AT&T, the telecommunications giant, reported on Wednesday that its first-quarter profit dropped 9.7 percent from a year ago, but the results far exceeded Wall Street’s expectation of a bigger drop.
Fueled largely by new subscribers using Apple’s iPhone handset, AT&T net income for the quarter was $3.1 billion, or 53 cents a share, compared with $3.5 billion or 57 cents a share in the period a year earlier.
Revenue was $30.6 billion, slightly down from $30.7 billion in the quarter a year earlier. Analysts had expected revenue of $31.1 billion.
Earnings were reduced by 5 cents a share because of increases in pension and retiree expenses. Excluding that item, earnings were 58 cents a share, exceeding analysts’ expectations that it would earn 48 cents a share.
The company reported growth from its wireless business, largely fueled by sales of Apple’s iPhone, for which the company is the sole carrier in the United States. The company reported a net gain of 1.2 million wireless subscribers and 875,000 consumers under contract, up 24.1 percent from the period a year earlier. AT&T also reported 1.6 million iPhone activations in quarter, more than 40 percent of which were for customers new to the company. The company faced declines in its wireline business.
An industry analyst with Sanford Bernstein, Craig Moffett, said the shift comes from a shrinking base of customers to sign up for cellphone services.
“For better or for worse, the industry depends on newcomers to sustain growth,” Mr. Moffett said. “They aren’t there any more.”
In terms of subscribers in North America who already have cellphones, he said “we are very close to saturation in the U.S.”
Disclosure I do not own T shares.