Citing robust wireless data growth, accelerated take-up of its U-verse TV service and double digit IP growth, AT&T reported Q4 revenues of $31.1 billion, net income of $2.4 billion and cash from operating activities of $10.9 billion. Full-year revenues totaled $124.0 billion, net income was $12.9 billion and cash from operating activities totaled $33.7 billion. However, the company is trimming its Capex forecast by 10% to 15% compared with 2008, lowering its growth target for 2009 to the low single-digit range, and slowing its planned U-verse rollout in some markets. As the U-verse network currently passes 17 million, AT&T said it now has a large base to which it will market its service. As such, rollouts to some markets will be pushed back, and the goal of passing 30 million homes is expected to be reached one year later than originally planned.
"Despite the economic environment, we grew revenues in 2008, and I expect 2009 will be another year of overall revenue growth and solid progress for our company," said Randall Stephenson, AT&T chairman and chief executive officer.
Some highlights from Q4:
Wireless Operational Highlights
- 2.1 million Net Gain in Wireless Subscribers. AT&T posted a fourth-quarter net gain in wireless subscribers of 2.1 million to reach 77.0 million in service, up 7.0 million over the past year. Retail postpaid net adds topped 1.3 million, up 13.9 percent versus results in the year-earlier quarter. Total monthly subscriber churn in the fourth quarter was 1.6 percent, down from 1.7 percent for both the preceding quarter and the year-earlier fourth quarter. Postpaid churn was 1.2 percent, flat versus results for the preceding quarter and the fourth quarter of 2007.
- 1.9 million Apple iPhone 3G Activations. Postpaid subscriber growth reflects the dramatic success of iPhone 3G, which was launched in July 2008. AT&T's fourth-quarter iPhone 3G activations totaled 1.9 million, approximately 40 percent to customers who were new to AT&T, and the company's total iPhone activations over the last half of 2008 topped 4.3 million. AT&T's iPhone exclusive continues to deliver high-value subscribers with ARPU approximately 1.6 times higher and churn rates significantly lower than the company's overall postpaid subscriber base.
- Integrated Devices. During the fourth quarter, nearly 60 percent of the company's postpaid net adds came from customers choosing an integrated device (such as the iPhone), and 24.9 percent of AT&T's postpaid wireless subscribers now have an integrated device, up from 13.0 percent one year earlier.
- 51.2 percent Wireless Data Revenue Growth. AT&T's wireless data revenues grew 51.2 percent versus the year-earlier fourth quarter to $3.1 billion. Wireless text messages on the AT&T network were nearly 80 billion in the fourth quarter, more than double the total for the year-earlier fourth quarter. Internet access revenues and multimedia message volumes also continued their robust growth. This marked AT&T's 12th consecutive quarter with wireless data revenue growth above 50 percent. Data represented 26.6 percent of AT&T's fourth-quarter wireless service revenues, up from 19.9 percent in the year-earlier quarter.
- Retail Postpaid Subscriber ARPU Up 3.9 percent. For the fourth quarter, total postpaid ARPU was $59.59, up 3.9 percent versus the year-earlier quarter. Postpaid data ARPU was $16.30, up $4.29 or 35.7 percent versus the fourth quarter of 2007, and up $1.60 or 10.9 percent sequentially. Total wireless subscriber ARPU was up 1.1 percent versus the fourth quarter of 2007.
- 13.2 percent Total Wireless Revenue Growth. Driven by subscriber gains and data growth, AT&T's total wireless revenues increased 13.2 percent to $12.9 billion, and wireless service revenues, which exclude handset and accessory sales, grew 13.3 percent to $11.5 billion. For the full year 2008, total wireless revenues were $49.3 billion, up $6.7 billion or 15.6 percent versus 2007 results.
- Sequential Wireless Margin Expansion. On a reported basis, fourth-quarter wireless operating expenses totaled $10.2 billion, operating income was $2.7 billion and AT&T's wireless operating income margin was 20.9 percent versus 17.0 percent in the year-earlier fourth quarter. On an adjusted basis, fourth-quarter wireless operating expenses totaled $9.7 billion, operating income was $3.2 billion and AT&T's wireless operating income margin was 24.6 percent versus 25.7 percent in the year-earlier fourth quarter.
Wireline Operational Highlights
- AT&T U-verse. AT&T reported a net gain of 264,000 subscribers in the fourth quarter, up from 232,000 added in the third quarter of 2008, to reach more than 1 million in service. AT&T U-verse network deployment more than doubled during 2008 and now passes 17 million living units.
- 14.2 percent Growth in Wireline IP Data Revenues. AT&T posted its fifth consecutive quarter of mid-teens growth in total wireline IP data revenues, driven by expansion in AT&T U-verse services and growth in business products such as VPNs and managed Internet services. Consumer IP data revenues, which include broadband and AT&T U-verse services, grew 21.4 percent, and retail business IP data revenues grew 11.4 percent. IP services now account for 45.2 percent of AT&T's total wireline data revenues, up from 41.5 percent in the year-earlier fourth quarter and 37.2 percent two years ago.
- Growth in Consumer ARPU. Reflecting growth in AT&T U-verse services and broadband, AT&T's revenues per consumer household served increased 3.4 percent versus the year-earlier quarter. Regional consumer revenue connections (retail voice, high speed Internet and video) totaled 47.0 million at the end of the quarter versus 49.4 million at the end of the fourth quarter of 2007 and 47.5 million at the end of the third quarter of 2008. Total wireline consumer broadband and TV connections over the past year increased by 1.8 million. Total regional consumer revenues were $5.3 billion, down 5.3 percent, as voice declines more than offset growth in data and video.
- Broadband Growth. AT&T's total broadband connections, which include wireline subscribers and wireless customers with 3G LaptopConnect cards, increased by 357,000 in the fourth quarter to reach 16.3 million in service, up 1.5 million or 10.3 percent over the past year. The number of 3G LaptopConnect cards in service nearly doubled over the past year. AT&T U-verse TV continues to have a high attach rate for broadband, more than 90 percent in the fourth quarter, and sales of bundles that combine wireless with wired broadband service continue to be strong. Both wired and wireless broadband subscribers benefit from access to AT&T's industry-leading Wi-Fi footprint, with nearly 20,000 hotspots in the United States and access to more than 80,000 hotspots around the world.
- Wholesale. AT&T extended its major turnaround in wholesale revenues, which grew 1.0 percent versus the year-earlier fourth quarter. This marks AT&T's second consecutive quarter of year-over-year growth in this category and compares with a year-over-year decline of 8.5 percent reported in the year-ago fourth quarter. The turnaround reflects solid demand for data services, offsetting expected declines in local voice. In addition, revenues from AT&T's global network alliance with IBM continue to ramp.
- Retail Business IP Data Growth. AT&T enterprise and regional business operations continued to generate double-digit growth in IP data revenues, offsetting in large part expected economic pressures on usage-based legacy revenues, primarily in voice. Regional business revenues declined 0.9 percent versus the year-earlier quarter to $3.2 billion. Regional business data revenues grew 7.0 percent, consistent with results in recent quarters, led by Ethernet and IP data services, which made up 55.4 percent of AT&T's regional business data revenues and grew 18.3 percent versus the year-earlier fourth quarter. Enterprise revenues totaled $4.5 billion, down 3.7 percent versus the year-earlier quarter, reflecting pressures on voice and legacy data transport volumes. Enterprise sales flow and new service adoption remain solid.
