AT&T reported revenues up 17.8 percent in the first quarter to USD 44.8 billion, driven by its takeover of Time Warner, expansion in advertising services and mobile service revenue growth. This was offset by continued declines its legacy wireline services and pay-TV subscriber losses. The company's net profit fell to USD 4.1 billion from USD 4.7 billion, hurt by one-time charges for the merger and employee benefit schemes. On an adjusted basis, the operating margin rose to 21.4 percent from 19.7 percent, and EPS increased to USD 0.86 from USD 0.85 a year ago.
After capital expenditure dropped to USD 5.2 billion and operating cash flow rose to USD 11.1 billion, AT&T was left with free cash flow of USD 5.9 billion for the period. CEO Randall Stephenson said the company was on track with strong cash flow and asset sales to achieve its planned debt reduction this year, with net debt cut by USD 2.3 billion already in Q1. In total, net debt should fall by around USD 20 billion this year, taking the group from a leverage of 2.8x at the end of March to 2.5x at year-end.
Telecom results stable
At the telecom business, revenues were down 0.4 percent to USD 35.4 billion, while adjusted EBITDA rose 0.3 percent to USD 12.6 billion. Revenue growth was driven by the mobile division, where service revenues rose 2.9 percent to USD 13.8 billion, helping offset lower revenues from the entertainment and business wireline divisions. The entertainment unit, which groups AT&T's consumer fixed and pay-TV businesses, also improved EBITDA, driven by cost-cutting efforts.
At the mobile unit, the EBITDA margin rose to 42.0 percent from 41.8 a year ago, helped by low phone upgrades. AT&T added a net 2.727 million mobile lines in the quarter, almost entirely connected devices. This included a net loss of 207,000 postpaid connections and a gain of 96,000 prepaid lines. AT&T said it still had 179,000 postpaid smartphone net adds in the quarter, after correcting for a clean-up of the smartphone base to downgrade 320,000 lines to feature phones. Postpaid phone churn was up slightly year-on-year at 0.93 percent, while postpaid ARPU rose to USD 49.72 from USD 47.79.
At the entertainment business, the EBITDA margin improved to 24.7 percent from 22.9 a year earlier, after a 0.9 percent fall in sales to USD 11.3 billion. AT&T lost another 627,000 pay-TV subscribers, including 83,000 in OTT and 544,000 from traditional TV in the quarter. Broadband returned to positive growth of 43,000 new subscribers, helped by expansion of fibre services, which passed the 3 million connections mark in Q1.
