AT&T Wireless reports surge in quarterly profit, revenue

SEATTLE (AP) — AT&T Wireless Services Inc. reported quarterly profits on Wednesday that surged past analysts’ expectations as the wireless telecommunications company added nearly half a million customers in a slowing market.

For the April-June quarter, the Redmond, Washington-based company reported a profit of $222 million, or 8 cents a share, compared with $19 million or 1 cent a share for the year-ago period.

The company also announced revenue of $4.16 billion, up 6.3 percent from $3.91 billion last year.

Analysts polled by Thomson First Call projected earnings of 4 cents a share on revenue of $4.05 billion.

The company provided little detail on its subscriber growth — which nearly doubled the January-March quarter’s new customer numbers. But much of that strength could have come from the company’s new GoPhone initiative, which offers prepaid calling plans to higher-credit-risk customers who would have been turned away in the past, said Greg Gorbatenko, vice president of equity research for Loop Capital Markets.

“Everything is just pointing to the GoPhone,” he said.

Shares of AT&T Wireless closed down 9 cents to $7.80 a share in trading Wednesday on the New York Stock Exchange. The earnings report, released after the market closed, sent shares up 47 cents, or 6 percent, in extended trading.

The performance was due in part to cost-cutting, said Joe McCabe, AT&T Wireless chief financial officer.

In recent months, AT&T Wireless has been brokering deals with other carriers to reduce the costs it pays when customers travel outside AT&T Wireless’ network and “roam” onto other carriers’ networks.

In addition, AT&T Wireless is seeking to reduce costs by moving administrative and other corporate workers to its regional offices in Redmond, and in New Jersey/New York. It also expects to lose hundreds of employees as a result of those who are unwilling to relocate and from other cuts.

The company added 446,000 customers in the quarter, bringing its total subscriber base to 21.5 million, up 7.7 percent from last year.

AT&T Wireless declined to reveal how many new subscribers were on the prepaid wireless calling plan, but a spokesman said the program has met expectations.

“We’re happy with the take rate, and actually subscribers have exceeded our expectations for average revenue per user,” spokesman Peter Rowe said.

Carriers are also preparing for a November deadline by which they must allow customers to transfer wireless-phone numbers if customers decide to switch carriers. McCabe declined to say how much meeting federal requirements on “portability” would cost AT&T Wireless and whether it would charge customers who want to transfer their number.

He said the company believes the requirement will increase the turnover of customers from one network to another, resulting in extra costs in customer service, technology and other areas for carriers.

“The wild card that we don’t know is what will happen to pricing,” McCabe said.

The company said it expects subscriber services revenue — which excludes revenue from wireless phone and device sales — to grow as much as 7 percent for the full year. It also expects capital expenditures to total around $3 billion for the year.

For the six months ended June 30, AT&T Wireless reported a profit of $357 million, or 13 cents a share, compared to a loss of $159 million, or 6 cents a share for the same period a year ago.

For the six-month period, the carrier reported revenue of $8.1 billion, up from $7.5 billion last year.

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