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AT&T Q3 2014 Numbers Disappoint, Keeping Customers Loyal With Cheaper Bills Hurts

October 23, 2014 - Written By David Steele

AT&T have announced their third quarter results and missed analyst expectations, despite recording growth across most of their businesses. During the quarter, AT&T reported a net gain of 785,000 subscribers, more than double the same period last year. This was short of analyst firm Jeffries’ expectations of 1.02 million postpaid subscribers, but unfortunately the business is fighting the trend that consumers want more for less. Customers like the idea of getting more for less and there’s intense competition in the US cell ‘phone market at the moment with competitor carriers lowering prices and increasing airtime, text messages or, critically, data allowances. Sprint, in particular, have been able to squeeze the bigger players by offering significantly more data for the same money or less.

AT&T’s ARPU, average revenue per user, is down year on year. ARPU is an important metric for mobile networks because it determines how much cash the business is successfully extracting from each customer. ARPU is under pressure from cheaper mobile plans and the carriers are struggling to increase the amount customers are paying without offering additional services or allowances. AT&T’s ARPU data makes for miserable reading: ‘phone-only ARPU is down 8.0% year on year, although it did increase by 0.3% quarter on quarter. AT&T Next billings showed a drop of 3.4%, which means an average customer’s bill with a Next plan is 3.4% lower this year compared with last year. AT&T are reported a record low level of churn: in layman’s terms, customers are happy paying less and so are becoming more loyal to the business. This should be good news for AT&T over the medium to longer term.

Other points of interest include AT&T having added over half a million connected cars, showing that their investment in the Internet-of-Things (IoT) is progressing. Another interesting snippet is that at the end of the third quarter, two thirds of AT&T’s postpaid smartphone customers have an LTE-capable device.

Putting this all together, where does this leave AT&T? They are feeling the pinch of keeping customers happy by reducing bills, which is not a viable long term strategy. It doesn’t need to be: keeping customers happy, keeps customers “sticky,” that is they’ll be with AT&T for a long time. AT&T are building a business for the longer term.