AT&T beats profit as promotions win over customers

NEW YORK: AT&T Inc, the second-largest U.S. wireless carrier, topped profit and sales estimates as more customers than analysts expected were lured in by the company's phone and tablet promotions. Fourth-quarter earnings, excluding some items, were 55 cents a share, beating the 54cent average of analysts' estimates. Revenue rose to $34.4 billion, compared with analysts' average projection for $34.2 billion. Facing heightened competition from T-Mobile US Inc. and Sprint Corp., AT&T has cut prices on shared-data plans in a battle to keep customers. While the promotions have helped attract subscribers, the skirmishes have put pressure on the profits of all four major U.S. carriers. AT&T has turned its attention to expanding beyond the highly competitive U.S. market, announcing its third deal this week that gives it assets in Mexico.

"AT&T, to their credit, more than a year ago became more aggressive at repricing, so a beat might show they have reached some price stabilization," Colby Synesael, an analyst with Cowen & Co. who recommends holding AT&T shares, said in an interview before the earnings release. AT&T rose as much as 2.6 percent to $33.66 in extended trading. The shares dropped 4.5 percent last year. The price cuts and promotions on tablets and popular phones like Apple Inc.'s latest iPhones helped AT&T add 854,000 monthly subscribers. Analysts expected 819,000.

Without tablets, AT&T actually lost about 100,000 monthly phone subscribers, Chief Financial Officer John Stephens said in a phone interview. A surge in smartphone converts wasn't enough to make up for an exodus of older mobile-phone users. The company added 969,000 net monthly tablet customers.

The efforts to lure more customers came at the expense of the company's margins. Profit margins on wireless service excluding interest, taxes, depreciation and amortization, came in at 36.7 percent, narrower than 42 percent a year ago.

For 2015, AT&T said adjusted earnings will grow in the "low single-digit range" as margins expand. Analysts were estimating that profit will increase about 2 percent to $2.56 a share this year. The company plans to give a more detailed forecast after the closing of pending acquisitions, particularly its purchase of DirecTV. AT&T CFO Stephens warned in December that price competition had put pressure on AT&T's margins and increased the rate of customers leaving in the fourth quarter.