AT&T said it was on track to meet its full-year targets after reporting improved profits for the third quarter. Revenues for the three months to September were still down 5.7 percent year-on-year to USD 39.9 billion due to the spin-off its pay-TV business in July, along with other divestments and weaker sales in Business Wireline. The mobile business did better, adding over 1 million postpaid lines, and HBO subscribers grew to nearly 70 million by the end of the quarter.
Excluding the US video business, revenues rose to USD 38.1 billion from USD 36.4 billion in the year-ago quarter, and adjusted operating improved to USD 8.1 billion from USD 7.8 billion.
AT&T said it cut operating expenses by USD 3.4 billion in the past 12 months, to USD 32.8 billion. Divestments and lower sports programming costs were offset by higher wireless equipment costs and higher costs for other types of content at WarnerMedia, plus increased sales and marketing expenses. Operating profit was helped also by lower depreciation and amortization following earlier asset writedowns.
The bottom line was a net profit of USD 5.9 billion, up from USD 2.8 billion a year ago. Adjusted EPS, excluding the one-time effects of the divestments, reached USD 0.87 versus USD 0.76 a year earlier. The company now expects full-year adjusted EPS to be at the high end of the earlier indicated low- to mid-single digit growth range and free cash flow should meet the USD 26 billion target.
Cash from operating activities fell by USD 2.3 billion year-on-year to USD 9.9 billion in Q3, including capital expenditures of USD 4.7 billion and content spend of USD 4.8 billion. Free cash flow was USD 5.2 billion for the quarter, and net debt decreased by USD 10.0 billion sequentially, for a ratio of 3.17x adjusted EBITDA at the end of the third quarter.
Wireless service revenues up 4.6%
At the wireless business, AT&T reported service revenues up 4.6 percent to USD 14.5 billion, helped by subscriber gains and a recovery in roaming, while equipment revenues grew 15.0 percent to USD 4.6 billion.
Operating expenses jumped 8.0 percent to USD 13.2 billion, due to higher equipment costs, including 3G network shutdown costs of nearly USD 200 million, higher costs due to the iPhone launch and HBO Max bundling. This left EBITDA at USD 8.0 billion, up 3.6 percent from a year ago.
The operator added a total 4.9 million mobile lines in the three months. The 1.2 million postpaid net adds included 928,000 phones, and AT&T also gained 249,000 prepaid phone customers in the period. Postpaid phone-only ARPU was USD 54.37, down 0.6 percent versus the year-ago quarter due to the impact of promotional discounts.
Business wireline revenues fell 5.2 percent to USD 5.9 billion as the pandemic-related increase in demand waned and the operator phased out legacy services. Despite a 2.4 percent cut in operating costs, the division reported EBITDA down 8.3 percent year-on-year to USD 2.3 billion.
Fibre subscriber gains outweigh DSL losses
AT&T said its business fibre footprint reached over 2.5 million customer locations, and over 650,000 sites are lit already. Consumer fibre reached more than 15 million premises passed and added 289,000 new subscribers in Q3.
The growth in fibre, which also comes with higher ARPU, helped consumer wireline revenues grow 3.4 percent year-on-year to USD 3.1 billion. EBITDA at the division increased 3.8 percent to USD 1.0 billion. Including DSL customer losses, net broadband growth was 6,000 new subscribers in the quarter.
Finally at WarnerMedia revenues increased 14.2 percent year-on-year to USD 8.4 billion, in a partial recovery from pandemic effects and led by higher subscription revenues from especially HBO. Operating profit at the division improved 15.2 percent to USD 2.0 billion.
AT&T added 1.9 million HBO and HBO Max subscribers worldwide in Q3, for a total of 69.4 million at the end of September. In the US alone there were 45.2 million subscribers, generating ARPU of USD 11.82. The domestic shrunk from 47 million in June, after AT&T stopped distribution of the HBO service with Amazon Channels. The company said it still expects to reach the high end of its full-year forecast range of 70-73 million HBO subscribers worldwide.
