AT&T’s (T) second-quarter profit fell 15% as growth in wireless business couldn’t offset continued weakness in the wireline segment - still, the firm's results topped estimates.
AT&T increased total subscribers by 1.4 million during the quarter to 79.6 million. Solid customer growth was driven by 2.4 million new iPhone activations, a third of which were new customers. Wireless data-services revenue – what customers pay for Internet browsing and sending emails – jumped 37%.
On the opposite end of the spectrum, demand for traditional phone service is steadily shrinking and business spending remains weak, resulting in a 36% dip in wireline profits on a 6.1% decline in revenue. Margins contracted in the segment, which was expected since the firm took a big chunk of costs out of the business early in the year, making additional improvement difficult.
Despite revenue and margin pressure overall, free cash flow thus far in 2009 is running at more than twice the level of a year ago. A 25% decrease in capital spending has contributed about half the increase in cash flow.
With global handset sales falling at a record pace, AT&T and competitors are expanding their offering to include netbooks, or small laptop computers, in an effort to capture additional data-services revenue. Bloomberg published this story today about telecom betting on netbooks to spur growth.
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Peter J. Lazaroff, Investment Analyst
Thursday, July 23, 2009
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