While most analysis of AT&T will, as usual, focus on its 29.8% growth in wireless and just how many iPhones it has shipped (2.7 million iPhone activations this quarter), to us the first quarter is remarkable for two sets of facts, its TV numbers and its immense losses in fixed line services.
The Wireline revenue line at AT&T for Q1 doesn’t look so bad with revenue off 4.6% but costs having been cut by 2.8%, also many AT&T headlines focused on the company’s overall fall in net income, which mostly came about due to a new tax treatment for health insurance.
But the contrasting fortunes of voice and TV with a massive 12% fall in fixed line voice revenues and yet a 72.7% increase in U-Verse TV connections, during the past year, taking it up to 2.3 million homes, show significant swings in opposite directions. If AT&T had not spent all that money over the past six years creating U-Verse, its fixed lines revenues would be going backwards so fast, the entire company would be in jeopardy. In fact at 0.3% revenue growth, it already is.
Even within those TV figures there is yet another surprise, which is that its satellite TV customers are actually falling, not rising, down from 2.2 million a year earlier to 2 .13 million now. That tiny 3.5% fall could be bad news for either Dish Network or DirecTV or potentially both, and since neither will report for a week we won’t be able to tell for sure until then.
It could be that it is the Dish subscriptions that are falling away through disuse or potentially because they have signed directly with Dish on a renewal anniversary. At the same time DirecTV subs might be growing nicely. But just as easily, given the fact that U-verse TV subscriptions are now ahead of those satellite TV subs, it might be that AT&T has just stopped aggressively marketing either service and only uses it to keep customers on board when they are on the verge of leaving AT&T and even then, only in regions where U-Verse is not currently available.
Over the past year video subscriptions at AT&T have gone from 3,534,000 to 4,422,000, a rise of 888,000, with around a 1 million increase in U-verse, that’s means a significant fall in DTH subs.
All of this will be over shadowed by the AT&T good news, with first quarter revenue up to $30.6 billion, just 0.3%, but with wireless subscribers surging by 1.9 million. the highest ever first-quarter number taking subs to 87 million on the back of its lowest combined churn figure of 1.3% (both postpaid and pre-paid). That drove a 10.3% increase in wireless revenues and an all important 30% increase in Wireless data revenues, now up to $4.1 billion.
Back at U-verse, TV subscribers went up by 231,000 in the quarter, and around 1 million over the past year and AT&T is really getting its triple play act together, attaching a broadband line to 90% of its new TV customers and with 75% also taking U-verse voice, a form of VoIP with extra features over and above normal fixed voice.
In total 75% of all AT&T U-verse TV subscribers have some form of triple or quad play option, when a little over a year ago AT&T never articulated a single serious bundle to include all four services. Sure you could subscribe to AT&T end to end, but the bundle and incentives had only been for three fixed lines services before, not four.
But even now U-verse has only scratched the surface. It says deployment reaches 24 million living units, and given that AT&T only has around 26 million fixed lines these days, it’s getting close to its full potential reach (although it once had over 45 million of them). So far AT&T has managed an average of 13% penetration across this footprint, but of course where AT&T has had U-verse in a market for over two years its penetration rate is far higher, closer to 20%.
Older DSL lines at AT&T are now eroding rapidly and although there was a net gain of 255,000 wired broadband connections, this is made up of a huge number of additions to U-verse, balanced by losses at the traditional DSL division. This net increase compares with 167,000 last time, so its an improvement. It’s no surprise that conventional DSL is falling off, given that AT&T U-verse broadband now includes a Max Turbo version, which has downstream speeds of 24 Mbps with 3 Mbps upstream and its DSL lines get nowhere near that. Meanwhile the Cablecos are going after AT&T with promises of 150 Mbps lines.
Rival Verizon will report tomorrow, so we’ll cover it next week, while
DirecTV reports on May 6, so we will have to wait until then to get an idea of whether or not AT&T’s failure to drive up DTH lines will affect its numbers.