8-KOther EventsExhibits & Filings

AT&T INC. 8-K Report, Corporate Update (Jul 24, 2014)

Filed July 24, 2014For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its second-quarter 2014 financial results, highlighting a slight increase in total revenues to $32.6 billion, primarily driven by growth in wireless device sales through the AT&T Next installment plan and expansion in U-verse and business services. However, net income saw a modest decline to $3.5 billion ($0.68 per diluted share) from $3.8 billion ($0.71 per diluted share) in the prior year. This decrease was partly offset by a significant pre-tax gain of $1.2 billion from the sale of AT&T's investment in América Móvil. The company continued to see a shift in its wireless segment, with increasing adoption of the AT&T Next installment plan, leading to higher equipment revenue but lower wireless service revenues. Despite this revenue mix change and increased operating expenses, the wireless segment grew its revenue by 3.7%. AT&T also reported solid subscriber growth, adding a net of 634,000 wireless subscribers, bringing the total customer base to approximately 116.6 million. This growth was primarily fueled by postpaid net adds, including smartphones and connected devices, though prepaid subscriber numbers saw a decline due to integration efforts with the recently acquired Leap Wireless.

Key Highlights

  • 1Second-quarter 2014 revenues reached $32.6 billion, a 1.6% increase year-over-year.
  • 2Net income attributable to AT&T was $3.5 billion ($0.68/share), down from $3.8 billion ($0.71/share) in Q2 2013.
  • 3A pre-tax gain of $1.2 billion ($0.08/share) was realized from the sale of AT&T's stake in América Móvil.
  • 4Wireless segment revenues increased by 3.7% to $17.9 billion, driven by AT&T Next installment plan adoption.
  • 5Total wireless subscribers grew by 634,000 net adds, reaching approximately 116.6 million.
  • 6Postpaid churn improved to 0.86% from 1.02% in the prior year's quarter.
  • 7Wireline revenues saw a slight decrease of 0.9% to $14.6 billion, with growth in U-verse video and broadband offsetting declines in legacy services.

Frequently Asked Questions

The sale of AT&T's investment in América Móvil generated a significant pre-tax gain of $1.2 billion, which contributed $0.08 per diluted share to the second-quarter 2014 net income. While this gain boosted overall earnings, it's important to note that the company's core operational performance faced some pressures.

The AT&T Next installment plan is driving an increase in wireless equipment revenue as more subscribers opt for these plans over device subsidies. However, this shift also leads to lower wireless service revenues and has put pressure on the wireless operating income margin due to increased operating expenses and promotional activities. Management views the combination of postpaid phone-only ARPU and AT&T Next billings as a more accurate measure of monthly subscriber value.

AT&T added a net of 634,000 wireless subscribers in the second quarter of 2014, bringing the total to approximately 116.6 million. This growth was primarily driven by postpaid subscribers, including smartphones and connected devices. Prepaid subscriber numbers decreased, largely due to the integration of Leap Wireless and expected subscriber reductions in Cricket.

The Wireline segment experienced a slight revenue decline of 0.9% year-over-year, reaching $14.6 billion. While legacy voice and data services continue to decline, revenues from business customers in IP-based services and consumer customers in U-verse broadband and video services showed growth. The company is seeing strong adoption of U-verse High Speed Internet and U-verse video services, with U-verse High Speed Internet now representing 70% of the total broadband base.