AT&T Profit Slips Thanks to Cheaper Plans

AT&T the wireless provider gained more new subscribers during the three months of the second quarter of 2014, than in any quarter in close to five years.

However, the gains in customers did not convert over to the top and bottom line of the company as well as investors had hope.

Part of that is due to the programs that had attracted the new subscribers were less expensive than traditional plans from the company. Because of this, revenue and profits was lower and translated to shares of the wireless provider falling during trading after hours this past week.

AT&T reported revenue for the second quarter of $32.5 billion an increase of 1.6% in comparison to the same quarter one year ago. However, that was short of analysts’ forecasts of $33.2 billion.

Net income was $3.5 billion a drop of 7.2% from the profit of $3.8 billion for the same reporting period during 2013.

Earnings per share for the latest quarter were 68 cents, which was down from 71 cents for the same period 12 months ago.

Including certain items, such as costs related to its acquisition of Leap Wireless, AT&T’s adjusted earnings ended at 62 cents a share, which was down from the 67 cents a share that was earned during the second quarter of 2013.

The results also missed Wall Street’s estimate by a penny.

The wireless provider added over one million subscribers in the quarter, as consumers flocked to phone plans that were more flexible such as AT&T Next, which allows customers to receive a new handset each 12 to 18 months but without an upgrade, financing or activation fee.

Total subscribers of wireless services were up by 634,000 in the quarter, as the number of customers with contracts leaving was at an all-time low of just 0.86%.

The wireless carrier affirmed its outlook for the full year, saying it expects revenue growth to be 5%, its adjusted earnings for each share to grow in the range of mid single digits and its available cash flow to be in the range of $11 billion.

The Author

David Miller

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