AT&T (T) Updates on Operating Metrics; Sees 400k Postpaid Net Adds in Q1

On March 10, 2015, AT&T (NYSE: T) provided updated information regarding certain first-quarter trends and reiterated full-year 2015 standalone guidance.

WIRELESS TRENDS
For the first quarter of 2015, AT&T expects continued expansion of its high-value smartphone base, solid gross adds and upgrades, and postpaid net adds in the 400,000 range driven by tablets. Postpaid churn is running lower on both a year-over-year and sequential basis. We also expect service revenues to be impacted by the continued strong adoption of Mobile Share Value (MSV) plans with about 60 percent of our postpaid smartphone base to be on no-device-subsidy MSV plans at the end of the first quarter. This compares to less than 30 percent of our postpaid smartphone base on no-device-subsidy plans at the end of the first quarter 2014. MSV plans were first introduced in mid-February 2014.

This strong adoption of MSV plan pricing as well as ongoing Cricket operational results will pressure margins when compared to the first quarter of 2014. We expect margin pressure from both of these to lessen, on a comparative basis, for the remainder of 2015. Based on this, and continued AT&T Next adoption throughout the year, we expect annual 2015 wireless service margins to expand on a year- over- year basis.

WIRELINE TRENDS
2015 year-over-year quarterly wireline comparisons will be impacted by the fourth-quarter 2014 sale of the Connecticut wireline properties, the exiting of certain low-margin businesses and non-cash changes in benefit expenses. We expect strategic business services revenue growth in the mid-teens and continued U-verse Consumer revenue growth this quarter. In the first quarter, we expect Wireline margins to decrease year over year due to the Connecticut sale, non-cash benefit expenses and TV content cost pressure. These pressures for the remainder of the year are expected to be offset by continued product revenue growth and additional cost savings, including the impact of a voluntary retirement plan offer, and provide margin improvement in subsequent quarters of 2015.

INTERNATIONAL
With the acquisition of the Mexico wireless property Iusacell, we will now have three reportable Segments: Wireless, Wireline and International. Costs associated with the acquisition and integration of this property are expected to have a negative impact on reported earnings in the first quarter.

OTHER ITEMS
In the first quarter of 2015, we expect a charge of approximately $130 million for the departure of nearly 3,000 employees electing to retire by March 31, 2015. These voluntary retirements were made under the terms of a special offer allowing for lump sum distributions and enhanced payments.

We expect annual free cash flow to grow year over year in line with guidance with the first-quarter impacted by higher AT&T Next volumes. The Company continues to expect the DIRECTV transaction to close in the first half of 2015 and we continue to expect the merger integrations savings to be larger than originally announced.

Additionally, beginning with the first quarter, we are updating our definition of wireless connected devices subscribers to include session-based tablets, which were previously reported as "prepaid" subscribers. Prepaid subscribers will now essentially be phone activity. The Company will update prior period subscribers consistent with current definitions.

You May Also Be Interested In

• Innodata (INOD) Awarded New Programs from "Magnificent Seven" Big Tech Customer Valued at Approximately $20 Million in Annualized Run Rate Revenue
• HP Inc. (HPQ) Climbs Following Stake by Greenlight Capital
• AT&T (T) beats earnings estimates in Q1 but revenue falls short, shares climb