ATT today reported second-quarter results highlighted by growing revenues and earnings, record wireless service margins and churn, strong wireless data growth and continued gains in U-verse services. Here are some of the highlights on wireless side of the business:
-$0.66 diluted EPS compared to $0.60 diluted EPS in the second quarter of 2011, up 10 percent year over year and sequentially -Consolidated revenues of $31.6 billion, up 0.3 percent versus the year-earlier period; up 2.0 percent when adjusted for Advertising Solutions sale -Highest-ever wireless margins, operating income margin of 30.3 percent, with EBITDA service margin of 45.0 percent -$2.5 billion in stock buybacks; 75.8 million shares repurchased -AT&T's growth engines -- wireless, wireline data and managed services -- represented 80 percent of total revenues when excluding Advertising Solutions, and grew 5.5 percent versus the same quarter a year ago, led by: -18.8 percent growth in wireless data revenues, up $1 billion versus the year-earlier quarter -13.5 percent growth in strategic business services revenues -38.3 percent growth in U-verse revenues -Best-ever postpaid, prepaid and total wireless churn; postpaid churn drops to 0.97 percent -1.3 million total wireless net adds, with gains in every customer category; 320,000 postpaid net adds -Strong smartphone sales of 5.1 million with more than one-third of all postpaid smartphone subscribers now on 4G-capable devices -Branded computing (tablets, tethering plans, etc.) net adds of 496,000 to reach a total of 6.3 million, up more than 50 percent versus a year ago -Postpaid wireless subscriber ARPU (average monthly revenues per subscriber) up 1.7 percent to $64.93 -First enterprise revenue growth in more than four years
AT&T delivered strong wireless data revenue growth, record low churn and best-ever service margins in the second quarter. Highlights included:
Wireless Data Revenues Increase $1 Billion. Total wireless revenues, which include equipment sales, were up 4.8 percent year over year to $16.4 billion. Wireless service revenues increased 4.3 percent, to $14.8 billion, in the second quarter. Wireless data revenues -- driven by Internet access, access to applications, messaging and related services -- increased by $1.0 billion, or 18.8 percent, from the year-earlier quarter to $6.4 billion. Second-quarter wireless operating expenses totaled $11.4 billion, flat versus the year-earlier quarter, and wireless operating income was $5.0 billion, up 17.8 percent year over year.
Best-Ever Wireless Margins. In the second quarter, the company reported its best-ever wireless service margins, driven by improved operating efficiencies, fewer handset upgrades and further revenue gains from the company's 43 million high-value smartphone subscribers. AT&T's second-quarter wireless operating income margin was 30.3 percent versus 26.9 percent in the year-earlier quarter, and AT&T's wireless EBITDA service margin was 45.0 percent, compared with 41.1 percent in the second quarter of 2011. (EBITDA service margin is operating income before depreciation and amortization, divided by total service revenues.)
Industry-Leading Postpaid ARPU Continues Growth. Postpaid subscriber ARPU increased 1.7 percent versus the year-earlier quarter to $64.93, which is the highest in the industry. This marked the 14th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. Postpaid data ARPU reached $28.04, up 14.1 percent versus the year-earlier quarter.
Subscriber Gains in Every Category. AT&T posted a net increase in total wireless subscribers of 1.3 million in the second quarter to reach 105.2 million in service. This included gains in every customer category. Subscriber additions for the quarter included postpaid net adds of 320,000. Prepaid net adds were 92,000, connected device net adds were 382,000 and reseller net adds were 472,000. Second-quarter net adds reflect continued adoption of smartphones and sales of tablets.
Churn Reaches Record Low Levels. Postpaid, prepaid and total churn reached their lowest levels ever. For the second quarter, postpaid churn was 0.97 percent, compared to 1.15 percent in the year-ago second quarter and 1.10 percent in the first quarter of 2012. Total churn was 1.18 percent versus 1.43 percent in the second quarter of 2011 and 1.47 percent in the first quarter of 2012.
Strong Smartphone Sales Continue. AT&T sold 5.1 million smartphones in the second quarter. Smartphones represented 77 percent of postpaid device sales. At the end of the quarter, 61.9 percent, or 43.1 million, of AT&T's postpaid subscribers had smartphones, up from 49.9 percent, or 34.1 million, a year earlier. AT&T's ARPU for smartphones is twice that of non-smartphone subscribers, and about 88 percent of smartphone subscribers are on FamilyTalk(R) or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers. More than one-third of AT&T's postpaid smartphone customers use a 4G-capable device.
Android, iPhone and Windows device sales were supported by AT&T's 4G network. Only AT&T's 4G network lets iPhone 4S download three-times faster than any other U.S. carrier's network. In the quarter, the company activated 3.7 million iPhones, with 22 percent new to AT&T.
Tethering Plans and Tablets Drive Branded Computing Sales. AT&T had another strong quarter of sales for branded computing subscribers, a wireless data revenue growth area for the company that includes tablets, tethering plans, aircards, mobile Wi-Fi hot spots and other data-only devices. AT&T added 496,000 to reach a total of 6.3 million, up more than 50 percent from a year ago. During the quarter, 219,000 tablets were added, about three-quarters of which were postpaid.
More Subscribers Move to Tiered Data Plans. The number of subscribers on tiered data plans also continues to increase. Approximately 27 million, or about two-thirds, of all smartphone subscribers are on tiered data plans, compared to 45 percent a year ago, and about three-quarters of these have chosen the higher-tiered plans. AT&T's postpaid wireless subscribers on data plans increased by 12.2 percent over the past year.