The company still expects to grow its adjusted margin over 2017, and the figure rose 80 basis points year-on-year in Q1 to 20.7 percent. Net profit fell to USD 3.5 billion from USD 3.8 billion a year ago due to merger integration costs and other one-time items, while adjusted EPS improved to 74 cents from 72 and is expected to show mid single-digit growth over the full year. After capital expenditure of USD 6.0 billion in the quarter, free cash flow totaled USD 3.2 billion.
The drop in quarterly revenues was led by the Consumer Mobility division, where sales fell 7.1 percent to USD 7.7 billion, hurt by the drop in handset sales and fewer customers. Operating profit fell a slower 6.5 percent, and the EBITDA margin improved to 41.5 percent from 41.0 a year ago as the lower sales volume helped reduce costs.
AT&T lost 353,000 consumer mobile customers during the quarter, for a total 51.9 million at the end of March. This includes a loss of 66,000 postpaid and 588,000 reseller subscribers in the three months. Postpaid churn was largely stable at 1.22 percent, while postpaid phone churn dropped to 0.98 percent.
Business revenues were also down 4.3 percent to USD 16.8 billion, hurt by lower handset sales and the continued declines in legacy wireline services. However cost savings helped push the operating margin up 150 basis points to 25.9 percent. AT&T lost another 125,000 postpaid mobile subscribers in the business market, as well as 25,000 fixed broadband customers. The drop in mobile was mostly tablet losses, the company said, and it added a record 2.6 million connected devices in the first quarter.
At the entertainment division, which includes DirecTV and AT&T's fixed residential business, revenues were flat year-on-year at USD 12.6 billion. Video revenue grew by 1.3 percent, as the operator continued to expand in satellite TV at the expense of IPTV. However higher content costs and the decline in legacy services, as well as costs for storms on the West Coast, led to a fall in the EBITDA margin to 23.9 percent from 24.3 a year ago.
TV subscriber growth slowed sharply, with no net additions for DirecTV and a loss of 233,000 U-verse customers. About 84 percent of customers are now on the satellite platform. Broadband did better, with a net gain of 242,000 IP broadband subscribers offsetting DSL losses of 127,000. AT&T Fiber reached 4.6 million homes passed at the end of the quarter and is expected to add another 2 million this year.
