Net profit increased to USD 3.4 billion or USD 0.55 per diluted share, compared to USD 3.1 billion or USD 0.59 per share in the year-ago quarter. Adjusting for USD 0.17 of amortization, merger- and integration-related costs and other expenses, EPS rose to USD 0.72 from USD 0.70.
Cash from operating activities was USD 10.3 billion in the second quarter, and capital investment1 totaled USD 5.6 billion. Free cash flow — cash from operating activities minus capital expenditures — was USD 4.8 billion, up 8.4 percent year over year.
AT&T said it still expects to report double-digit revenue growth over the full year, as the growth in the TV market with DirecTV offsets pressure from weaker equipment sales and currency effects. In the second quarter, it added 342,000 satellite TV subscribers in the US, and totals gains since the DirecTV takeover are near 1 million. It is increasingly pushing the satellite service over IPTV, with the latter losing 391,000 customers in Q2. In total it had 25.295 million TV subscribers at the end of June, down from 25.344 million three months earlier. Broadband connections were also lower at 14.181 million, as 164,000 fewer DSL subscribers offset the gain of 54,000 new IP broadband customers.
Adjusted EPS in the full year is expected to grow in the mid single-digit range "or better", after a nearly 7 percent increase in the first half. Operating margins will be stable, amid increased investment in Mexico, while EBITDA margins in the US should improve. Capital spending is estimated at USD 22 billion for the full year, after USD 10.3 billion in the first half.
The growth in TV and in Latin America is helping offset the slowdown in AT&T's mobile business. Wireless revenues fell 2.1 percent in Q2 to USD 17.9 billion, mainly due to lower equipment revenues following the shift to installment plans and more BYOD. AT&T said 93 percent of the smartphones sold in the quarter were not subsidised. Wireless service revenues dropped 1.3 percent to USD 14.9 billion, while operating profit was still up 0.8 percent to USD 5.3 billion, thanks to lower commercial costs on the slowdown in handset sales. The wireless EBITDA service margin was AT&T’s best ever at 49.8 percent, up from 48.5 percent in the year-ago quarter.
Connected devices continue to lead the growth in Sims, which rose by a net 1.4 million in the three months to nearly 132 million. AT&T added 257,000 postpaid subscribers and 365,000 prepaid subscribers in Q2, as well as 1.2 million connected devices. It lost 459,000 reseller subscribers in the quarter, largely due to disconnects from the 2G network. The operator counted 20.4 million customers on its Mobile Share plans at the end of the quarter, with an average of about 3 devices per plan. Over 5 million customers have subscribed to its unlimited mobile offer for TV customers.
