AT&T reported a small increase in underlying revenues in the fourth quarter and full year 2021, as growth at its mobile business and a recovery at Warner Media helped offset the divestment of its pay-TV businesses last year. The company aims for a low single-digit increase in underlying revenues in 2022, but adjusted earnings and free cash flow will be lower than in 2021, as it steps up investment and sells off more businesses.
Quarterly revenues fell 10.4 percent year-on-year to USD 41.0 billion, due to the divestments and lower business wireline revenue. Excluding the sale of the US pay-TV business and Vrio in Latin America, revenues rose slightly to USD 40.6 billion from USD 39.0 billion.
Full-year revenue showed the same picture, with sales excluding the divestments up 5.9 percent to USD 153.2 billion. For 2022, AT&T forecast low single-digit growth from this number, including both WarnerMedia and Xandr, which are up for separation or sale. The two businesses together are expected to generate USD 37-39 billion in revenue and USD 6-7 billion in EBITDA in 2022.
At the Communications business, fourth-quarter revenues rose 2.4 percent to USD 30.2 billion, as growth in Mobility and Consumer Wireline more than offset a decline in Business Wireline. Operating contribution was USD 6.5 billion, up 1.4 percent year over year, leading to a small drop in the margin to 21.4 percent.
The mobile business contributed USD 21.1 billion in quarterly revenue, up 5.1 percent. Services revenue rose 4.6 percent, due to subscriber gains and the lapping of pandemic effects on international roaming, and equipment revenues were up 6.2 percent, driven by increased sales of higher-priced smartphones. EBITDA at the mobile business rose 4.3 percent to USD 7.4 billion, for a margin of 35.0 percent. AT&T said it booked around USD 130 million costs for the upcoming shutdown of the 3G network and faced higher costs for bundling HBO Max with its mobile plans.
Consumer wireline revenues rose 1.4 percent to USD 3.2 billion, driven by gains in broadband from subscriber growth and higher priced fibre plans. EBITDA in this segment fell 2.3 percent to USD 1.0 billion, after a 4.1 percent rise in operating costs.
Business wireline revenues fell 5.6 percent to USD 5.9 billion, after a slowdown in pandemic-related demand and a decision to move away from non-core services. EBITDA declined 4.3 percent to USD 2.2 billion, for a slightly higher margin of 37.5 percent.
The main growth engine for AT&T was WarnerMedia, which it is hoping to spin off in a joint venture with Discovery in order to refocus on the telecom business. WarnerMedia revenues were up 15.4 percent to USD 9.9 billion in Q4, benefiting from the recovery in the TV and cinema markets after the initial impact of the pandemic and growth in HBO subscribers.
AT&T's bottom line recovered in 2021 to a profit of USD 19.9 billion from a loss of USD 5.4 billion in 2020. Adjusted earnings rose to USD 3.40 per share from USD 3.18, but these are expected to drop back to USD 3.10-3.15 this year amid a number of extra costs for the divestments.
Capital expenditure will increase to around USD 20 billion this year from USD 16.5 billion in 2021. This will contribute to a further drop in free cash flow, to an estimated USD 23 billion, after last year's figure fell to USD 26.8 billion from USD 27.5 billion in 2020. The company paid out 56 percent of last year's free cash flow in dividends, and net debt rose by USD 8.7 billion over the year.
