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AT&T: U-verse Revenue Nears $3 Billion Annually
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AT&T: U-verse Revenue Nears $3 Billion Annually - 29-January-2010, 04:06

AT&T: U-verse Revenue Nears $3 Billion Annually
Telco Tops 2.1 Million TV Subscribers; Landlines Dropped 10.6% In 2009
By Todd Spangler -- Multichannel News, 1/28/2010 4:57:03 PM

AT&T said revenue from U-verse TV, Internet and voice services nearly tripled over 2009 and is approaching an annual run rate of $3 billion, as the telco continues to pack on video and broadband subscribers.

Nevertheless, U-verse still represents less than 5% of total wireline segment revenue, and the growth hasn't been enough to offset declines in other parts of AT&T's wireline business. The wireline unit saw revenue fall 6.0% for 2009, to $65.7 billion, and net income plummeted 29.2% to $7.9 billion.

In the fourth quarter, the telco posted 248,000 net adds for U-verse TV to reach 2.1 million subscribers, a gain of 1 million over the course of the year. More than 75% of U-verse TV subscribers have a triple- or quad-play option, and video penetration rates exceed 20% in areas that have been marketed to for more than 24 months.

U-verse has grown to the point where "it's beginning to meaningfully change our consumer revenue profile," AT&T chief financial officer Rick Lindner said on the company's earnings call Thursday.

The telco also had 167,000 net adds for wireline consumer broadband in the fourth quarter, with gains on the more advanced U-verse DSL service offsetting a loss of 100,000 traditional DSL connections in the period. Total wireline broadband connections as of Dec. 31 were 13.7 million, up 5.8% year over year.

AT&T also announced that it now serves 1 million U-verse Voice digital home phone lines, two years after introducing the VoIP service. More than 67% of new U-verse TV customers bundle the VoIP service, the telco said.

At the same time, AT&T's legacy phone business kept eroding, with primary residential phone lines dropping 10.6% year to year, to end 2009 at 24.6 million.

Wireless continued to drive AT&T's overall growth, with 2009 revenue of $48.7 billion up 9.6% year-to-year and net income of $13.3 billion, up 19.7%. The company activated 3.1 million Apple iPhones in the fourth quarter and on Wednesday, Apple announced AT&T would be the exclusive 3G provider for its new iPad mobile device. AT&T ***cutives noted that it will not be subsidizing the iPad, as it has with the iPhone.

The Dallas-based telco said capital expenditures for 2010 are expected to be $18 billion to $19 billion -- up approximately 5% to 10% from 2009 -- and that U-verse is on track to pass 30 million living units by the end of 2011 up from approximately 23 million today.

Lindner said many of the new U-verse markets will be in the Southeast, which represents markets served by the former BellSouth. "Our expectation for U-verse is to continue to, market permitting, grow at the kind of rates you've seen us grow over the last four to five quarters," he said. In just about all U-verse markets, penetration tends to increase at one percentage point per month, Lindner added.

In 2010 AT&T expects to deliver "stable consolidated revenue," Lindner said, and pointed to some improvement in business sector trends. However, he added, "Frankly I think the economy is still fragile at this point in time."

Overall, AT&T's fourth-quarter revenue totaled $30.9 billion (down 0.7% vs. the year-ago period) while net income soared 25.6%, to $3.0 billion. The fourth-quarter 2009 results included $330 million in severance charges related to workforce reductions; fourth-quarter 2008 results included a severance charge of $617 million and a charge of $445 million for merger-related trust investment losses.

For the full year 2009, AT&T's consolidated revenue was $123 billion versus $124 billion the year prior, as net income declined 2.6% to $12.5 billion from $12.9 billion.

The telco had 2.174 million satellite TV customers at the end of 2009, representing a net decline of 21,000 in the fourth quarter. AT&T resells DirecTV service in areas where it does not offer U-verse. U-verse and bundled satellite customers combined reached 4.2 million at the end of the year, representing 16.0% of households served.
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