AT&T Edges Above Q1 Earnings Expectations And Raises Outlook As It Ventures Into Online Streaming Market

Apr 22 2014, 4:08pm CDT | by

AT&T kicked off 2014 with a bang, revealing Tuesday afternoon that not only was the first fiscal quarter of the year its best first-quarter subscriber growth in five years, but that its revenue and profit results edged above what everyone was expecting. However, the good news for the company’s bottom line is bad news for its stock price: shares of the telecommunications company are down in after-hours trading as investors see the earnings beat, positive full-year outlook and the company’s venture into the online streaming space as a selling opportunity.

AT&T reported $32.5 billion in first quarter revenue, a hair above the $32.4 billion analyst consensus and a 3.6% increase over revenue reported for the same time in 2013. First quarter net income came in at $3.7 billion, or 70 cents per share, up from 67 cents per share in the prior-year quarter. Adjusting the results to exclude special items — like the costs associated with its acquisition of Leap Wireless — earnings came in at 71 cents per share, beating the Street consensus by a penny and marking an 11% increase over the adjusted 64 cents per share reported for the first quarter of 2013.

The wireless carrier said it added more than 1 million subscribers in the quarter, 625,000 of which were postpaid net adds (or contract subscribers), more than double the 296,000 postpaid subscribers added during the same time in 2013. This growth also marks an improvement over the fourth quarter of 2013, when AT&T reported 566,000 contract subscribers, missing analyst predictions and marking a 27.4% year-over-year decline.

These gains were slightly offset by a net loss of 50,000 prepaid subscribers (which AT&T attributed to declines in session-based tablets) and a net loss of 206,000 reseller subscribers, which AT&T attributed to losses in “low-revenue” 2G accounts. Even with this, the company said this was its best first-quarter postpaid growth in five years.

“We have been working very deliberately to transform our business, and this quarter you really start to see the benefits,” Randall Stephenson, AT&T chairman and CEO, said in a statement Tuesday afternoon. “Customers really like the new mobility value proposition and are choosing to move off device subsidies to simpler pricing while at the same time, they are continuing to move to smartphones with larger data plans.”

Other highlights from the quarter include the company’s wireless revenue, which increased 7% to $17.9 billion, as well as the company’s smartphone base, which increased 1.1 million during the quarter and now accounts for 92% of postpaid phone sales.

As a result of the quarter’s strong results, AT&T is raising its outlook for the rest of 2014, predicting consolidated revenue growth of “4% or greater,” adjusted earnings per share growth in the mid single digit range and free cash flow in the $11 billion range.

Earlier on Tuesday AT&T revealed that it is making a play for a chunk of the online video streaming market: together with The Chernin Group, a privately-held independent media holding company, it is committing $500 million to fund a venture that will acquire, invest in and launch video streaming services (also known as “over-the-top,” or OTT video services). AT&T and Chernin said the goal of this new joint venture will be to invest in advertising and subscription video-on-demand channels and online streaming services.

“AT&T and The Chernin Group are combining our skill sets to address the growing consumer demand for accessing content how and when they want it,” John Stankey, AT&T’s Chief Strategy Officer, said in a statement on Tuesday.

“Consumers are increasingly viewing video content on their phones, tablets, computers, game consoles and connected TVs on mobile and broadband networks,” said Peter Chernin, Chernin Group CEO. This is not Chernin’s first attempt to get into the online streaming space: in 2013, the former News Corp president made an unsuccessful attempt to acquire Hulu. In AT&T, however, he has found something with an even greater reach. AT&T boasts 110 million wireless subscribers compared to the 5 million people subscribed to Hulu as of year-end 2013. “AT&T’s massive reach on those platforms across mobile and broadband and their commitment to the online video space make them the perfect fit for this venture with us,” Chernin said.

AT&T’s move into the online streaming space follows a similar effort launched by competitor Verizon earlier in the year; in January, Verizon announced that it would purchase the assets of Intel Media, Intel’s business division dedicated to the development of cloud TV products and services. At the time, Verizon CEO Lowell McAdam called the move an opportunity to ”enhance, expand, accelerate and integrate” Verizon’s delivery of video products and services on a wide array of devices.

Shares of AT&T, which traded in the green following the video streaming announcement and closed at $36.26 for an 0.55% gain, dipped in after-hours trading as investors saw the good earnings news and positive forward momentum as a selling opportunity. The stock is currently down 2.04%; year-to-date,  AT&T has posted a 3.2% return.

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days.
 
 
American whiskey faces challenge in whisky-gulping India
Washington, Nov 23 (IANS) For the most part Indians love things American, but when it comes to their tipple, the world's largest whisky drinkers usually go for Scotch or their very own home-made brands.
 
 
Tiny shrimps hold clue to alien life
Washington, Nov 23 (IANS) A tiny shrimp residing at one of the world's deepest undersea hydrothermal vents holds clues about what life could be like on other planets, NASA scientists report.
 
 
What causes discomfort among users of contact lenses
Melbourne, Nov 23 (IANS) If you are not comfortable wearing contact lenses, it could be due to degradation of the lipid layer in the eyes' natural tear film, says a study.
 
 
 

Latest from the Network

A8 Chip of iPhone 6 and iPhone 6 Plus Can Handle 4K Videos
The outstanding features of the A8 chip are continuing to be revealed, as the processor is found to have the capability of playing 4K videos on the new iPhone 6 and iPhone 6 Plus.According to Mac Rumors, the fact has...
Read more on Apple Balla
 
One infant dies in Pakistan hospital
Islamabad, Nov 23 (IANS) One more infant died due to lack of oxygen in an incubator and negligence of the hospital administration in Pakistan, bringing the number of such deaths to 19 in the past five days. The death...
Read more on Business Balla
 
American whiskey faces challenge in whisky-gulping India
Washington, Nov 23 (IANS) For the most part Indians love things American, but when it comes to their tipple, the world's largest whisky drinkers usually go for Scotch or their very own home-made brands. Indians...
Read more on Business Balla
 
Tiny shrimps hold clue to alien life
Washington, Nov 23 (IANS) A tiny shrimp residing at one of the world's deepest undersea hydrothermal vents holds clues about what life could be like on other planets, NASA scientists report. These tiny shrimps in the...
Read more on Business Balla
 
Katy Perry hits back at Australian media
Los Angeles, Nov 23 (IANS) Singer Katy Perry has called the paparazzi in Australia "perverted" and "disgusting" for following her along the beach and for asking her to pose during her visit to the country for her...
Read more on Celebrity Balla
 
Tiger Woods gets new swing coach
Miami, Nov 23 (IANS) Former World No.1 golfer Tiger Woods said that he has named Chris Como as new swing coach. Como is the fourth swing coach for Woods since the American turned professional in 1996, reports Xinhua...
Read more on Sport Balla
 
All's not well between Kourtney Kardashian, Scott Disick
Los Angeles, Nov 23 (IANS) Pregnant reality TV star Kourtney Kardashian has hinted at a relationship strife with partner Scott Disick by posting a cryptic message-based image on a social media platform. The 35-year-...
Read more on Celebrity Balla
 
$1 Samsung Galaxy S5 Best Buy Black Friday Deal is on Sale Now
Best Buy has released a new set of deals on Sunday 11/23 including a deal advertised in the Best Buy Black Friday 2014 Ad. The $1 Samsung Galaxy S5 Black Friday deal is now on sale at bestbuy.com.The regular price of...
Read more on Apple Balla
 
What causes discomfort among users of contact lenses
Melbourne, Nov 23 (IANS) If you are not comfortable wearing contact lenses, it could be due to degradation of the lipid layer in the eyes' natural tear film, says a study. Patients with discomfort showed degradation...
Read more on Business Balla
 
Rosetta's comet landing captured in 3D
London, Nov 23 (IANS) A stunning 3D image generated from data collected by Rosetta Lander Imaging System (ROLIS) aboard the European Space Agency's Philae lander shows what it would look like to fly over the surface of...
Read more on Business Balla