AT&T Inc. today reported third-quarter results highlighted by strong EPS growth, record free cash flow, $3.8 billion in share buybacks and, when you exclude the divested Advertising Solutions business, strong consolidated revenue growth led by wireless, U-verse and strategic business services.
“We had another impressive quarter with strong earnings growth, record cash flows and solid returns to shareholders through dividends and share buybacks”, said Randall Stephenson, AT&T chairman and chief executive officer, in a statement. “In wireless, we had another excellent smartphone quarter, penetration of usage-based mobile data plans continues to climb, and our 4G LTE network build is ahead of schedule. And in wireline, our IP network continues to deliver strong gains in U-verse high speed Internet connections, which helped drive an almost 10 percent increase in broadband data ARPU.
“Our strong performance allows us to increase our free cash flow guidance to $18 billion or higher this year, exceeding our previous outlook by $2 billion.”
AT&T sold 6.1 million smartphones in the third quarter, 1.3 million more than in the third quarter a year ago. Smartphones represented 81 percent of postpaid device sales. At the end of the quarter, 63.8 percent, or 44.5 million, of AT&T’s postpaid subscribers had smartphones, up from 52.6 percent, or 36.1 million, a year earlier and up 1.4 milion from the second quarter. AT&T’s ARPU for smartphones is twice that of non-smartphone subscribers, and about 89 percent of smartphone subscribers are on FamilyTalk®, Mobile Share or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers. More than 40 percent of AT&T’s postpaid smartphone customers use a 4G-capable device.
In the quarter, the company activated 4.7 million iPhones, with 18 percent new to AT&T.
AT&T posted a net increase in total wireless subscribers of 678,000 in the third quarter to reach 105.9 million in service. This included gains in every customer category. Subscriber additions for the quarter included postpaid net adds of 151,000. Postpaid results were impacted by iPhone 5 inventory constraints which resulted in the vast majority of third-quarter iPhone sales going to existing customers, where there was considerable pent-up demand.
Total wireless revenues, which include equipment sales, were up 6.6 percent year over year to $16.6 billion. Wireless service revenues increased 4.5 percent, to $14.9 billion, in the third quarter. Wireless data revenues — driven by mobile Internet access, access to applications, messaging and related services — increased by more than $1 billion, or 18.3 percent, from the year-earlier quarter to $6.6 billion. Third-quarter wireless operating expenses totaled $12.3 billion, up 11.7 percent versus the year-earlier quarter, driven by increased smartphone volumes, and wireless operating income was $4.4 billion, down 5.6 percent year over year.
For the quarter ended September 30, 2012, AT&T’s consolidated revenues totaled $31.5 billion, flat versus the year-earlier quarter. When excluding the divested Advertising Solutions business unit, AT&T’s consolidated revenues grew 2.6 percent. Compared with results for the third quarter of 2011, operating expenses were $25.4 billion versus $25.2 billion, up 0.7 percent year over year; excluding Advertising Solutions, operating expenses were $25.4 billion versus $24.6 billion in the year-ago quarter, up 3.4 percent. Operating income was $6.0 billion, down from $6.2 billion; and AT&T’s operating income margin was 19.2 percent, compared to 19.8 percent.
Third-quarter 2012 net income attributable to AT&T totaled $3.6 billion, or $0.63 per diluted share, consistent with $3.6 billion, or $0.61 per diluted share, in the year-earlier quarter. When adjusted for Advertising Solutions, earnings per share was $0.62 compared to $0.59 in the year-ago quarter.
Third-quarter 2012 cash from operating activities totaled $11.5 billion, a record for the company, and capital expenditures totaled $4.9 billion. Free cash flow — cash from operating activities minus capital expenditures — totaled $6.5 billion, also a record for the company. The company now expects free cash flow to be $18 billion or higher this year, up from previous guidance of $15 to $16 billion. Capital expenditures for the year are now expected to come in at the low end of the $19 to $20 billion range while still meeting network build targets. In fact, the company’s LTE deployment is ahead of schedule, already covering more than 135 million POPs. During the third quarter, AT&T continued buying back shares under its initial 300 million shares repurchase authorization. A second 300 million share buyback authorization also was approved by the AT&T board during the third quarter. The company repurchased 101.1 million of its shares for $3.8 billion in the quarter. Through October 19, the company has repurchased 271 million shares for $9.4 billion. The company expects to continue to buy back shares consistent with its repurchase authorizations.
Read more AT&T’s full release here.
MacDailyNews Take: Dominance (even with AT&T retail staffers trying their damnedest to steer the ignoranti towards fake iPhones).