AT&T Hits Sales, Profit Targets

Shares rise 22 cents, or 0.6%, to $37.81.
By Robert Holmes ,

Updated from 8:46 a.m. EDT

AT&T

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posted first-quarter numbers that were in line with estimates, buoyed by strong growth in its wireless, broadband and enterprise divisions.

The No. 1 U.S. mobile-phone service provider posted adjusted earnings of $4.5 billion, or 74 cents a share, up 13.8% from the 65-cent pro forma profit a year ago. Analysts expected 74 cents, according to Thomson Financial.

Sales also hit Wall Street's targets, coming in at $30.7 billion, up 6.1% from the year-ago quarter.

"We delivered an excellent first quarter and a solid start to the year," said CEO Randall Stephenson said in a release. "Revenue growth continues to ramp, we have good momentum across key growth areas, major cost initiatives are on track, and our operational results reinforce the confidence we have in our outlook."

AT&T said it had a net gain of 1.3 million wireless subscribers in the quarter, taking its total customer count to 71.4 million. AT&T picked up 705,000 retail postpaid customers in the fourth quarter, a 3.7% improvement over last year's levels. The average monthly revenue per subscriber, or ARPU, was up 5% among retail postpaid subscribers.

The company has benefited from the decline of No. 3 wireless shop,

Sprint

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, which has seen high customer attrition, and the introduction last year of

Apple's

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iPhone, a product for which it is the exclusive authorized U.S. service provider.

Previously one of the company's weak spots, AT&T's fiber and DSL-based expansion, as a part of its so-called triple play service package, has started to gain some traction. Total high-speed Internet connections, which include DSL, U-verse enabled AT&T Internet and satellite-broadband services, jumped by 491,000 subscribers. AT&T ended the first quarter with 14.6 million high-speed Internet connections, up 13.9% from a year ago.

The company added 148,000 Internet-protocol video customers in the first quarter, giving AT&T U-verse 379,000 subscribers at the end of the quarter.

Shares of AT&T rose 22 cents, or 0.6%, to $37.81. Telco peer

Verizon

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slipped 23 cents to $35.73, and

Qwest

(Q)

gave back 11 cents to $4.58. Sprint added 35 cents to $7.05.

Stifel Nicolaus analyst Christopher King said total switched access lines fell 7.7% from the year-ago period, a result that was worse than expected, while net wireless additions of 1.3 million fell shy of his estimate. These notable operational soft spots have King concerned going forward, even though the company met Wall Street's estimates.

"Notably, even with the iPhone and the recently reduced price point of the handset, post-paid net adds were 705,000 in the quarter, essentially flat with the year-ago 680,000 post-paid net add figure," King said in a note. "U-verse TV penetration continues to improve, albeit at a slightly slower pace than we had forecast."

During the quarterly conference call for investors, CFO Rick Lindner said that AT&T wants to get wireless churn, or the rate at which subscribers cancelled the service, down to an industry leading level by continuing to build network coverage and performance.

"We're pleased with the continued improvement in wireless," said Lindner. "Our postpaid churn has continued to trend down. We would expect overall churn, and in particular postpaid churn, to continue to decline."

Lindner added that the new unlimited service plans for a flat rate of $99.99 a month should not have an impact on ARPU. He also said Apple's iPhone "continues to be popular with customers," and that the device has pushed ARPU across that customer base to the mid-to-high $90 range.

When asked about

the results of the Federal Communications Commission's auction

of the 700-megahertz spectrum, AT&T said its winning bid for the bulk of the B-block will help the company as it eliminates the need to clear spectrum to roll out its Long Term Evolution, or LTE, network.

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