AT&T Q1 Preview: Will Postpaid Phone Subscriber Adds Turn Positive?
AT&T (NYSE:T)– the second largest U.S. wireless carrier – is set to report its Q1 2016 earnings on April 26. Below is a quick review of what we will be watching when the company publishes earnings Tuesday.
We have a $37 price estimate for AT&T, which is roughly in line with the current market price.
See our complete analysis for AT&T here
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Postpaid Phone Connections
Postpaid customers are most valuable to carriers, owing to their higher ARPUs and lower churn rates. However, AT&T’s branded postpaid phone base has been shrinking over the last five quarters, falling from about 68.6 million subscribers in Q3 2014 to about 66.4 million in Q4 2015. While AT&T has indicated that these declines were largely due to the attrition of less lucrative feature phone post paid subscribers (who had an average ARPU of roughly $35), there is also a possibility that carrier is being hurt by more intense competition from smaller rivals Sprint and T-Mobile. ((AT&T’s (T) CEO Randall Stephenson on Q4 2015 Results – Earnings Call Transcript, Seeking Alpha, January 2016)) For instance, while AT&T lost 256k postpaid phone customers during Q4 2015, Sprint posted 366k postpaid phone net adds while T-Mobile posted 917k net adds. Additionally, T-Mobile CEO John Legere indicated that AT&T was its biggest subscriber donor over 2015. We will watching to see whether AT&T is able to cut its postpaid phone losses this quarter.
Satellite TV Business
Q1 will mark the second full quarter since the close of AT&T’s acquisition of DirecTV. The company added about 214k U.S. satellite subscribers during Q4, compared to a net addition of just about 26k subscribers during Q3. It’s likely that satellite net adds will remain relatively strong this quarter, as AT&T has been selling DirecTV in almost all of its company-owned stores, while promoting DirecTV over its relatively lower margin U-Verse video offering. U-Verse saw a net of 240k customers leave during the holiday quarter. The company has also been focusing on selling bundled services. For instance, AT&T recently reinstated its unlimited wireless data offering (that it stopped about five years ago) for wireless customers who also subscribe to TV services.
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