AT&T Posts Strong Quarter Results Despite Rising Competition
A Brief Glance at the Quarter
The revenue of the Dallas-based company increased 2.2% to $32.16 billion for the quarter. The rise in revenue is primarily attributable to the solid 18% boost in the wireless data revenue of the company. The carrier recorded the addition of 363,000 new postpaid customers on its network during the quarter, which is over twice the number of additions it recorded in the last year quarter.
The third quarter revenue of the telecom giant rose 4.9%. The company reported profit of $3.81 billion up from $3.64 billion a year earlier. The average revenue per user also increased 1.5% year over year, thanks to the wide 4G LTE coverage and rising usage of smartphones. Increase in smartphone penetration helped the company increase the ARPU. As smartphone users consume huge data and account twice the revenue of non smartphone subscribers, AT&T greatly benefited as several subscribers shifted to smartphones. About 89% of postpaid sales came from smartphone users during the quarter.
The LTE Coverage
AT&T is increasingly gaining from its LTE network which is strengthen with time. At present the company’s 4G network covers 250 million Americans. However, competition is growing stronger for the mobile operator. Verizon (VZ), the top US mobile carrier, leads in terms of the LTE coverage and this has helped the carrier to increase its market share.
The resurgence of T-Mobile and Sprint, particularly after their recent combinations, is also suggesting higher competition in the future. Both these companies are working extensively to widen their LTE coverage and expand subscriber base. Verizon and AT&T are facing increased competition from these telecom players as T-Mobile is adopting aggressive marketing strategy while Sprint is spending massively on its Network Vision.
AT&T is not quite. Aware of the possible threat from T-Mobile and Sprint, AT&T is working on the growth of its network coverage. It has huge capital spending plans for upgrading the network and posing challenge to larger rival Verizon to attract heavy internet users from rival networks. Additionally, this will also help AT&T to maintain its distance from the Kansas carrier and T-Mobile.
This is not all. The second largest wireless operator is also in the process of closing a deal with regional carrier Leap Wireless (LEAP) in a transaction of $1.2 billion and by assuming a net debt of $2.8 billion. The regional carrier postponed its shareholders vote for the proposed acquisition as it was required to make corrections in prior financial statements.
The Bottom Line
The third quarter results have been particularly impressive for the carrier as it was feared of losing market share to rival players who are working on a strong come back. Verizon recently posted its third quarter results and experienced soft customer addition. However, it is a threat to AT&T as the Big Red has an extensive and strong network coverage. T-Mobile, on the other hand, is expected to record strong third quarter subscriber gain as its simplified and cheaper plans are constantly luring customers from rival networks. It would be interesting to see how AT&T plans its movement amidst strengthen competition.