AT&T reports first wireline revenue growth in more than four years

AT&T Inc. (NYSE:T) highlighted “solid earnings and free cash flow,” as well as mobile broadband growth in its third quarter 2011 results. But perhaps the most remarkable achievement during the quarter was sequential growth in its wireline revenues.

The international service provider reported consolidated revenues of $31.5 billion for the quarter, which ended September 30. That figure represented a decrease of $103 million (0.3%) from the same quarter in 2010. However, operating margins this year beat those of 3Q10, coming in at 19.8% versus 17.2 %. Operating expenses were $25.2 billion versus $26.2 billion in the year-ago quarter, while operating income was $6.2 billion, up from $5.4 billion in 3Q10.

Third-quarter 2011 net income attributable to AT&T totaled $3.6 billion, or $0.61 per diluted share. While this fell short of last year’s $12.3 billion, or $2.07 per diluted share, the year-ago quarter benefited from one-time gains from a tax settlement and the sale of Sterling Commerce. With these one-time factors removed, earnings would have been $0.54 per diluted share, AT&T said.

While success in wireless services during the quarter was not unexpected, the sequential growth in wireline revenues undoubtedly surprised many. Third-quarter total wireline revenues were $15.0 billion, a slight increase over the previous quarter, albeit a drop of 2.2% from 3Q10. The revenue increase was overcome by additional expenses, however; wireline operating income totaled $1.8 billion, down from $2.0 billion in the year-ago quarter as well as less than the second quarter of 2011. Improved consumer and business IP data revenue trends and execution of cost initiatives helped to partially offset declines in voice revenues, the company said.

AT&T reported total consumer revenue connections at the end of the third quarter were 41.9 million, compared with 43.7 million at the end of 3Q10 and 42.5 million at the end of the second quarter of 2011.

The company said it added 176,000 U-verse TV subscribers to reach 3.6 million in service. Meanwhile, the AT&T U-verse High Speed Internet attach rate was 90% and about half of new subscribers took AT&T U-verse Voice. Three-fourths of AT&T U verse TV subscribers have a triple- or quad-play option from AT&T, the company added. ARPU for U verse triple-play customers was almost $170, an increase of 5.7% year over year.

AT&T's says its U-verse deployment reaches almost 30 million living units. Total company penetration of eligible living units is 15.7%, and 24.8% across areas marketed to for 36 months or more. Total video subscribers, including both U-verse and bundled satellite, hit 5.4 million at the end of the quarter, representing 22.6% of households served.

Meanwhile, total wireline business revenues were $9.3 billion, an increase of 0.7% sequentially. However, that figure was down 2.7% versus the same quarter in 2010. AT&T attributed the year-over-year decline to economic weakness in voice and legacy data products. Growth in IP data somewhat offset these effects, AT&T revealed.