AT&T revenue misses forecasts as more customers bring own phones

Wed Oct 22, 2014 7:28pm EDT
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By Marina Lopes

WASHINGTON (Reuters) - AT&T Inc on Wednesday reported a rise in quarterly revenue, but the increase was less than Wall Street expected as a wave of subscribers plugged into the network using pre-purchased devices.

The company cut its outlook for consolidated revenue growth for 2014 to 3-4 percent from 5 percent.

AT&T's option allowing customers to bring their own devices has become popular this year, and analysts have worried the program may lead to less customer loyalty and a glut of phones in the market.

"People look at this and say, 'Oh, I can do with my phone a little bit longer," said Roger Entner, analyst at Recon Analytics in Boston. "It will depress demand for new handsets and puts all the devices in the market longer, which slows down the whole innovation process."

AT&T said more than 400,000 subscribers brought their own devices when signing up for service this quarter, instead of purchasing one at an AT&T store.

"The value in our customer relationships is in providing good service to the network. The phones themselves are not profitable pieces of business," Chief Financial Officer John Stephens told Reuters in an interview. "The issue many people don't understand is that while we don't have the equipment revenue, we also don't have the equipment expense."

Earlier on Wednesday, the U.S. Federal Communications Commission paused its informal "shot clock" deadline on the review of AT&T's proposed $48.5 billion merger with DirecTV to decide how to handle highly confidential documents related to agreements with media companies.

In a call with investors, Stephens said the decision should not impact the timeline for the deal to close.   Continued...

An AT&T building is pictured in Los Angeles , California May 13, 2014.  REUTERS/Mike Blake