It wasnâ€™t long ago major wireless carriers like AT&T were handing out smartphones on the cheap with service contracts, it wasnâ€™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 $0.63â€”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, â€œâ€¦most of its customers had remained loyal despite the rising costs of its wireless data plans and other policy revisions.â€
Average revenue per customer also grew. As reported in the New York Times article, â€œThe company also said that strong mobile device sales, new customers and revenue from subscribers drove growth in the quarter.â€
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&Tâ€™s record low churn rate of 0.97% in the quarter serves as a reminder that price isnâ€™t everything. As cited in the article, â€œthe rate at which subscribers leave the carrier, was at a record low of 0.97 percent.
If that wasnâ€™t enough to please investors, AT&T has successfully bought back shares during the period enriching its shareholders. Whatâ€™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 corporationâ€™s ability to dole out dividends or make important acquisitions.