Earnings Preview: AT&T expected to post 54 cents per share in 1st-quarter earnings
By APMonday, April 19, 2010
Earnings Preview: AT&T to report 1Q results
NEW YORK — AT&T Inc., the country’s largest telecommunications company and second-largest wireless carrier, reports its first-quarter results before the stock market opens on Wednesday.
WHAT TO WATCH FOR: Now that nearly everyone has a cell phone, the competition is largely based upon which carrier can snag subscribers from the others. AT&T has been doing very well in that game thanks to its exclusive contract to carry the iPhone. However, last quarter, Verizon Wireless outdid AT&T when it came to signing up customers under contract.
There’s also talk of AT&T losing its exclusive contract with Apple Inc. this year, but the companies haven’t confirmed anything.
Analysts expect AT&T to report adding a net of about 600,000 “postpaid,” or contract-signing, customers, and slightly more for Verizon.
For the first time, AT&T will break out subscriber figures for non-phone devices like e-readers and GPS units with wireless service. That category is expected to grow explosively, and AT&T has taken a lead by providing service for Amazon.com Inc.’s Kindle and several other e-readers. But they yield little revenue — about $3 per subscriber per month.
Apple Inc. reports results for the quarter on Tuesday. What it says about iPhone sales could give an early read on how many new subscribers AT&T gained, but Apple usually doesn’t break out how many of the new phones were sold in the U.S.
Like other phone companies, AT&T is losing landlines at a rapid pace, since households are choosing to rely on cell phones alone. This means total company revenue is shrinking slowly.
WHY IT MATTERS: AT&T has been stung by complaints about dropped calls and other quality problems with its wireless network. On its last earnings conference call, it said it would invest an additional $2 billion this year to improve the network, particularly where heavy iPhone use is clogging the airwaves. It could provide additional details or progress reports on Wednesday.
AT&T’s stock largely missed out on last year’s rally, and has yet to reach its pre-recession level. Analysts see few prospects for substantial increases in earnings in the next few years, but some also view the sector, and AT&T in particular, as underappreciated.
WHAT’S EXPECTED: Analysts surveyed by Thomson Reuters expect AT&T to earn 54 cents per share on $30.7 billion in revenue. The estimate does not include a $1 billion non-cash, one-time charge the company has announced it will take in the quarter because of a tax effect of the U.S. health care reform. That charge should trim earnings by about a third.
LAST YEAR’S QUARTER: AT&T reported a profit of 53 cents per share on $30.6 billion in revenue.
