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AT&T INC. 8-K Report, Corporate Update (Jul 25, 2017)

Filed July 25, 2017For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. reported its second-quarter 2017 financial results, showcasing a net income of $3.9 billion ($0.63 per diluted share), an increase from $3.4 billion ($0.55 per diluted share) in the prior year's quarter. While total revenues slightly declined by 1.7% to $39.8 billion, driven by legacy service declines and the impact of unlimited wireless plans, operating income saw a significant increase of 11.6% to $7.3 billion, with an improved operating income margin of 18.4%. This performance indicates successful cost management and a shift towards higher-margin services. The company demonstrated robust subscriber growth across key segments. North American wireless subscribers grew by 2.8 million, reaching approximately 149.6 million, with strong contributions from connected devices, particularly connected cars. The transition to equipment installment plans (AT&T Next) and Bring Your Own Device (BYOD) continues, with AT&T Next accounting for nearly 83% of postpaid smartphone gross adds and upgrades. Video subscribers saw a slight increase to 38.8 million, bolstered by the new DIRECTV NOW service, and broadband connections reached 15.7 million, with IP broadband showing positive net adds.

Key Highlights

  • 1Second-quarter 2017 net income increased to $3.9 billion ($0.63 per diluted share) from $3.4 billion ($0.55 per diluted share) in Q2 2016.
  • 2Total revenues for Q2 2017 were $39.8 billion, a 1.7% decrease year-over-year, attributed to legacy service declines and unlimited wireless plan adoption.
  • 3Operating income increased by 11.6% to $7.3 billion, with operating income margin improving to 18.4% from 16.2%.
  • 4North American wireless subscribers grew by a net 2.8 million in Q2 2017, reaching approximately 149.6 million.
  • 5Connected devices added 2.3 million subscribers, with 1.5 million from connected cars.
  • 6The shift to equipment installment plans (AT&T Next) is strong, representing nearly 83% of postpaid smartphone gross adds and upgrades.
  • 7Total video subscribers reached 38.8 million, including 491,000 from the new DIRECTV NOW service.
  • 8International operations showed strong revenue growth of 10.8% to $2.0 billion, driven by both Latin American video and Mexican wireless services.

Frequently Asked Questions

The revenue decline of 1.7% to $39.8 billion was primarily driven by continued decreases in legacy voice and data services, as well as pressure on wireless service revenues resulting from the increasing adoption of unlimited wireless plans by customers.

AT&T is successfully transitioning customers to equipment installment programs like AT&T Next and the Bring Your Own Device (BYOD) option. In Q2 2017, AT&T Next accounted for nearly 83% of all postpaid smartphone gross adds and upgrades, indicating customer acceptance of this model.

Total video subscribers increased to 38.8 million, benefiting from the addition of 491,000 DIRECTV NOW subscribers. While overall video subscribers decreased by 255,000 in the quarter due to subscriber losses in legacy services, the growth in DIRECTV NOW signals a positive momentum for its over-the-top video offering.

The International segment delivered strong performance with a 10.8% revenue increase to $2.0 billion. This growth was fueled by both Latin American video services and Mexican wireless operations, indicating successful expansion and execution in these markets.