AT&T Reports Q4 Earnings With CapEx Below Estimates


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AT&T Inc. (NYSE:T) reported strong Mobility results in the fourth quarter, claiming solid domestic wireless service revenue growth with record fourth-quarter wireless service margins. (On a GAAP basis, domestic service revenues declined 3.0 percent; however, on a comparable basis, service revenues grew 2.9 percent).

“Our top priority for 2018 and 2019 is reducing our debt and I couldn’t be more pleased with how we closed the year.

 In 2018, we generated record free cash flow while investing at near-record levels. Our dividend payout as a percent of free cash flow was 46 percent for the quarter and 60 percent for the year, allowing us to increase the dividend for the 35th consecutive year,” said Randall Stephenson, AT&T chairman and CEO. “This momentum will carry us into 2019, allowing us to continue reducing our debt while investing in the business and continuing our strong record for paying dividends.”

“This lower capex is surprising,” said Jennifer Fritzsche, Senior Analyst at Wells Fargo Securities, citing the $5.3B being well below their $7.2B estimate (Street: $5.8B), “or was $4.2B net of $1.1B FirstNet reimbursements”.   

“Wireless service revenue was $13.9B vs. our $13.8B,” Fritzsche said, “and equipment revenue of $4.9B was slightly light of our $5.1B est. T added 134K postpay phone net adds vs. our 165K est. (Street 208K) and added 26K prepaid adds vs. our 175K (Street 319K).”  

Results were mixed, according to new street research’s Jonathan Chaplin, noting strong progress on margins offset by weak subscriber trends across every segment.  

“The most important metric for AT&T this year may be meeting guidance of $26BN in FCF,” Chaplin said, “and the margin expansion we saw this quarter will help them get there.  Longer-term, the trajectory of the business isn’t great,” he said. “In wireless, churn continues to rise and subs slow.”

North America Wireless Highlights:

  • 3.8 million total wireless net adds:
  • 2.8 million in U.S., driven by connected devices and smartphones
  • 1.0 million in Mexico

Communications Highlights

  • Operating income up 3.1 percent on a comparable basis; EBITDA up 1.9 percent


  • Service revenues up 2.9 percent on a comparable basis; operating income up 18.7 percent with EBITDA up 13.3 percent on a comparable basis
  • 147,000 phone net adds in the U.S.
  • 134,000 postpaid phone net adds
  • 13,000 prepaid phone net adds
  • 467,000 branded smartphones added to base

January 31, 2019

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