In a saturated market it’s no surprise that AT&T is watching the rate of new subscribers slowly decline, but one of the bright spots in its first-quarter earnings report on Wednesday was that the carrier is doing a better job of keeping its customers from leaving.
AT&T reported a net profit of $3.2 billion or 63 cents a share on Wednesday, narrowly beating analyst estimates for 62 cents a share. Sales came in at $32.57 billion, just under the $32.82 billion expected by Wall Street analysts.
AT&T generates more than half of its total revenue from its U.S. wireless business and it’s here that the company faces mounting competitive pressures from the likes of T-Mobile and now Google. That was reflected in some of the numbers AT&T unveiled on Wednesday.
America's second-biggest network operator added 441,000 new contract subscribers in the first-quarter, its most valuable commodity, which was ahead of analysts' projections. Many of these new gains came from tablet users, the company said, which helped to offset losses from lower-end feature phones.
But the rate at which AT&T is taking on these valuable new mobile subscribers is gradually slowing. It had taken on 854,000 new post-paid subscribers in the fourth quarter (typically a bonanza thanks to the holiday season), 785,000 in the third and 1 million in the first quarter of 2014.
AT&T’s bugbear continues to be T-Mobile, with analysts at Wells Fargo reportedly estimating the upstart carrier added 1.03 million contract subscribers in the first quarter.
Verizon is faring somewhat better when it comes to picking up new customers. It reported a profit of $4.22 billion or $1.02 a share on Tuesday, beating analysts estimates, and said it had added 565,000 retail postpaid connections in the first quarter, which was actually up 4.8% from last year.
Incumbent carriers like AT&T and Verizon both face a new challenge in the ongoing war over prices and subsidies in the form of Google. The search giant unveiled its new wireless service on Wednesday, called Project Fi.
In contrast to the usual subscription fee charged by carriers, Google will only charge customers for the data they use each month, similar to the usage-based model used by the Republic Wireless, an MVNO that competes with larger carriers.
Like other MVNOs, Google’s service relies on renting bandwidth from Sprint and T-Mobile and will initially only work with the company’s Nexus 6 phones. The service will jump between either network depending on where it can get the best signal.
One bright spot for AT&T was its declining rate of churn, or the rate at which customers leave the network each quarter. It had fallen to 1.02%, which was the company’s best-ever rate for the first quarter.
