The top two U.S. telecom operators, AT&T Inc (Dallas, Texas, U.S.A.) and Verizon Communications (New York) reported financial results from the third quarter of 2011. Both companies reported increased revenue from the year-ago quarter; although AT&T's revenue was below analyst expectations, while Verizon's revenue was slightly higher than expectations. Both companies’ revenue was affected by weak smartphone sales in the third quarter.
Analysts noted that Verizon Wireless handily beat their wireless profit margin estimates -- a record 47.8% margin based on EBITDA (earnings before interest, tax, depreciation and amortization) as a percentage of service revenue, says Reuters.
Stifel Nicolaus (St. Louis, Mo., U.S.A.) analyst Chris King said AT&T's 43.7 % profit margin from wireless services was well ahead of his expectation for 41.9%. Although, he also said its third-quarter ARPU (average revenue per person) of $63.69 missed his $64.50 expectation.
"The primary driver of ARPU (average revenue per customer) in Q3 was slower smartphone growth. As smartphone growth continues in Q4 we expect (ARPU) growth to pick up," Ralph de la Vega, the head of AT&T's mobile business, told analysts on a conference call.
According to analysts, Verizon and AT&T’s third quarter results were affected by the customer purchase delays ahead of the iPhone 4S launch. Customers held out on purchasing the smartphone until the newest version was launched after the close of the quarter, causing a decrease in sales and revenue.
AT&T’s quarterly revenue fell short of Wall Street estimates, while Verizon’s were relatively in line with estimates. AT&T had an operating revenue of $31.48 billion, down from $31.58 billion in the year-ago quarter. It also fell below analyst expectations of $31.60 billion. Verizon reported Q3 revenue of $27.9 billion, up from$26.6 billion in the year-ago quarter, and slightly ahead of analyst estimated of $27.88 billion.
In the smartphone segment, AT&T activated 1 million iPhone 4S smartphone as of Tuesday, although this was after the end of the third quarter. Verizon stated that it also had a strong demand for the iPhone 4S, but did not provide numbers.
Verizon's Chief Financial Officer Fran Shammo did tell analysts that Verizon Wireless sold 2 million iPhones in the third quarter but that only 20% of its iPhone customers were new subscribers.
Verizon Wireless added 882,000 subscribers in the third quarter, more than doubling AT&T’s 319,000 added subscribers. Verizon fell below the average analyst expectation of 1.04 million new subscribers, while AT&T exceeded the expectation of 311,000 new subscribers, according to Reuters.