January 24, 2008 / 5:58 PM / 10 years ago

AT&T posts strong wireless growth

NEW YORK (Reuters) - AT&T posted stronger-than-expected mobile growth on Thursday and affirmed its 2008 outlook, but its shares fell as much as 3.4 percent amid persistent worries about the U.S. economy.

An AT&T logo is seen in this undated file photo. AT&T Inc. on Thursday posted a higher quarterly profit as strength in its wireless business offset weakness in traditional consumer services. REUTERS/Files

The largest U.S. phone company warned earlier this month that it saw some softness in its consumer business, but it said on Thursday that it added 2.7 million net new wireless subscribers in the fourth quarter, ahead of expectations.

Five analysts contacted by Reuters had on average estimated AT&T’s new subscribers at 1.92 million for the fourth quarter.

“It was a solid quarter certainly,” said Stifel Nicolaus analyst Chris King said. “In this type of market, any reiteration of guidance has to be viewed positively.”

AT&T forecast 2008 revenue growth in the mid-single-digit percentage range, double-digit adjusted earnings-per-share growth and mobile service revenue growth in the mid teens.

If the economy gets worse, King said there was a risk AT&T would come in at the low end of its outlook.

“It does not appear to us as if the mid-to-high end of company guidance for 2008 assumes much weakness, if any, in enterprise or wireless that could be seen if the economy continues to weaken,” King said.

AT&T shares closed down about 2 percent at $35.75 on the New York Stock Exchange, erasing Wednesday’s gain of about the same amount. The stock has fallen almost 13 percent since the end of 2007 due to economic concerns.

The exclusive U.S. carrier for Apple Inc’s iPhone, AT&T results came after No. 3 U.S. mobile service Sprint Nextel Corp warned last week it had incurred steep losses of high-value customers last quarter. Verizon Communications Inc is scheduled to report results on Jan 28.

AT&T said it was not seeing any weakness in wireless or business services and that it had baked in economy-related weakness in broadband and access lines in its 2008 forecast.

But Chief Financial Officer Rick Lindner did say telephone line and broadband numbers were hurt by the U.S. housing slump and disconnections of customers who did not pay their bills.

“We’re clearly not seeing any impact in our wireless business ... it’s just a limited impact in our access line and broadband results,” Lindner said on a call with analysts.

King said he was expecting 500,000 new Digital Subscriber Line broadband customers at AT&T, compared with the 400,000 it reported. He had expected an access line loss of 6.8 percent versus AT&T’s actual loss of 6.8 percent.

WIRELESS GROWTH

AT&T said its fourth-quarter profit was $3.1 billion, or 51 cents per share, compared with $1.9 billion, or 50 cents a share, a year earlier. Most of the year-ago quarter excludes earnings from BellSouth, which AT&T bought at the end of 2006.

Before merger-related costs and other special items, AT&T’s profit rose to 71 cents a share from 61 cents a year ago, matching Wall Street expectations.

AT&T said quarterly revenue grew 2.9 percent to $30.3 billion assuming it owned BellSouth for both full quarters. Analysts were expecting revenue of $30.5 billion, according to Reuters Estimates.

Lindner said AT&T ended 2007 with about 2 million subscribers using iPhone. Apple, which also sells the phone overseas through other service providers overseas, had said it had sold about 4 million by January 15.

Since analysts estimate that overseas carriers had sold only about 350,000 iPhones, this may mean the remaining phones are either being held as inventory by operators such as AT&T or have been bought in the United States for use in Europe.

So far in the first quarter, Lindner said broadband was somewhat improved since the fourth quarter and that access lines were at the same level if not better.

The company said it had approved a buyback of 400 million shares, or 6.6 percent of its shares outstanding, and expects to complete the transactions by the end of 2009.

AT&T said it maintained double-digit growth in revenue and subscribers for its broadband Internet service and saw subscribers to its U-verse video service rise to 231,000 by the end of the quarter from 126,000 the previous quarter.

Stephenson said AT&T was on track to reach more than 1 million U-verse subscribers by the end of 2008.

U-verse is a video and broadband service AT&T is building to compete with cable rivals such as Comcast Corp.

King said AT&T’s addition of 12,000 U-verse customers a week in December was better than its goal of 10,000.

Additional reporting by Michele Gershberg, editing by Maureen Bavdek/Andre Grenon

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