AT&T Wireless Performance Improves as Hardware Sales Grow 8%

AT&T reported an improved wireless performance for the final quarter of 2017.  The company added 286k postpaid phone net adds and 199k prepaid net adds.  This improvement on the postpaid side helped boost smartphone sales by over 8% YoY.  Late rally in the back-half of the quarter filled with BOGO offers and upgrade specials helped drive the wireless improvements.

On the prepaid side, the seasonally weak Q4 quarter was hit with higher churn (5.2%).  However, smartphone sales within prepaid remained quite stable at 2m.

With the increase in net adds, EBITDA margins fell to 43.8% (from 50.4% in Q3).  Higher marketing costs, higher upgrades, and higher equipment costs were the main culprits.  Some of this will come back to the company via monthly equipment installment plans over the coming quarters.  U-Verse and satellite TV remain weak and losing 100-250k subs per quarter.  DirecTV Now offsets these losses.  The company points to wireless stickiness DirecTV Now brings – total subs today nearly 1.2m.

Lastly, the fight for more content continues.  The Justice Dept has blocked the Time Warner acquisition, but AT&T vows it remains a top priority for the company.  Court date set for March 19th


Key 4Q17 hardware stats:

  • 9.2m smartphones were activated:
    • 7.2m were activated within postpaid channels.
    • 2m were activated within Cricket and AT&T prepaid channels.




  • Key improvements led to the higher hardware sales including:
    • Upgrades rose to 7%, an improvement over 4Q16’s 6.3% and Q3’s record low of 3.9%. 
    • The iPhone refresh certainly helped upgrade rates and AT&T lit up more iPhones in 4Q17 vs. 4Q16.  Other top drivers include improved bundling strategies with DirecTV NOW and a late quarter Android BOGO. 
    • Postpaid churn remained low at .89%, which is lower than competitors with the exception being Verizon.  DTV NOW subs remain sticky and churn less.



  • The top selling postpaid devices during the quarter were:
    • In just 7 weeks of sales during the quarter, the iPhone X was the top seller
    • 8, 8 Plus and Samsung flagships all strong sellers; Samsung received a December pop due to late BOGO
  • The top selling prepaid devices within Cricket:
    • ZTE Blade X: 5.5” HD display often $29-$49 retail price, key switcher device
    • Samsung Galaxy Amp 2, LG Fortune, ZTE Sonata 3, free switcher devices
    • LG Stylo 3: name recognition value device
    • iPhone X available but tiny sales
  • The top selling prepaid devices within AT&T Prepaid:
    • ZTE Maven 3 was free with a new line and the top selling smartphone.
    • LG Phoenix 3, 5” smartphone with KnockOn marketing was also a top seller.
  • BYOD: The bulk of BYOD phones were iPhones, Galaxies, and Pixels, and a long tail of ‘others’. 
  • Wholesaling is falling and lost over 500k subs.  One, cost of acquisition of low ARPU subs has increased and AT&T has de-emphasized these sales.  Secondly, there remains some churn/drop-off of government subsidized programs. 
  • Connected devices subs grew 2.59m:
    • Connected cars continue to be the majority of these subs.
    • Wearables sales accelerated—Apple iWatch was a common holiday gift and sold ~400k units.
  • 5G Network plans:
    • AT&T is committed to launching mobile 5G in 12 cities this year.
    • The 5G use case cases AT&T is most excited about is nationwide broadband replacement.  Autonomous cars, too, are an obvious application all carriers are excited for when 5G and needed infrastructure is rolled out.
    • The company is expecting to use mmWave within mobile devices, which has some risk as there are some major hurdles to overcome.




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