AT&T's Profit Up, But Business Revenue a Mixed Bag in Q2

AT&T reported a profit of $3.4 billion for the second quarter of 2016 and a more than 22 percent increase in revenue from the year-ago quarter, mostly from last summer’s DirecTV acquisition.

The telco reported $3.1 billion in profit for the same quarter in 2015. Consolidated revenues for the latest quarter totaled $40.5 billion, up from $33 billion for the year-ago quarter.

Second-quarter profit met analysts’ expectations.{ad}

“One year after our acquisition of DIRECTV, the success of the integration has exceeded our expectations,” said Randall Stephenson, AT&T’s chairman and CEO. “Cost synergies are ahead of target, we’ve added nearly 1 million DirecTV subscribers since the acquisition, and our new video-streaming services are scheduled to roll out later this year. We plan to serve every segment of the video industry and offer customers their favorite content virtually wherever and whenever they want it.”

AT&T reported 2.1 million North American wireless net adds driven by connected devices, its business in Mexico and Cricket Wireless. Also, nearly 800,000 U.S.-branded smartphones were added to the subscriber base, offsetting a nearly 600,000 decline in the U.S.-branded feature phone base.

Second-quarter revenue from business customers totaled $17.6 billion, down 0.5 percent versus the year-earlier quarter. Growth in mobility services and strategic business services helped offset declines in legacy services and wireless equipment sales.

Business wireless revenue was up 2 percent year over year, to $9.7 billion, driven by wireless service revenue growth, which offset lower equipment revenues. Wireless service revenues were up 2.7 percent year over year, reflecting smartphone and tablet gains, and continued migration from consumer plans.

In business wireline, declines in legacy products were partially offset by continued growth in strategic business services. Total business wireline revenues were $7.8 billion, down 3.4 percent year over year. Data revenue makes up nearly 60 percent of Business Solutions wireline revenues.

Revenue from strategic business services, including VPNs, Ethernet, cloud, hosting, IP conferencing, voice over IP, MIS over Ethernet, U-verse and security services, grew by more than $200 million, or 8.4 percent, versus the year-earlier quarter and 9 percent when adjusting for foreign exchange pressure. These services represent an annualized revenue stream of more than $11 billion.

During the quarter, AT&T also added nearly 20,000 high-speed IP broadband business subscribers, while total business broadband had a loss of 14,000 subscribers in the quarter.

The telco ended the quarter with 77.5 million business wireless subscribers. It added 185,000 postpaid subscribers and 1.2 million connected devices in the second quarter.

Also, AT&T had 54.3 million consumer mobility subscribers at the end of the quarter. It lost 10,000 total subscribers, with 72,000 postpaid net adds and 365,000 prepaid subscriber net adds mostly offsetting losses of 446,000 reseller subscribers.