AT&T says customers are excited about its Next upgrade program and its tiered Mobile Share programs, and together the offerings had mixed impacts on the carrier’s first-quarter 2014 bottom line.
AT&T’s net income fell 1.2 percent, to $3.65 billion, as it felt the impact of 1.1 million customers taking advantage of the opportunity to upgrade their devices. But revenue rose 3.6 percent, to $32.5 billion, as the number of customers moving to Mobile Share accounts more than tripled year-over-year.
Further, 46 percent of AT&T’s Mobile Share accounts have opted for 10GB of data or more while the quarter saw AT&T’s strongest first-quarter postpaid net adds in five years.
“We have started off the year very strong and have made major strides in transforming our business,” CFO John Stephens said during the company’s earnings call April 22.
We’re giving customers a more transparent way of choosing their payment model. More and more customers are choosing the installment plan method of buying handsets,” Stephens said.
Stephens never directly mentioned T-Mobile during the call (although he twice referred to a “noisy” competitive environment) the smaller carriers’ fingerprints were all over AT&T’s quarter.
In December, AT&T introduced Mobile Share Value plans, which—following the T-Mobile model—don’t require a two-year contract. In the statement announcing its earnings, AT&T folded together the two types of Share plans, saying they now account for nearly 33 million connections, or 45 percent of postpaid subscribers.
AT&T’s popular Next program also arrived after T-Mobile introduced a similar service, Jump. T-Mobile also led the industry in separating service prices from devices prices and offering monthly payment options for devices at retail prices, instead of that heavily subsidized price of $199 that AT&T has pushed since at least its introduction of the iPhone in 2007.
Letting customers pay full price for devices has proven so popular, and cost-effective for AT&T, that Stephens said that the carrier has considered moving toward that model entirely.
We’re certainly considering those things,” he told analysts, after the question was posed to him. “This may sound simplistic … but some of our customers still choose the subsidy program [and] we want to stay responsive to them. … But as we see the Next program grow, we are expecting to see some changes.”
Such changes, he added, will include savings for AT&T, as customers “drive efficiencies themselves,” as well as potential savings for customers.
During the quarter, AT&T added 311,000 postpaid smartphones, 255,000 prepaid smartphones and 313,000 tablets. Churn was flat, and wireless revenues were up 7 percent from a year ago, to $17.9 billion.
During the quarter, AT&T also celebrated the close of its Leap Wireless acquisition, which will help AT&T to take better advantage of the growing prepaid market, which Stephens said AT&T hasn’t “necessarily focused on in the past.”
He shared that 70 percent of new Cricket customers use smartphones, so when the time comes to transition them from Cricket’s network to AT&T’s speedier network, “It could be very opportunistic for us,” Stephens said.
The Cricket acquisition also gives AT&T some breathing room when it comes to available wireless spectrum—and negotiating space regarding the Federal Communications Commission’s (FCC) planned 2015 spectrum auction.
In a recent filing, Joan Marsh, AT&T’s vice president of federal regulatory, threatened not to participate in the auctions if the FCC put rules in place that reserved some highly desirable low-frequency spectrum for some smaller carriers that don’t already have spectrum blocks in those bands, Reuters reported April 16.
“We would like to participate in the auctions. We are, and have been, working with the Commission to … produce a successful result for AT&T,” Stephens said during the call.
He added that he’s “very pleased” to have completed the Leap transaction, and that Leap’s spectrum is already being put into service for AT&T. Upgrades occurring thanks to Next are also helping to make AT&T’s network more efficient.
“We feel pretty good with our spectrum position right now,” Stephens added. “But, as with anybody, we’re always looking to have that [option] available.”