AT&T's Earnings Confirm It Is Outpacing T-Mobile's Efforts

Despite massive efforts from the competition, AT&T's wireless business is stronger than ever.

Apr 23, 2014 at 3:05PM

AT&T (NYSE:T) and T-Mobile (NASDAQ:TMUS) have been publicly battling each other for wireless subscribers for more than a year. And while T-Mobile's efforts have helped increase its wireless subscribers, AT&T's latest quarter shows the nation's No. 2 wireless carrier is outrunning T-Mobile's Un-carrier efforts.

Winning at wireless
This was a banner first quarter for AT&T's wireless division. The company activated 1.1 million smartphones in the quarter and added 625,000 post-paid subscribers. AT&T said in a press release the post-paid adds were "best first-quarter net adds in five years."

The company also increased its percentage of smartphone customers form 72% to 78%. That's important for the company considering that smartphone customers bring in twice the average revenue per user (ARPU) than non-smartphones customers. That uptick in smartphone customers helped AT&T see its wireless revenue increase 7% year over year.

Staying ahead of the Un-carrier
T-Mobile has set its sights on AT&T for a while now, and has had a lot of success branding itself as the underdog carrier in the wireless space. Over the past few months T-Mobile has offered a credit up to $650 per line to AT&T subscribers who switch to its network, restructured monthly pricing plans and contracts that pushed AT&T to make similar changes, and T-Mobile's CEO even crashed an AT&T event at the Consumer Electronics show a few months ago.

While T-Mobile has seen growth based on its efforts -- and caused AT&T to change some strategies -- it's apparent from AT&T's Q1 earnings that it's not bringing the carrier down.

Looking ahead
But AT&T didn't just outpace T-Mobile's efforts this quarter, it also beat analysts' expectations. AT&T's revenue was $32.5 billion with earnings per share of $0.71, excluding costs from the Leap Wireless acquisition. Analysts expected $32.4 billion and $0.70. The company also raised its full-year revenue outlook, which it expects to grow by 4% or more.

AT&T held on to to its large customer base by managing to keep it its churn rate at 1.39%, up from 1.38% a year earlier. But the company will want to make sure that number doesn't keep inching higher as it competes against Verizon Wireless' lower churn rate of 0.96%, and as T-Mobile attempts to snatch customers away.

While AT&T isn't immune to T-Mobile's removal of long-term contracts, price drops, and Un-carrier campaigns, the company has shown this quarter that adopting some of T-Mobile's efforts has actually paid off. AT&T's advantage is that it already has a strong customer base of 60 million postpaid smartphone subscribers and it's building those numbers and increasing wireless revenue at the same time.

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Fool contributor Chris Neiger has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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