 percent a year earlier.

As the U.S. wireless market reaches saturation, the company has been expanding its footprint in Mexico. It said on Monday it would buy bankrupt NII Holdings Inc's [NIHDQ.PK] wireless business in Mexico for $1.875 billion.

AT&T is awaiting regulatory approval for its proposal to buy satellite TV company DirecTV for $48.5 million. It expects the deal to close later this year.

In 2015, AT&T expects margin expansion along with adjusted earnings growth in "the low single-digit range." It said it had added more than 2 million new wireless customers and 854,000 contract subscribers in the quarter.

Revenue rose to $34.4 billion from $33.16 billion a year earlier. Wall Street analysts, on average, had expected $34.27 billion, according to Thomson Reuters I/B/E/S.

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