8-KOther EventsExhibits & Filings

AT&T INC. 8-K Report, Corporate Update (Jul 23, 2015)

Filed July 23, 2015For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) reported its second-quarter 2015 financial results, showcasing modest revenue growth driven by its wireless segment and the recent acquisition of Mexican wireless properties. While net income saw a slight decline year-over-year, operating income and cash from operating activities demonstrated improvement. The company continues to see a strong shift in consumer behavior towards its AT&T Next installment plan and Mobile Share Value plans, impacting revenue recognition for device sales but strengthening the overall subscriber base and service revenue in the long term. Key operational highlights include robust wireless subscriber net adds, particularly in connected devices and the prepaid segment, alongside a growing adoption of smartphones. The wireline segment experienced a revenue decline, largely due to the sale of its Connecticut operations and ongoing shifts away from legacy products, though IP-based broadband and video revenues showed resilience. The newly integrated Mexican operations contributed to revenue but also reported an operating loss in their first quarter under AT&T. Investors should note the strategic importance of the AT&T Next program and Mobile Share Plans in reshaping revenue streams and customer relationships. The company's ability to manage legacy declines while capitalizing on growth areas like IP-based services and international expansion will be crucial for future performance. The increasing contribution of mobile services to business solutions also signals a positive trend for the company's diversified offerings.

Key Highlights

  • 1Second-quarter 2015 net income attributable to AT&T was $3.0 billion ($0.58 per diluted share), down from $3.5 billion ($0.68 per diluted share) in Q2 2014.
  • 2Total revenues reached $33.0 billion, a 1.4% increase year-over-year, boosted by Mexican wireless properties, AT&T U-verse, strategic business services, and wireless device sales.
  • 3Wireless segment revenues grew 2.1% to $18.3 billion, driven by increased equipment revenue from the AT&T Next installment plan, offsetting flat service revenues.
  • 4Total wireless subscribers grew to approximately 123.9 million at June 30, 2015, with significant net adds in connected devices (including cars) and prepaid subscribers.
  • 5Wireline segment revenues decreased by 2.9% to $14.2 billion, impacted by the sale of Connecticut operations and declines in legacy products, though IP-based broadband and video revenues showed growth.
  • 6AT&T's International segment (Mexican wireless properties) generated $491 million in operating revenues in Q2 2015, with an operating loss of $163 million.
  • 7Cash from operating activities increased to $9.2 billion in Q2 2015 from $8.1 billion in the year-ago quarter.

Frequently Asked Questions

AT&T reported $3.0 billion in net income ($0.58 per diluted share) for Q2 2015, a decrease from $3.5 billion ($0.68 per diluted share) in Q2 2014. Total revenues were $33.0 billion, up 1.4% year-over-year. Operating income increased slightly to $5.7 billion, with an improved operating income margin of 17.3%. Cash from operating activities saw a notable increase to $9.2 billion.

The AT&T Next installment plan continued to gain traction, with 68% of postpaid smartphone gross adds and upgrades choosing the program in Q2 2015. This shift from device subsidies to installment payments increased equipment revenue recognized for device sales, contributing to the 2.1% growth in wireless segment revenues. However, it also led to essentially flat wireless service revenues as customers adopted Mobile Share Value plans.

The Wireline segment's revenues declined by 2.9% to $14.2 billion year-over-year. This decrease was primarily attributed to the sale of the Connecticut operations in October 2014 and continued declines in legacy voice and data products. However, IP-based broadband and video revenues showed growth, and U-verse High Speed Internet subscribers reached 12.9 million.

AT&T acquired Iusacell in January 2015 and Nextel Mexico in April 2015. These newly acquired Mexican wireless properties contributed $491 million in operating revenues in their first reported quarter (Q2 2015) under AT&T. While contributing to revenue growth, these operations also reported an operating loss of $163 million in the quarter.