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.

Chris Neiger
Chris Neiger
Apr 23, 2014 at 3:05PM
Technology and Telecom

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.