AT&T Has a Surprise Quarter on Margin Improvement

Filed in Gather Money Essential by on July 30, 2012 0 Comments

It wasn’t long ago major wireless carriers like AT&T were handing out smartphones on the cheap with service contracts, it wasn’t the phone that was the real value, it was the data plan.

Smartphones comprise the greatest driver of growth for AT&T. In its most recent quarterly results, the company delivered 8.7% growth on earnings of $0.66 a share. According to Yahoo! Finance, analysts following the stock expected $0.63—a 4.8% positive surprise.

With positive subscriber gains of 320,000, AT&T boasts more than 43 million smartphone users, all who are paying a premium to keep their data plans. They have sold more iPhones than its competitor Verizon. What this means is despite higher costs, AT&T is a go-to carrier for mobile data plans.

The New York Times reports this anomaly of loyal customers on higher prices and higher costs of phone upgrades, “…most of its customers had remained loyal despite the rising costs of its wireless data plans and other policy revisions.”

 

Average revenue per customer also grew. As reported in the New York Times article, “The company also said that strong mobile device sales, new customers and revenue from subscribers drove growth in the quarter.”

It sold 5.1 million smartphones and added 320,000 contract subscribers, the most valuable type of customer. Its average monthly revenue per subscriber increased 1.7 percent, to $64.93.

AT&T’s record low churn rate of 0.97% in the quarter serves as a reminder that price isn’t everything. As cited in the article, “the rate at which subscribers leave the carrier, was at a record low of 0.97 percent.

If that wasn’t enough to please investors, AT&T has successfully bought back shares during the period enriching its shareholders. What’s more, thanks to the cost management and 18% growth in operating cash flow, the company was able to generate $5.1 billion in free cash flow, a measurement of a corporation’s ability to dole out dividends or make important acquisitions.

 

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Freelance writer in the L.A. area with experience in business and finance writing.I enjoy the fine arts and hold a B.A. in Finance from Cal State Fullerton. I'm currently writing an original screenplay about an emerging painter who finds his muse

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