I’ve mentioned to several of my friends that after more than 20 years in the investment business, I can sometimes read between the lines and get to what companies really mean. When I look over earnings reports, sometimes there is a statement that might seem innocuous enough, but it almost jumps off the page because of its meaning. This is exactly what happened when I read over AT&T Inc. (NYSE:T) earnings report. There were several positives, and a few negatives, but this one statement meant more than anything else.
The best commercials, but still finishing second
AT&T Inc. (NYSE:T) not only competes with Verizon Communications Inc. (NYSE:VZ), but also with Sprint Nextel Corporation (NYSE:S), and local telecoms. like CenturyLink, Inc. (NYSE:CTL) for customers. Whether it’s right or wrong, AT&T Inc. (NYSE:T) is always going to be compared to Verizon Communications Inc. (NYSE:VZ) when it comes to wireless performance. The two companies have all but locked up the industry, with Sprint and T-Mobile running a distant third and fourth.
When it comes to wireless, it’s really simple actually, AT&T Inc. (NYSE:T) is doing better than Sprint Nextel Corporation (NYSE:S), but worse than Verizon. If you look at analysts expectations for EPS growth, AT&T is expected to grow by 5.25%, which is better than the 5% at Sprint, but pales in comparison to the 9.25% growth at Verizon. If you look at current revenue growth, AT&T’s wireless revenue increased 3.4%, which was better than Sprint at 1.75% growth, but worse than the 6.8% increase at Verizon.
In fact, while AT&T and Verizon were nearly neck and neck with churn rates of 1.04% and 1.01%, Sprint wasn’t even in the same ballpark with a postpaid churn of 2.09%. However, if you look at Sprint’s core subscriber additions (without Nextel), Sprint actually outperformed AT&T, with 356,000 net additions to 296,000 additions at AT&T. Once again, neither of these companies could keep up with Verizon’s additions of 677,000.
Don’t get me wrong, there are some positives
Though AT&T finished second to Verizon by nearly every measure in wireless, the company outperformed when it comes to their wireline results.
The wireline business is a race to try and replace losses in voice connections, with additions in high-speed Internet and video subscribers. Looking at high-speed Internet additions, AT&T reported impressive growth of 8.7%. By comparison, Sprint reported high-speed Internet losses, CenturyLink, Inc. (NYSE:CTL) saw an increase of just 1.13%, and Verizon reported an increase of 3.36%. Clearly AT&T is winning business with their high-speed Internet offerings.
When it comes to video subscribers, the only peer that beat AT&T was CenturyLink, which reported an 11.67% increase in video customers. However, CenturyLink only has a few hundred thousand video subscribers, compared to 4.8 million at AT&T. Given AT&T’s much larger base, the company’s subscriber growth of 4.83% is impressive. In fact, AT&T beat Verizon’s video growth of 3.45%, and beat Sprint, which saw losses in video subscribers.
