AT&T (NYSE: T) has been in a cocoon for years, slowly transforming itself from a wireline caterpillar into a wireless butterfly. Last night's earnings report suggests the metamorphosis is accelerating.
The former Ms. Bell booked $13.9 billion in wireless segment revenue, up 8.2% year over year. Wireline revenue declined 4.6% over the same period. We've seen this pattern before:
|
Metric |
Q1 2010 |
Q4 2009 |
Q3 2009 |
Q2 2009 |
|---|---|---|---|---|
|
Wireless revenue |
$13,897 mil. |
$13,838 mil. |
$13,654 mil. |
$13,245 mil. |
|
As a % of total |
45.3% |
44.8% |
44.3% |
43.1% |
|
Wireless operating income |
$4,169 mil. |
$3,420 mil. |
$3,359 mil. |
$3,151 mil. |
|
As a % of total |
69.4% |
70.4% |
62.3% |
57.2% |
Sources: Company press releases and Capital IQ, a division of Standard & Poor's.
Data current as of April 21.
Below the surface, AT&T is profiting almost as much from data connections as it is voice connections. Revenue from wireless data improved by 29.8%, to $4.1 billion, which means data now accounts for roughly 30% of AT&T's wireless business.
Expect this ratio to grow. AT&T said that it activated 2.7 million iPhones during the quarter, the biggest data hog of them all. Historically, Apple's (Nasdaq: AAPL) iconic handset tends to account for one-third of the carrier's gross subscriber additions in any given quarter.
Spread those clipped wings ...
Interestingly, despite all this good news, AT&T still reported lower net income due to a $995 million charge related to tax law changes enacted as part of President Obama's recently passed health-care plan. Excluding that $0.17 per share charge, AT&T reported $0.59 in per-share earnings, a healthy increase over last year's $0.53, and better than the $0.55 a share Wall Street was expecting.
Cash from operations fell by $700 million, but at $7.3 billion, there was more than enough for AT&T to fund $3.3 billion worth of expansion of its data network. This is crucial construction. Sprint Nextel (NYSE: S) already has WiMax live in select markets, and Verizon (NYSE: VZ) is upgrading their networks for 4G data delivery later this year. AT&T won't be ready with 4G before 2011.
And yet, even with its still-clipped butterfly wings, AT&T is handling a massive amount of wireless data because of the iPhone and new handsets built on Google's (Nasdaq: GOOG) Android mobile operating system.
I like the trend and the better profit mix it creates. That's why I closed my profitable short of AT&T in Motley Fool CAPS earlier today. Wireless data's too big and important a business to bet against.
Which telecom would you buy today: AT&T, Verizon, Sprint Nextel, or a different one altogether? Discuss in the comments box below.
