AT&T boosts Q2 revenue thanks to wireless gains

AT&T beats the Street, reporting slightly higher than expected revenue for the second quarter thanks to solid sales from wireless services.

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
4 min read
An AT&T store in Manhattan. Marguerite Reardon/CNET

AT&T reported on Tuesday a slight increase in revenue for the second quarter of 2013, as the company continued to boost sales in wireless.

AT&T said that for the quarter ending June 30, its consolidated revenues totaled $32.1 billion, up 1.6 percent compared with the same quarter a year ago when it reported revenue of about $31.58 billion. Analysts had expected the company to generate about $31.81 billion in revenue, according to Thomson Reuters.

AT&T posted earnings of $3.82 billion, or 71 cents per share. This compared with earnings of $3.97 billion, or 66 cents per share, during the same quarter a year ago.

As forecast, the company added about 551,000 new wireless customers on its contract service. In terms of contract customers, these were the best second-quarter net additions AT&T has had in four years. The company said in June that it expected to add 500,000 contract wireless customers.

Tablets are a big data driver
The bulk of these new customers came from customers adding tablets to their data plans. The company said that 400,000 of the 500,000 new additions were tablets. Overall this accounted for about 72 percent of the company's overall net postpaid subscriber additions in the second quarter.

Ralph de la Vega, head of AT&T's wireless business, said that tablet customers are helping drive the use of data services on the network, which is resulting in customers signing up for larger buckets of data.

Wireless revenue was up 5.7 percent, and service revenues were also up, 4.1 percent, according to the company. The carrier said it had record sales in terms of smartphones in the second quarter, with 6.8 million devices sold. AT&T also said it sold a record number of Android devices. And its average revenue per user was up 1.8 percent with contract customers.

What about the iPhone?
But the company declined to comment on how many Apple iPhones it sold this quarter. De la Vega noted that the company took a slight hit in terms of sales due to the introduction of the iPhone on T-Mobile. But he said the uptick in defections that the company saw due to the introduction of the iPhone on T-Mobile was much less than it has been in the past when the iPhone was introduced on Sprint and Verizon Wireless's networks.

In aggregate he said that Android sales represented the highest percentage of smartphones sales. Still, he said that AT&T still managed to sell more iPhones than it did a year ago.

The company also said 35 percent of its post paid contract customers are now on smartphones. And that a large number of its customers are moving to the usage base Mobile Share plans. About 70 percent of the company's entire base of post paid customers are moving to the usage based service. And of those people moving to these services, about 80 percent of them are subscribing to larger data plans. AT&T still offers its unlimited service to "grandfathered" customers, but executives said that about 15 percent have moved from the unlimited plan to the usage based plans.

About 65 percent of the smartphones sold in the quarter are considered 4G capable, meaning they can connect to either the faster LTE network or the HSPA+ network. AT&T expects to cover nearly 270 million people with its LTE network in 400 markets by the end of this year. The carrier said it expects its LTE network build to be mostly complete in the summer of 2014.

U-verse becomes big driver in broadband
In addition to solid wireless growth, AT&T also said that it saw strong growth in its U-verse broadband service. Now for the first time since the service was introduced, AT&T said U-verse generates over half of all consumer wireline revenue, about 51 percent. A year ago, it generated about 41 percent of consumer wireline revenue.

In the second quarter, revenue from residential U-verse customers totaled $5.6 billion, an increase of 2.4 percent versus the second quarter a year ago. It was also up 1.8 percent versus the first quarter of 2013.

In all, AT&T said that TV and high speed Internet U-verse customers totaled 9.4 million in the second quarter. U-verse TV added 233,000 subscribers to top 5 million in service. U-verse high speed Internet had a net gain of 641,000 subscribers to reach a total of 9.1 million.

Updated 3:10 p.m. PTThis story has been updated with additional information from the company's conference call.