January 27, 2012

AT&T’s Net Loss Tied to T-Mobile Merger Fees

By JENNA WORTHAM

Published: January 26, 2012

AT&T, the second-largest phone company in the United States, reported a substantial $6.68 billion net loss for the fourth quarter, primarily from the break-up fees incurred as a result of the company’s failed acquisition of T-Mobile USA. During the same period a year earlier, the company reported profit of $1.09 billion, or 18 cents a share.

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Mark Lennihan/Associated Press

Despite posting a net loss for the quarter, AT&T said that a wave of momentum from iPhone sales and new subscribers nudged its revenue up.

However, a wave of momentum from iPhone sales and new subscribers nudged AT&T’s revenue up 4 percent during the quarter, with sales rising to $32.5 billion from $31.4 billion a year ago. Analysts expected the company to report $31.95 billion in revenue.

The company added 717,000 post-paid wireless subscribers, the largest increase in five quarters, and a net total of 2.5 million wireless subscribers, which lifted the company’s base to 103.2 million wireless customers. AT&T also said it beat previous records for smartphone sales during the quarter, selling 7.6 million iPhones and 9.4 million smartphones over all.

Rick Franklin, an analyst with Edward Jones, said the report “sets AT&T up well for future wireless data growth and profitability.”

After discounting charges from the $4 billion breakup fee paid in the wake of the T-Mobile USA bid, AT&T’s per-share profit was 42 cents; analysts expected 43 cents a share.

The company also beat results for Verizon, the country’s largest phone company, which said on Wednesday that it sold 4.2 million iPhones and 7.7 million smartphones during the same period. AT&T said that 76 percent of its overall revenue increase stemmed from the company’s growth in wireless, wireline data and services.

“We had a tremendous year in terms of execution, and we have excellent momentum across our growth platforms,” said Randall Stephenson, the chief executive of AT&T, in a statement. “This was a blowout quarter for smartphone sales.”

“Looking ahead, we start 2012 with the best visibility we’ve had in some time, and we’re well-positioned to deliver solid results,” Mr. Stephenson said.

Investors seemed initially disappointed by the results, with shares slipping 2.4 percent to $29.50 in premarket trading. 

My Comments:

This article is basically about the net loss AT&T found in their fourth quarter sales. Last year at this time that had a profit of $1.09 billion and this year there has been a $6.68 billion net loss. Although this all seems like bad news AT&T also reported having gained more customers this quarter than they have in the past five quarters. More good news is that AT&T still “beat out” Verizon on number of smart phones sold. As a current customer of AT&T (although not a stock holder) I am curious as to why this quarter showed such results. AT&T for a long time was the only wireless provider with the Iphone so I wouldn’t have been surprised if many people were switching over/buying Iphones when they first came out, but it seems like since AT&T is losing money, people are either downgrading their talking/texting plans or since Verizon has the Iphone also, less are switching to AT&T. Although only mentioned in the beginning of the article, I believe it is a good thing that AT&T wasn’t able to acquire T-Mobile. This would give AT&T too much of a monopoly on the cellular phone business.