AT&T Q2 Revenue Edges Up as Company Transition Continues

The company also announced that it gained another 410,000 postpaid contract wireless customers and 331,000 prepaid wireless customers in Q2.

AT&T, earnings, profit and loss statement, Q2 2015, mobile carriers, wireless carriers, smartphones

Citing its transformation efforts, AT&T reported second-quarter revenue of $33 billion, up slightly from $32.6 billion in the same quarter last year, while net income of $3 billion for the quarter ended June 30 compared with $3.6 billion a year earlier.

Analysts were bullish about AT&T's quarterly results and its outlook because of the addition of new wireless customers, the acquisition of two Mexican telecoms and the approval of the DirecTV acquisition.

The $33 billion revenue figure for the first time includes earnings from the company's recent acquisitions of telecoms in Mexico, according to its earnings report, which was released on July 23.

AT&T's diluted earnings per share came in at 58 cents per share, down from the 68 cents per share posted in the same quarter one year ago, which included a one-time gain from the sale of the company’s América Móvil investment. Excluding certain items, EPS rose in the latest quarter to $0.69 from $0.62 from last year's second quarter.

The company's wireless division tallied 2.1 million net new customers, according to AT&T, including 410,000 postpaid wireless contract customers, 331,000 prepaid customers and 1 million connected cars. AT&T's total churn rate for all customers was 1.31 percent for the quarter, down from 1.47 percent one year ago, while its churn rate for postpaid wireless contract customers was 1.01 percent, up from 0.86 percent in the same quarter one year ago.

"These results reaffirm our transformation strategy," Randall Stephenson, AT&T's chairman and CEO, said in a statement. "We grew revenues, expanded margins and delivered double-digit adjusted EPS and cash flow growth. We added more than 2 million new wireless subscribers as the repositioning of our smartphone base nears completion. We also began expanding high-quality, high-speed wireless service to Mexican consumers and businesses."

Stephenson said the latest earnings report is a "pivotal time for us" as the company prepares to close its $48.5 billion planned purchase of DirecTV, which earlier this week received a conditional approval by the Federal Communications Commission.

Bill Menezes, an industry analyst who covers U.S. wireless carriers for Gartner, told eWEEK that AT&T's results "looked like a pretty good quarter on a couple of counts," including the addition of 2.1 million new customers in a saturated marketplace and its success with its AT&T Next wireless plans, which provide devices to customers without subsidies. By not having to subsidize the cost of devices, AT&T saves itself lots of money, he said.

"It's a good sign for them," said Menezes, especially because the 2.1 million new customers includes 1 million connected car users, which could potentially be a new growth area for the company. Much of that will depend, he said, on whether connected car users choose to continue such services at their own expense after the trial periods end on their new vehicles. "That's something you want to keep an eye on," he said.

AT&T's acquisitions of two Mexican telecoms—Nextel Mexico for $1.88 billion earlier this summer and Mexican wireless provider Iusacell for $2.5 billion in November 2014—are also worth watching as time goes on, said Menezes. The AT&T deal was described by that company as a step in the creation of what it called the first-ever North American Mobile Service area covering more than 400 million consumers and businesses in Mexico and the United States, and time will tell if the deals were a good move for the company, he said.

"The Mexican operations had a loss of $163 million for the quarter, so we will have to watch to see if this improves over time, he said.

Another analyst, Charles King, president and principal of Pund-IT, told eWEEK that "given these cheery numbers and the regulatory approval of the DirecTV acquisition, AT&T should have pretty clear sailing through the next quarter or two. Beyond that, who knows?"

King called the company's performance "a pleasant surprise," especially since its "efforts to expand into new territories are succeeding even as its traditional businesses, like dial-up services, continue to contract."

Often it is "difficult for large, tradition-bound vendors to adapt to rapidly changing markets and business opportunities," said King. "Overall, it seems as if AT&T is up to that task."