Intellectual Property Law

Wireless, Video Growth Push AT&T Ahead

By Cynthia Brumfield

After bumming out Wall Street last month with statements that economy-driven consumer disconnects were the on the rise, AT&T posted impressive results for Q4 07 in its earnings report this morning. Net income jumped by 41% year-over-year to $3.1 billion, while revenues advanced by 3% to $30.3 billion, no simple feat for a big telco these days. (These figures take into account AT&T's acquisition of BellSouth, while some press reports simply repeat company statistics, which don't include BellSouth for Q4 06.)

Fueling the growth was a spike in wireless customers, thanks to the hot iPhone. During the quarter, AT&T added 2.7 million net new wireless customers, a record for any U.S. carrier and far above where analysts thought the company would land. By quarter's end, AT&T served 70.1 million wireless lines.

The only other area of strong growth for the telco was video, which continued to gain steam in terms of net adds. During Q4 07, AT&T added 235,000 net new video customers, a run rate more than double that of Q4 06 levels and up slightly over Q3 07 net video adds. Much of the growth came from AT&T's controversial Uverse fiber-to-the-node service, which ended the quarter with 231,000 total subscribers, up 83% over the previous quarter's Uverse subscriber tally. Although, AT&T served 2.3 million multichannel video customers by the end of 2007, representing around 6.7% of consumer primary lines.

As AT&T earlier warned, broadband growth softened during the quarter, with the telco adding only 396,000 net new broadband customers, a run rate that was 30% lower than year-ago levels and down 21% from Q3 07 net high-speed additions. By quarter's end, AT&T served 14.2 million broadband customers, of which 12.1 were residential subscribers.

As is always the case for incumbent phone companies these days, AT&T continued to lose traditional, circuit-switched landline customers. During the quarter, AT&T's access line count dropped by 1.3 million, wrapping up 2007 at 61.58 million.

During the company's earnings call, CFO Rick Lindner downplayed the negative recession indicators that the company mentioned back in December. "We feel good about guidance and our plan for 2008. The economy is always a risk. But if you look across our business, we?re relatively defensive in terms of these downturns," he said.

Even the slow-down in broadband growth could be viewed more positively, Lindner said. "Even in broadband, while we certainly would say that fourth quarter net broadband adds were lower than we had seen in previous quarters...when you annualize growth, we?re still growing at double-digit rates."

Two other AT&T announcements today could help gig growth in broadband. First, AT&T is offering its broadband customers free Wi-Fi access to every AT&T hotspot in the country. Secondly, AT&T will roll out a 10 Mbps Uverse-based high-speed Internet option called AT&T Yahoo! High Speed Internet Max, which will be priced at a relatively high $55.

Although most cable operators, as well as fellow telco Verizon, already offer high-speed tiers that easily beat this new offering in terms of both price and speeds, some small portion of speed junkies in AT&T's territories will no doubt find Internet Max attractive. AT&T is working on even faster Uverse high-speed Internet services through something called "pair-bonding," which literally pairs two copper wires to double the connection capacity. During the earnings call, Lindner said that AT&T will roll out pair-bonded service in the second half of 2008.

Full post as published by IP Democracy on January 24, 2008 (boomark / email).