(Bloomberg) -- AT&T Inc. gained more mobile subscribers in the third quarter than analysts expected, continuing the winning streak from the previous period.
The company added 403,000 net new monthly wireless phone subscribers, outpacing analysts’ projected gains of 394,600, according to data compiled by Bloomberg. Revenue was little changed from a year earlier at $30.2 billion, compared with analysts’ average estimate of $30.4 billion, the company said in a statement Wednesday.
As the pool of potential new wireless customers tightens, AT&T and its peers have been pushing broadband internet services, through fiber-optic lines and fixed wireless service, which delivers service over the airwaves. AT&T Chief Executive Officer John Stankey told investors Wednesday that “it’s increasingly clear that customers prefer to purchase mobility and broadband together as a converged service. Only AT&T can offer this at scale.”
AT&T said about four in 10 fiber customers also choose AT&T wireless service. The company said its churn rate, which reflects the level of customer turnover, is less than 1%. Customers aren’t upgrading their phones as often, however, leading to lower equipment revenue, which weighed on sales. The stock was up 2.2% late morning in New York.
The efforts by the telecom providers are increasingly encroaching on the space of traditional cable companies. The big three telecom operators, including T-Mobile US Inc. and Verizon Communications Inc., are expected to report they added more than 900,000 broadband customers in the third quarter, including wireless home service and fiber, according to according to estimates compiled by Bloomberg. T-Mobile reports its third-quarter results after the market close on Wednesday.
AT&T has outrun its peers in deploying fiber and it now offers wired broadband connections to roughly a third of the country. The company added 226,000 net fiber internet subscribers in the third quarter, missing analysts’ estimates for 265,390 due to severe weather and a work stoppage in the Southeast.
AT&T added 135,000 fixed wireless subscribers, less than the 147,000 analysts were anticipating. Its Internet Air fixed wireless product lags behind competitors such as Verizon as AT&T focuses more on its leading fiber optic network. AT&T’s strategy has been to capture home broadband customers with the wireless offering as a bridge solution while building fiber connections to those areas.
Stankey noted that companies are also transitioning from traditional fixed wire to wireless internet service, contributing to a decline in business wireline revenue.
“It’s a technology shift, in some cases, of business that have traditionally purchased wireline services that are now migrating certain products and services to wireless. And I think our product portfolio is now starting to evolve,” he said on a conference call with investors. “I’m pretty confident we’re going to make that pivot and we’re going to be in a good place.”
On Tuesday, Verizon also reported third-quarter sales that fell slightly short of expectations due to the slower pace of new phone purchases, as the September release of the new iPhone 16 didn’t rise to must-have status. Its stock fell 5%.
Telecom executives, including Stankey, said they didn’t expect Apple Inc.’s latest iPhone, which came out in September, to spur a significant upgrade cycle. The iPhone 16 offers only modest hardware upgrades, and its advanced artificial intelligence technology will only be gradually added to the device via incremental software updates.
Stankey said it “remains to be seen” whether those software updates will be enough to drive consumer enthusiasm for upgrades. “I think some of these things are going to be a more graceful ramp-up in consumer interest rather than a big bang,” he told investors. He noted, however, that the company can “expect seasonally higher phone purchasing activity, upgrades, and promotional cycles” toward the end of the year.
He also praised a Federal Communications Commission decision on Tuesday that allows AT&T to access the 4.9 GHz spectrum band, adding additional capacity to bolster the company’s FirstNet public safety network.
“We look forward to working together on plans that take these capabilities to the next level,” he said.
In September, AT&T ended its expensive foray into the pay-TV business, agreeing to sell its remaining stake in satellite television operator DirecTV to the investment firm TPG Inc. for $7.6 billion in cash spread out over five years. Doing so allows AT&T to hand off responsibility for hemorrhaging video subscriber numbers, which plummeted from more than 18 million in 2014 to about 10 million now. The company said it will instead focus on delivering wireless 5G and its “fiber to the home” product while also strengthening its balance sheet.
Dallas-based AT&T reported adjusted earnings of 60 cents a share in the third quarter, beating the average analyst estimate of 57 cents. The adjusted figure excludes a 61 cent-impact driven by a non-cash goodwill impairment associated with its business wireline offerings, as corporations rely less on fixed voice services. The company reiterated its full-year guidance, including adjusted Ebitda growth of about 3% and adjusted earnings per share in the range of $2.15-$2.25.
AT&T stock has gained about 28% this year through Tuesday’s close, compared with a 37% increase for T-Mobile and 10% for Verizon.
(Updates with CEO comments and opening shares)
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