AT&T beat expectations with its fourth-quarter earnings report, helped by strong smartphone sales, international growth, and the new tax laws, which were retroactive to September 2017. Revenue for the fourth quarter was $41.7 billion, about half a billion more than analysts had projected, while net income came in at $19.0 billion, or $0.78 adjusted earnings per share.
Investors pushed AT&T’s stock price up more than 4% on the news, encouraged also by the carrier’s positive guidance for 2018. AT&T is projecting adjusted earnings per share “in the $3.50 range” this year, with free cash flow of about $21 billion and capital expenditures approaching $25 billion. AT&T, which has higher capital spending than any other U.S. company, has invested $18 – $21 billion annually in recent years.
AT&T added 329,000 postpaid phone customers in the quarter, an increase from both Q4 2016 and Q3 2017. Churn was just 0.89% during the quarter. Postpaid smartphone net additions were 400,000 and gross smartphone additions were even higher, helped by the company’s buy-one-get-one-free promotion.
“We had a year-over-year increase of 700,000 smartphone gross adds and upgrades in the quarter as our customers kept coming back and getting new phones,” CEO Randall Stephenson told investors during the company’s earnings call.
Strong smartphone sales also helped AT&T business solutions group offset the declining revenue in the legacy wireline business. Wireless revenue was up 6% for AT&T’s enterprise business, while wireline revenue was down 3.5% year-on-year. Stephenson said he expects tax reform to boost spending for AT&T business customers this year, noting that as companies invest more, they tend to hire more, and new employees need smartphones and computers.
AT&T now has over 1.1 million global route miles of fiber and says that than 8 million business customer locations nationwide are within 1,000 feet of its fiber. 1.8 million of those are already connected, according to the company.