8-KOther Events

AT&T INC. 8-K Report, Corporate Update (Mar 10, 2015)

Filed March 10, 2015For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) filed an 8-K on March 10, 2015, providing updated first-quarter 2015 trends and reiterating full-year guidance. The company anticipates strong performance in its wireless segment, driven by continued growth in high-value smartphone users and net additions primarily from tablets, with lower churn rates. However, the strong adoption of AT&T's Mobile Share Value (MSV) plans and growth in Cricket operations are expected to pressure first-quarter wireless margins year-over-year, though this pressure is anticipated to lessen for the remainder of the year, leading to expected annual wireless service margin expansion. The wireline segment will see year-over-year comparisons impacted by the sale of Connecticut wireline properties and other factors, leading to expected lower first-quarter margins. Despite these headwinds, strategic business services and U-verse Consumer revenues are projected to grow. The company also announced the acquisition of Mexico's wireless property, Iusacell, adding an 'International' segment and incurring integration costs expected to negatively impact first-quarter earnings. Additionally, AT&T expects a $130 million charge for voluntary employee retirements and reiterated its expectation for annual free cash flow growth.

Key Highlights

  • 1Wireless: Postpaid net adds expected in the 400,000 range, largely driven by tablets.
  • 2Wireless: Postpaid churn rates are decreasing year-over-year and sequentially.
  • 3Wireless: Strong adoption of Mobile Share Value (MSV) plans is pressuring Q1 margins but is expected to benefit annual wireless service margins.
  • 4Wireline: Q1 margins are expected to decrease year-over-year due to the sale of Connecticut properties, non-cash benefit expenses, and TV content cost pressure.
  • 5International: Acquisition of Mexico's Iusacell creates a new reportable segment; Q1 earnings will be negatively impacted by acquisition and integration costs.
  • 6Other: Approximately $130 million charge expected for voluntary employee retirements.
  • 7Financial Outlook: Annual free cash flow expected to grow year-over-year; DIRECTV transaction remains on track for a H1 2015 close with expected merger integration savings greater than initially announced.

Frequently Asked Questions

AT&T expects its wireless net additions in the first quarter of 2015 to be in the range of 400,000, primarily driven by tablet activations.

The strong adoption of MSV plans, which offer no device subsidies, is expected to put pressure on first-quarter wireless margins compared to the prior year. However, AT&T anticipates this pressure to decrease throughout the remainder of 2015, leading to expected annual wireless service margin expansion.

Wireline segment comparisons will be affected by the Q4 2014 sale of Connecticut wireline properties, the exit of certain low-margin businesses, and non-cash changes in benefit expenses. These factors are expected to decrease Q1 wireline margins year-over-year, despite projected growth in strategic business services and U-verse Consumer revenues.

The acquisition of Iusacell in Mexico will create a new 'International' reportable segment. Costs associated with the acquisition and integration are expected to negatively impact AT&T's reported earnings in the first quarter of 2015.