AT&T might have registered a significant and welcome increase in terms of margins in consumer wireless during the first quarter of this year, but alas, the second biggest wireless carrier in the United States has also reported a net loss of 215,000 postpaid phone subscribers during the first three months of 2016.
Moreover, the wireless carrier also revealed that it had gained 3 million subscribers who have enrolled in its unlimited mobile data plan, which AT&T has made available only to customers of DirecTV. Overall, the company posted net additions of 2.3 million customers in North America, thanks to its connected devices, prepaid handsets, and its expansion efforts in the Mexican mobile market. AT&T also registered net additions of 712,000 branded postpaid and prepaid phones.
Many industry watchers have already been projecting that AT&T will sustain losses in its postpaid phone business during the first quarter of 2016. As a matter of fact, Wells Fargo Securities had predicted that the wireless carrier would report a loss of 200,000 postpaid phone subscribers. However, the actual net loss of 215,000 postpaid customers prove to be worse than expected.
Still, there are some positives for AT&T. Despite the overall decrease in revenues among mobile network providers due to the industry wide decline in handset sales, AT&T had actually managed to register a wireless service earnings before interest, tax, depreciation and amortization (EBITDA) margin of 49.5 percent, a record margin for the first quarter of 2016.
Interestingly, even at this early stage, AT&T’s decision to explore software defined networking is already producing some good results. As explained by John Stephens, the chief financial officer of the wireless carrier during an earnings call with analysts, AT&T’s virtualization and software defined networks have already started bringing in material capital expenditure savings, generating 2.5 times more capacity at three fourths of the capital costs compared to 2014. Stephens further noted that so far, AT&T should be on schedule to completely shut down its 2G network before the end of this year, paving the way for newer and faster networks.
Earnings wise, AT&T surpassed initial projections by posting an overall quarterly revenue of $40.54 billion ($0.72 a share), representing a 24 percent improvement over its 2015 first quarter earnings. Wireless EBITDA margins for the first quarter increased over $600 million compared to the previous year’s, while business wireless earnings rose 2.3 percent, thanks to sales of new smartphones and tablet devices.
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