Top three U.S. telecom carriers report quarterly results

The top three U.S. telecom carriers, Verizon Communications, AT&T Inc and Sprint Nextel Inc, recently released financial results for the first quarter of 2012.  All three carriers reported higher-than-expected financial results for 1Q2012. 



The top three U.S. telecom carriers, Verizon Communications, AT&T Inc and Sprint Nextel Inc, recently released financial results for the first quarter of 2012.  All three carriers reported higher-than-expected financial results for 1Q2012. 


All three carriers reported slow customer growth in the first quarter, which helped Verizon and AT&T increase profit margins for the quarter. Slow customer growth combined with fewer phone upgrades, meant the carriers had to pay less subsidies for smartphones like the Apple iPhone.   Both AT&T and Verizon Wireless have recently tightened their policies to temper upgrades after they were both hurt by hefty iPhone subsidies in the fourth quarter.


Sprint also posted higher-than-expected results, although most analysts still remain skeptical due to slowed spending on network upgrades.


Verizon


Last week, Verizon Communications (New York) posted first-quarter revenue that beat Wall Street expectations as customers increased their spending on services such as wireless data.


While wireless customers growth slowed, Chief Financial Officer Fran Shammo said the company’s mobile venture, Verizon Wireless, saw the fastest growth in mobile service revenue in three years.


Verizon Wireless average monthly revenue per user (ARPU) for contract customers rose 3.6% in to $55.43, which was helped by data service revenue that grew 16% to $23.80.


Data revenue growth can be seen as a relief to Verizon Wireless, as they have been paying phone vendors such as Apple Inc (Cupertino, Calif., USA) hefty subsidies for every smartphone they sell.


Verizon Wireless added 501,000 contract customers in the quarter, down from fourth quarter additions of 1.2 million.


The slower customer growth also comes with a silver lining as the Verizon Wireless profit margin rose to 46.3% from 42.2% in the fourth quarter, when an Apple Inc iPhone fueled growth, but also required hefty subsidies. The company said it sold 3.2 million iPhones in the quarter and 2 million phones using its Long Term Evolution (LTE) technology.


Verizon earnings rose to $1.69 billion, or 59 cents per share, while in the year-ago quarter it reported a profit of $1.44 billion, or 51 cents per share. Revenue rose to $28.24 billion from $26.99 billion and compared with analyst expectations for $28.17 billion


AT&T


AT&T Inc (Dallas, Texas, USA) report a higher-than-expected quarterly profit of Tuesday, as a decline in iPhone sales reduced the amount of cash it had to pay Apple Inc and boosted its margins.


AT&T’s net income rose to $3.58 billion, or 60 cents per share, from $3.4 billion, or 57 cents per share, a year earlier. Consolidated revenue rose nearly 2% to $31.8 billion from $31.25 billion.


AT&T added 187,000 subscribers in the quarter, which was roughly in line with expectations for 193,000 from six analysts surveyed by Reuters.


While fewer iPhone sales meant weaker subscriber growth in the quarter, it did help the company’s wireless profit.


Piper Jaffray analyst Christopher Larsen said AT&T’s mobile service margin of 41.6% had beaten his expectation for 39.7%. The margin, based on EBITDA was 28.7% in the fourth quarter and 39% in the year-ago quarter.


AT&T noted that its margin was also helped by the fact that the percentage of its customers using smartphones increased from the first quarter of the previous year.


AT&T said it had activated 4.3 million iPhones in the quarter, down from 7.6 million in the fourth quarter.


The percentage of AT&T subscribers upgrading their handsets fell to 7% in the quarter from 12% the fourth quarter and 8.9% in the first quarter the year before.


Sprint


On Wednesday, Sprint Nextel (Overland Park, Kan., USA) posted stronger than expected wireless operating income, which helped it post a quarterly new revenue loss narrower than Wall Street estimates.  But, some analysts attribute this partly to slower than expected spending related to a network upgrade project.


“While the results from the quarter, from a financial perspective, were better than anticipated, it appears that none of the longer term risks around execution and financing have changed at all,” said Evercore analyst Jonathan Schildkraut.


Sprint is currently embarking on a $7 billion project to upgrade one of its two networks and close down the other. Investors worried that slower than expected first quarter spending on the project could signal a delay and creates more uncertainty for the rest of the year, Schildkraut said.  Sprint’s first quarter capital spending of about $700 million compared with his expectation for about $1.4 billion


While the company added subscribers to its Sprint network in the quarter, it lost customers from its Nextel iDen network, which it is in the process of shutting down. This led to a total net loss of 192,000 subscribers, which was worse than estimates.


The weaker customer numbers helped reduce one-time phone subsidy costs, leading to adjusted wireless operating income before depreciation and amortization (OIBDA) of $1.05 billion.


Sprint posted a loss of $863 million, or 29 cents per share, compared with a loss of $439 million, or 15 cents per share, in the year-ago quarter. Revenue rose 5% to $8.7 billion from $8.3 billion and was in line with Wall Street estimates of $8.7 billion, according to Thomson Reuters I/B/E/S. Sprint’s average monthly revenue per user (ARPU) of $59.88 was ahead of several analysts’ expectations.


Sprint said it expects 2012 adjusted OIBDA to be at the high end of its previously announced forecast of between $3.7 billion and $3.9 billion.


(Reporting By Sinead Carew; editing by Gerald E. McCormick, Dave Zimmerman, Andre Grenon, Maureen Bavdek, Phil Berlowitz, Sayantani Ghosh, Lisa Von Ahn and Alden Bentley)