AT&T 2014 results show strain but top analyst expectations

AT&T has posted its 2014 full year results, showing financial strain as it made a loss of nearly $4 billion in the last quarter alone. However, the operator still managed to exceed analyst expectations, albeit narrowly as it earned 55 cents per share (excluding exceptional items), a penny more than expected.

The fourth quarter loss of $3.98 billion compares to $6.91 billion profit during the same period in 2013, partially resulting from $7.9 billion pension-related costs. But the telco’s fourth quarter revenues increased 3.8% in Q4 to $34.4 billion, and full year revenues came to $132 billion representing a 3.1% increase compared to 2013.

During the final quarter, AT&T gained 854,000 post-paid net adds and 3.3 million net adds in total during the year. Total net adds (including pre-paid) amounted to 1.9 million in Q4 and 5.6 million for the full year. Postpaid chrun was 1.22% in Q4, compared to 2013 Q4 1.1%, which according to the operator was the lowest ever. Overall the wireless business grew by 7.7% in the last quarter compared to the same period the previous year.

Total post-paid smartphone net adds for the year came to 5 million, of which 1 million in the final quarter. Gross adds of smartphones and upgrades amounted to a record 10.1 million in Q4, and 29.1 million in total for 2014.

AT&T has been active in the M&A space lately, and recently expanded its reach to Mexico with the Iusacell purchase, and the proposed acquisition of Nextel Mexico.

“Over the last year, we’ve made several moves to significantly transform our business for the future” AT&T Chairman and CEO, Randall Stephenson said, presumably also referring to the telco’s plans to create a new single North American market including both the US and Mexico where voice and data tariffs will be unified.

“Our transactions with DIRECTV and Mexican wireless companies Iusacell and Nextel Mexico will make us a very different company. We’ll be unique in the industry because we’ll be able to offer integrated capabilities across a diversified base of services, customers, geographies and technology platforms. After we close DIRECTV, our largest revenue stream will come from business-related accounts, followed by US TV and broadband, US consumer mobility and then international mobility and TV.

In the last few years AT&T has made significant investments, spending about $21 billion on wired and wireless network upgrades. The operator said it expects to spend a bit less, around $18 billion in 2015. The US mobile market is highly competitive and riddled with a fierce price war. AT&T has moved away from its strategy of long contracts to one more focused on device financing plans, which has helped it reduce service costs.

“We ended the year substantially complete with our Project VIP network initiative and with most of our postpaid smartphone customers off of device subsidy plans. As a result, our full-year performance saw record-low postpaid customer churn and best-ever wireless service margins – all in a highly competitive wireless market.”