Telecom & Wireless

AT&T Might Be Facing Some Operating Cost Problems

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AT&T Inc. (NYSE: T) reported second-quarter 2013 results after markets closed today. The telecom giant reported adjusted diluted quarterly earnings per share (EPS) of $0.67 on revenues of $32.1 billion. In the same period a year ago, the company reported EPS of $0.66 on revenues of $31.58 billion. Second-quarter results also compare to the consensus estimates for EPS of $0.68 on revenues of $31.81 billion.

On a GAAP basis, the company reported quarterly EPS of $0.71, which included a one-time gain of $0.04 related a sale of shares in America Movil.

Wireline revenues totaled $14.77 billion in the quarter, down 0.9% year-over-year. Margins also fell from 13% to 11.1%.

Wireless revenues totaled $17.29 billion for the quarter, up 5.7% year-over-year. Margins fell however, from 31% a year ago to 27.1%. Operating expenses rose nearly 12% in the wireless segment and operating income fell nearly 8% in the wireless business.

AT&T said it added a net 551,000 postpaid wireless customers in the quarter, its second highest level of new subscribers in four years. Of that number, 398,000 are tablet subscribers. At the end of the quarter, 73% of the company’s wireless subscribers had smartphones, up from 64% in the second quarter last year. The company sold 6.8 million smartphones in the quarter, including a “record number” of phones that use Google Inc.’s (NASDAQ: GOOG) Android operating system.

The company’s CEO said:

This was a solid quarter for revenue and customer additions across our key growth platforms. Our 4G LTE network is the fastest and the most reliable in the nation, and deployment is ahead of schedule. That contributed to a step-up in postpaid subscriber gains, and strong mobile data revenue growth of nearly 20 percent. Growth in U-verse and strategic business services also continued to be strong — adding to our momentum.

AT&T did not offer any revenue or earnings guidance, but the consensus estimates for the third quarter call for EPS of $0.68 on revenues of $32.08 billion. For the full 2013 fiscal year, estimated EPS totals $2.50 on revenues of $128.31 billion

Shares are down about 0.2% at $35.73 in after-hours trading after closing at $35.81. The stock’s 52-week range is $32.71 to $39.00. Prior to today’s release Thomson/Reuters had a consensus price target of around $37.80 on the company’s shares.

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