AT&T raised its sales growth forecast for the full year after a strong first-quarter performance. Revenues in the first three months of the year rose 3.6 percent to USD 32.5 billion, its strongest growth in two years, and the US operator now expects to achieve at least 4 percent growth over the full year. The operating margin improved to 19.3 percent from 18.9 a year ago, and net profit rose to USD 3.7 billion or 70 cents a share, from USD 3.7 billion or 67 cents a share. Adjusting for USD 0.01 per share of Leap transaction-related costs, EPS rose to USD 0.71 from USD 0.64 in the year-ago quarter, an increase of almost 11 percent.
The Leap takeover closed on 13 March. AT&T expects USD 1.2 billion in integration costs for the acquisition in the next two years, while the takeover will have a negative impact of USD 0.05 on EPS this year. Despite this, AT&T still expects stable margins this year and mid-single digit growth in adjusted EPS. The operator forecast capital expenditures around USD 21 billion in 2014, after USD 5.8 billion in Q1, and free cash flow of USD 11 billion over the full year, versus USD 3.0 billion in Q1.
AT&T's mobile activities reported quarterly revenues up 7.0 percent to USD 17.9 billionm and operating profit grew 8.1 percent to USD 5.1 billion. While service revenue grew only 2.2 percent, in part due to more low-use tablet customers, AT&T said it was seeing good demand for AT&T Next, its equipment installment plan, as well as data plans over 10 GB per month. The operator added a total 1.062 million subscribers in the quarter, including 625,000 in postpaid and 693,000 connected devices. These were offset by the loss of 50,000 prepaid users and 26,000 subscribers at resellers.
Around 78 percent of postpaid customers were using smartphones at the end of the quarter, and of these 57 percent had LTE devices. AT&T sold in total 5.8 million smartphones in the three months. The operator also reported more customers on Mobile Share plans. The number tripled over the past year to 11.3 million, and customers averaged three devices on each shared plan.
At the wireline division, revenues fell 0.4 percent from a year ago to USD 14.6 billion, while service revenues were up 0.1 percent. Operating profit fell 10.5 percent to USD 1.5 billion, hurt by higher costs for TV content, lower voice revenues and costs for adding customers and the Project VIP upgrade. Business revenues fell to 2.7 percent to USD 8.7 billion, while Consumer revenues increased 4.3 percent to USD 4.7 billion, the strongest growth since the fibre-based U-verse service was introduced eight years ago.
U-verse TV customers grew by 201,000 in the three months to 5.7 million at the end of March, and U-verse broadband subscribers rose by 634,000 over the same period to 11.0 million. This helped offset the loss of 556,000 DSL customers, while also improving wireline broadband ARPU by 9 percent compared to a year earlier. U-verse now represents two-thirds of broadband customers, versus just over half a year earlier.
