The Wall Street Journal-20080125-AT-T Soothes Wireless-Business Jitters- IPhone Drives Growth- But Landline- Internet Deliver Weak Results
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AT&T Soothes Wireless-Business Jitters; IPhone Drives Growth, But Landline, Internet Deliver Weak Results
AT&T Inc. calmed investor nerves about the state of the wireless market, reporting fourth-quarter results showing its wireless business was booming.
But just as the company warned two weeks ago, the impact of the softening economy showed up in other parts of the telecommunications giant's business, with weaker-than-expected results in both its landline and Internet operations.
AT&T added 396,000 high-speed Internet customers, fewer than some analysts had expected. And the number of landline subscribers lost was higher than some forecasts. Major phone carriers have been losing landline customers as people switch to Internet phone services or opt to use cellphones as their primary phone service.
So far in January, economic pressures appear to be continuing to hurt the landline business, Chief Financial Officer Rick Lindner said. But the company is seeing an improvement on Internet sign-ups over last quarter. In all, the outlook doesn't appear much worse than last quarter, he said.
"We feel good about our guidance and our plan for 2008," Mr. Lindner told investors during a conference call. "The economy is always a risk, but I think when you look across our business we're relatively defensive in nature in these kinds of downturns."
Some investors were worried by the soft spots. AT&T shares fell 94 cents, or 2.6%, to $35.75 in 4 p.m. composite trading on the New York Stock Exchange. AT&T shares have fallen this month along with the broader market and suffered after the company's comments earlier this month on the souring economy.
The company had said that its wireless business wasn't being affected by economic softness. Putting any doubts to rest, AT&T said it added 2.7 million wireless subscribers, surpassing analysts' expectations in what was the strongest quarterly gain for a U.S. carrier. AT&T is the biggest wireless carrier in the U.S. by subscribers, serving 70.1 million wireless customers at the end of December.
AT&T's results were driven by the popularity of Apple Inc.'s iPhone, which exclusively uses AT&T's network in the U.S. AT&T has about two million iPhones on its network and said sales are equally split between its own and Apple's distribution channels.
The results came several days after Sprint Nextel Corp. warned of heavier than-expected subscriber losses in the fourth quarter and issued a gloomy outlook for 2008. With the percentage of U.S. consumers already owning cellphones now at about 80%, some on Wall Street wondered whether years of growth in the wireless market was coming to an end.
"Seems to be a company rather than an industry issue," said Craig Moffett, an analyst at Sanford Bernstein & Co., in a note to clients. "At least for now, the question seems to have been answered resoundingly."
The company is hopeful consumer interest in the iPhone and other smartphones will fuel growth. Executives said average revenue per users for subscribers with smartphones is double the company's average. Just 12% of its customers have smartphones, AT&T said.
