AT&T returned to revenue growth in the first quarter, with sales up 2.7 percent year-on-year to USD 43.9 billion. The growth was driven by higher equipment sales and a recovery at WarnerMedia, offset by the continued drop in pay-TV customers and pressure at the business wireline and Latin America activities, including forex effects and divestments.
Operating profit improved to USD 7.7 billion from USD 7.5 billion in the year-ago quarter, thanks to the higher revenues and lower merger amortization costs. Net profit jumped to USD 7.5 billion from USD 4.6 billion a year ago, boosted by an actuarial gain on benefit plans. Excluding one-time items, adjusted EPS rose to USD 0.86 from USD 0.84 a year earlier.
AT&T increased operating cash flow by USD 1.1 billion to USD 9.9 billion in Q1. After capex of USD 4.0 billion and another USD 1.7 billion of cash payments for vendor financing, the company was left with free cash flow of USD 5.9 billion. Net debt jumped by USD 21.4 billion compared to the end of 2020 due to payments for the C-band spectrum auction. This left the company with total net debt equal to 3.1x adjusted EBITDA at the end of March.
For the full year, AT&T targets stable adjusted EPS and revenues up around 1 percent on a comparable basis. The company increased its capex budget slightly to USD 22 billion, including USD 4 billion in vendor financing payments, leaving free cash flow at around USD 26 billion for the year. The annual dividend pay-out is expected to be a high 50s percent of free cash flow.
Telecom revenues up over 5%
Revenues from the telecom business increased 5.2 percent year-on-year to USD 28.2 billion, led by growth at the mobile business. Operating profit fell 0.5 percent to USD 7.4 billion.
At wireless, revenues rose 9.4 percent year-on-year to USD 19.0 billion. This was largely thanks to a 45.2 percent rise in equipment sales, after stores were closed in the year-earlier period. The operator posted a 0.6 percent increase in service revenue, and AT&T said it still expects around 2 percent growth in wireless service revenues over the full year. Wireless EBITDA rose 2.3 percent to USD 8.0 billion, impacted by costs for offering HBO Max free with mobile plans and the increased equipment sales costs.
The operator added a net 3.6 million mobile customers in the quarter, slightly better than the 3.3 million in Q1 2020. That includes 823,000 postpaid customers (595,000 phones, 22,000 tablets and other devices) and 207,000 prepaid phone customers. Postpaid phone-only ARPU was USD 54.10, down 2.8 percent due to promotional discounts and reduced roaming.
At the wireline activities, business revenues fell 3.5 percent to USD 6.0 billion on the continued decline in legacy services, and business EBITDA dropped 1.8 percent to USD 2.3 billion. Consumer revenues were down 0.4 percent year-on-year to USD 3.1 billion, and EBITDA dropped 13.4 percent to USD 1.1 billion, also hurt by the loss of customers for higher-margin legacy services.
AT&T managed a net gain of 46,000 consumer broadband subscribers in the quarter, as the addition of 235,000 fibre customers offset the drop in slower services. AT&T Fiber was available to more than 14.5 million customer locations at the end of the quarter, and fibre accounted for nearly 5.2 million of the total 14.1 million broadband customers.
At WarnerMedia, revenues rose 9.8 percent to USD 8.5 billion, and operating profit was up 0.8 percent to USD 2.0 billion. Subscription revenues increased 12.6 percent to USD 3.8 billion thanks to the growth in HBO subscribers, and ad revenues rose 18.5 percent to USD 1.8 billion, helped by the return of the NCAA basketball on its channels. At the end of the quarter, the company had 44.2 million domestic HBO Max and HBO subscribers, up from 41.5 million three months earlier.
