AT&T reported Q2 revenues of $30.7 billion, compared with $30.9 billion in the year-earlier quarter, as growth in wireless and advanced wireline data services in large part offset pressures from the macro-environment, including revenue declines in voice and legacy data products.
Compared with results for the year-earlier quarter, AT&T's operating expenses for the second quarter of 2009 were $25.2 billion versus $24.3 billion; operating income was $5.5 billion versus $6.6 billion; and AT&T's operating income margin was 17.9 percent, compared with 21.3 percent.
Net income attributable to AT&T totaled $3.2 billion versus $3.8 billion in the year-earlier quarter, and earnings per diluted share totaled $0.54, compared with $0.63 in the second quarter of 2008.
Some highlights for the quarter:
Wireless
- Postpaid Subscriber Gains. Retail postpaid net adds totaled 1.2 million, up 29.0 percent versus results in the year-earlier second quarter and up 31.8 percent versus the first quarter of 2009. This marked AT&T's fourth consecutive quarter with a double-digit year-over-year improvement in postpaid net adds. Total wireless subscribers, which include prepaid and reseller results in addition to postpaid, increased by 1.4 million in the second quarter to reach 79.6 million, up 6.7 million over the past year.
- Subscriber Churn. Average monthly postpaid churn improved to 1.09 percent, the lowest level in the company's history; postpaid churn was 1.10 percent in the year-earlier second quarter and 1.20 percent in the first quarter of 2009. Total wireless subscriber churn reached a record low at 1.49 percent, down from 1.64 percent in the year-earlier quarter and 1.56 percent in the first quarter of 2009.
- 2.4 Million iPhone Activations. On June 19, AT&T began offering Apple iPhone 3GS, the fastest, most powerful iPhone yet, and immediate customer response was positive. The day of the launch was the best sales day ever for AT&T's retail stores, and att.com experienced its largest order day ever on that day. For the full second quarter, AT&T iPhone activations totaled more than 2.4 million, with more than a third of those activations for customers who were new to AT&T.
- Integrated Devices. AT&T offers a wide variety of integrated devices that bring advanced functionality to subscribers, ranging from advanced multifunction handsets for business customers to quick messaging and social networking devices. Including iPhone, the total number of 3G integrated devices in service on AT&T's network increased by more than 3.5 million in the second quarter. Over the past year the number of postpaid integrated devices on AT&T's network has more than doubled, and at the end of the second quarter, 36.0 percent of AT&T's 62.1 million postpaid subscribers had integrated devices.
- Wireless Data Revenue Growth. AT&T's wireless revenues from messaging, Internet access, access to applications and related services increased $934 million, or 37.2 percent, versus the year-earlier second quarter. Data represented 28.7 percent of AT&T's second-quarter wireless service revenues, up from 22.9 percent in the year-earlier quarter and 17.3 percent in the second quarter of 2007. Wireless text messages on the AT&T network exceeded 108 billion, more than 1 billion text messages a day and nearly double the total for the year-earlier quarter. Internet access, data access and media bundle revenues also continued their strong growth. The number of 3G LaptopConnect cards on AT&T's network increased by nearly 50 percent over the past year to 1.4 million.
- Postpaid ARPU Growth. Driven by strong data growth, postpaid wireless subscriber ARPU increased 2.3 percent versus the year-earlier quarter to $60.21. This marked the sixth consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU and the first time postpaid ARPU has topped $60. Postpaid data ARPU reached $17.72, an increase of $3.66 over the year-earlier quarter and up $1.24 from the first quarter of this year. Total service ARPU, which includes reseller and prepaid results in addition to postpaid, grew 0.2 percent versus the year-earlier quarter and was up 1.2 percent sequentially.
- Wireless Margins. AT&T's second-quarter wireless operating income and margins reflect solid revenue growth of 10.1 percent and strong operational execution in network and support systems, offset by increased acquisition costs from the company's iPhone 3GS launch. AT&T iPhone subscribers, both new customers and upgrades, take two-year contracts with data packages. As a result, robust iPhone demand drives strong recurring revenues and substantial long-term value. Versus results for the year-earlier second quarter, wireless operating expenses totaled $10.1 billion, up 12.5 percent; operating income was $3.2 billion, up 2.8 percent; and AT&T's wireless operating income margin was 23.8 percent versus 25.5 percent in the year-earlier quarter. AT&T's second-quarter wireless OIBDA service margin was 38.3 percent, compared with 41.2 percent in the year-earlier quarter. (OIBDA service margin is operating income before depreciation and amortization, divided by total service revenues.) AT&T estimates that without increased acquisition costs associated with the iPhone 3GS launch, its second-quarter OIBDA service margin would have been more than 40 percent, in line with results for the second quarter of 2008 and the first quarter of 2009.
Wireline
- AT&T U-verse Growth. AT&T U-verse TV subscribers in service increased by 248,000 in the second quarter to reach 1.6 million, up more than 1 million over the past year. This growth reflects the high quality of the AT&T U-verse video experience, which offers a host of advanced features, including AT&T U-verse Total Home DVR, integrated voice and broadband service and at least 100 High Definition channels in all markets. U-verse TV's broadband attach rate continues to run above 90 percent, and its U-verse Voice attach rate was more than 65 percent in the second quarter. More than 75 percent of U-verse TV subscribers have a triple- or quad-play option from AT&T (adding broadband, wireline voice and wireless). AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached 3.8 million at the end of the second quarter, representing 13.8 percent of households served.
- Broadband Net Adds. Total AT&T U-verse broadband subscribers nearly tripled over the past year to reach 1.6 million, and growth in stand-alone broadband continues to be strong. These factors drove a substantial year-over-year improvement in net adds as AT&T's wireline broadband connections increased by 112,000 in the second quarter. This was up from net adds of 46,000 in the year-earlier second quarter, with both quarters reflecting typical seasonality. Total broadband connections, which include wireline subscribers and wireless customers with 3G LaptopConnect cards, increased by 209,000 in the second quarter to reach 16.9 million in service. In addition to AT&T's high-quality wireline and wireless options, broadband subscribers also benefit from access to AT&T's industry-leading Wi-Fi footprint, enabling customers to take advantage of broadband connectivity in more than 20,000 hot spots in the U.S. and in more than 100,000 hot spots around the world.
- Consumer Revenue Connections. Combined, wireline consumer broadband and TV connections increased by 363,000 in the second quarter and 1.9 million over the past year. AT&T U-verse Voice connections increased by 176,000 in the quarter and 539,000 over the past year. These trends are reflected in a second-quarter sequential decline in consumer connections (retail voice, high speed Internet and video) that was nearly 40 percent smaller than the decline in the year-earlier quarter, with both quarters impacted by typical seasonality. AT&T had 46.3 million total consumer connections at the end of the second quarter, compared with 48.4 million at the end of the second quarter of 2008 and 46.8 million at the end of the first quarter of 2009. Total wireline consumer customer revenues were $5.4 billion in the second quarter, compared with $5.7 billion in the year-earlier quarter and essentially flat, down only $11 million, versus the first quarter of this year. This marked the company's smallest sequential decline in consumer revenues in seven quarters.
- 17.0 Percent Growth in Wireline IP Data Revenues. AT&T posted its sixth 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 voice over IP. Increased AT&T U-verse TV and broadband penetration with a greater number of triple- and quad-play customers drove 29.7 percent year-over-year growth in consumer IP revenues in the second quarter, and AT&T posted its sixth consecutive quarter of year-over-year growth in consumer wireline revenues per household, up 2.1 percent. Total wireline data revenues grew 5.2 percent to $6.6 billion, led by a 17.0 percent increase in revenues from IP-based services. IP services now account for 48.3 percent of AT&T's total wireline data revenues, up from 43.4 percent in the year-earlier second quarter and 39.3 percent in the second quarter of 2007.
- Business Strategic Services. Revenues from the new-generation capabilities that lead AT&T's most advanced solutions -- including Ethernet, VPNs, hosting, IP conferencing and applications services -- grew 15.2 percent year over year. Progress in these areas reflects the strength of AT&T's network and its advanced product sets for business customers. Total second-quarter wireline business customer revenues -- which include results from enterprise, wholesale, government, education, medical and small/midsize customers -- totaled $10.6 billion versus $11.2 billion in the year-earlier quarter and $10.7 billion in the first quarter of this year, reflecting economic impacts.
