AT&T's Strategic Business Services Sales Grow, But Profit Disappoints

AT&T reported $2.4 billion in profit attributed to the company and $41.8 billion in consolidated revenue, below analysts’ expectations, for the fourth quarter of 2016.

Fourth-quarter profit was down from $4 billion for the same quarter in 2015. Revenue for the latest quarter fell from $42.1 billion for the year-ago quarter.

For the full year, AT&T reported $163.8 billion in revenue, up 11.6 percent, from $146.8 billion for 2015 — driven by a full year of results from DirecTV, and gains in IP services and video. Profit attributed to the company totaled $13 billion, down from $13.3 billion for 2015.

Randall Stephenson, chairman and CEO, said 2016 was a “transformational year for AT&T, one in which we made tremendous progress toward our goal of becoming the global leader in telecom, media and technology.”

“We launched DirecTV Now, our innovative over-the-top streaming service,” he said. “Our 5G evolution plans and improved spectrum position are paving the way for the next-generation of super-fast mobile and fixed networks. And we shook up the industry with our landscape-changing deal to acquire Time Warner, the logical next step in our strategy to bring together world-class content with best-in-class distribution which will drive innovation and more choice for consumers.”

Wireless revenue totaled $18.8 billion, down .7 percent year over year, due to decreases in service and equipment revenues. Wireless-service revenues of $14.7 billion also were down .7 percent year over year.

The telco reported 2.8 million wireless net adds, including 1.5 million in the United States and 1.3 million in Mexico. Also, 1.1 million branded smartphones were added to its U.S. subscriber base.

Revenue from consumer mobility customers was $8.4 billion, down 3.8 percent versus the year-ago quarter, reflecting declines in equipment revenue from lower handset sales and in postpaid service revenue due to the success of Mobile Share plans and migrations to business plans.

Fourth-quarter revenue from business customers was $18 billion, down 1 percent from the year-ago quarter. Growth in mobility and strategic business services offset declines in legacy services, the lack of business investment and the second-quarter 2016 sale of certain hosting operations.

Business wireless revenue was up 1.9 percent year over year to $10.3 billion, driven by wireless service revenue growth, which more than offset lower equipment revenues due to lower sales and upgrades. Wireless service revenues were up 3.9 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 revenue was $7.7 billion, down 4.6 percent year over year.

Of particular note to partners, 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 $226 million, or 8.3 percent compared to the year-ago quarter. These services represent an annualized revenue stream of nearly $12 billion.

During the quarter, AT&T also added nearly 14,000 high-speed IP broadband business subscribers. Total business broadband had a loss of 15,000 subscribers in the quarter.

The telco ended the quarter with more than 81 million business wireless subscribers. It added 250,000 postpaid subscribers and 1.3 million connected devices during the quarter.