AT&T Inc. (NYSE:T) reports the results of the second quarter of 2014 on July 23. But the Tier 1 carrier decided it couldn’t wait that long to talk about what it sees as several positive trends touching its Project VIP network investment plan, wireless services, and full-year 2014 revenue guidance.
The international service provider said that its Project Velocity IP (VIP) program, designed to update its wireline and wireless IP networks, is ahead of schedule in the second of its three years (see “AT&T announces Project Velocity IP capex plans”). The program appears to be the main funding vehicle for AT&T’s gigabit fiber to the home (FTTH) broadband effort (see, for example, “AT&T releases list of potential new 1-Gbps FTTH markets”) as well as fiber to the building (see "AT&T increases fiber to the building count in multiple markets"). On the latter front, AT&T reports that it expects to reach in excess of 400,000 new business customer locations with fiber-optic cable by the end of the second quarter.
Meanwhile, its 4G LTE expansion under Project VIP has expanded its coverage to almost 290 million people, AT&T asserts. This milestone is one of several positive wireless trends, the company says. Others it expects to report July 23 include postpaid subscriber net adds exceeding 800,000, postpaid churn of 0.95% or lower; approximately 3.2 million AT&T Next smartphone sales; and approximately half of the company’s postpaid smartphone customer base on no-device-subsidy Mobile Share Value pricing plans.
Further looking forward to July 23, AT&T has the following expectations for the wireline sector:
- U-verse video adds bundled with broadband will continue to “perform well,” AT&T said. The carrier says the fact that customers prefer a bundled offering underscores the wisdom of its proposed acquisition of DIRECTV (see “AT&T to buy DIRECTV for $48.5 billion”). Overall, AT&T says it expects U-verse broadband revenues to be “solid,” despite second-quarter seasonality and fewer migrations from DSL.
- Business high-speed broadband adds should show growth.
- Growth in strategic business services revenue should reach the mid-teens, despite “continued economic pressures.”
- Pressure also will continue on wireline margins overall, thanks to content cost increases, fiber expansion, and high-speed broadband subscriber growth.
In wireless, AT&T expects second-quarter wireless service EBITDA margins also will feel pressure year-over-year thanks to increased sales activity and strong customer acceptance of the no-device-subsidy Mobile Share Value plans. Wireless service EBITDA margins are expected to exceed 40% in each of the three remaining quarters of 2014.
Overall, AT&T likes these trends enough to raise its full-year 2014 guidance for revenue growth to 5%. Consolidated margins for full-year 2014 should remain stable, with adjusted earnings per share growth at the low-end of the mid-single-digit range. Capital expenditures forecasts remain in the $21 billion range and free cash flow in the $11 billion range.
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