AT&T profit beats Street, raises full-year forecast

Thu Oct 22, 2015 8:47pm EDT
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By Sudarshan Varadhan and Malathi Nayak

(Reuters) - AT&T Inc (T.N: Quote), the No. 2 U.S. wireless carrier and the world's largest pay-TV operator, raised its 2015 earnings forecast as quarterly earnings beat expectations on cost cuts and gains in wireless and DirecTV subscribers.

AT&T shares rose 1.7 percent in after-hours trading on Thursday.

Reporting results for the first time since closing its $48.5 billion purchase of satellite TV operator DirecTV in July, AT&T lifted its adjusted earnings forecast to $2.68 to $2.74 per share from $2.62 to $2.68.

"It's early days, but it seems like they are gaining some traction in cross-selling ... and gaining momentum throughout the quarter selling DirecTV in wireless stores," Jefferies analyst Mike McCormack said.

As the U.S. wireless market stagnates, AT&T is seeking new revenue streams and betting on DirecTV's satellite TV business to help beef up its bundles of cellular, broadband, TV and fixed-line phone services. It has been expanding in Mexico after the recent purchase of the third- and fourth-largest wireless carriers in that country.

AT&T's net income, excluding DirecTV, fell to $3 billion, or 50 cents per share, in the quarter ended Sept. 30, from $3.13 billion, or 60 cents per share, a year earlier. Excluding items, earnings of 74 cents per share beat the average analyst estimate of 69 cents according to Thomson Reuters I/B/E/S.

Total operating revenue rose 18.6 percent to $39.1 billion, short of the average estimate of $40.4 billion.

Like its rivals, AT&T is shifting its subscriber base from contracts to monthly equipment installment plans, making customers pay the full price for their phones while charging them lower service fees. Previously, carriers offered two-year contracts that included subsidized phones.   Continued...

An AT&T Logo is pictured on the side of a building in Pasadena, California, January 26, 2015.  REUTERS/Mario Anzuoni