AT&T: Good for investors, not so good for customers
Filed under: Company News, Technology, Earnings, Apple, AT&T, Verizon
AT&T (T) customers complain about dropped calls, glacial web-surfing speeds and shoddy coverage. Wall Street, on the other hand, loves the way the phone giant runs its network. For an explanation of that disconnect, let's take a look at AT&T's third-quarter earnings, announced earlier today. The telecom's results topped Wall Street profit forecasts and delivered revenues in line with estimates. Shares gained about 2% in midday trading to around $26.40.
Here's where the numbers start to tell the story: AT&T activated a record 3.2 million iPhone customers over the quarter. But despite the huge ramp-up in these famously data-hungry devices, AT&T's capital spending actually dropped 24 percent to $4 billion from the same period a year ago. Partially as a result, free cash flow surged to $13.9 billion for the first three quarters of the year from $7.9 billion during the same period a year ago.
"If there was a surprise in the quarter, then, it was that the tsunami of capital spending to support all that data usage never came," Craig Moffett, an analyst at Sanford C. Bernstein wrote in a research report following the results.
In other words, the same tightfisted ways that drive some customers nuts have made AT&T a hit with investors. Shares of AT&T have outpaced rival Verizon Communications (VZ) by about a staggering 25% over the last five years. And Verizon is widely credited for having a more broadly available and more robust network, to most customers' delight.
It seems that AT&T's iPhone approach is shrewd when it comes to the bottom line. Sure, the company pays heavy subsidies to Apple (AAPL) for the devices. But AT&T gets to piggyback off the popularity of the iPhone while skimping on some of the massive costs that would come with putting up additional radio towers and building out a bigger network.
Nor is AT&T's thrift limited to wireless services. Reeling from landline losses, both Verizon and AT&T have responded by rolling out pay-TV services in addition to phone and broadband connections. Verizon will spend a total of $23 billion dollars on its FiOS service, which strings fiber optics to a customer's home.
But AT&T is spending only $7 billion on its U-verse service, which takes fiber to the neighborhood level but then pushes the massive amounts of data over the company's traditional copper lines. The service has been slammed for glitches by customers, but investors are so far cheering AT&T's much more limited approach.
When it comes to AT&T, investors may be better off buying the company's stock than its services.
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Reader Comments (Page 1 of 2)
10-22-2009 @ 1:07PM
joe said...
I have been a customer of AT&T for years now and have had no problem with dropped calls. I love my iphone and the 3G network is plenty fast for me when on the Internet. I have a number of friends that have U-verse and they love the service, can't wait for it to be available in my area. Just because their competitor is spending more money doesn't mean it is worth it. I will be in Europe shortly using my iphone. Try doing that with your Verizon phone. Joe
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10-22-2009 @ 11:33PM
Jim B said...
AT&T service is good, but overpriced. Have tried to find ways to cut the costs but have only been able to reduce slightly. These companies have almost a monopoly on us.
10-25-2009 @ 11:04AM
Rob said...
Actually Joe my Verizon phone works well in Europe and Asia. As for AT&T their service works much better overseas then they do here at home. I had a I phone thru work and live in a large metro area and must admit have experienced lots of patchy service including slowwww data service, my Verizon service is 100% on all the time.
10-23-2009 @ 8:47AM
MIke JR said...
Joe,
I was in Europe last year with Verizon's Blackberry Storm. (Denmark, Germany and Poland)
I usually pay $29.99 for unlimited data but while I was in Europe they charged me $64.99 per month for unlimited data.
I opened exel/word attachements for my work. Used Google maps for directions and even used Tetherberry a few times to tether my laptop to the storm.
Worked great while over there. Also, they automatically put my data plan back to normal on my return day.
Total Cost -
$29.99 / 30 days = $1 per day regular data
$64.99 / 30 days = $2.17 per day international data
$28.16 (for 14 days international) + $16 = $44.16 for data for the whole month (not to mention I get 20% off my bill)
This is a STEAL compared to my co-worker who got socked for $275 for international data alone.
Our calling minutes were pretty much the same and we both got whalloped on that one. But to say that AT&T is better.. I'm still waiting for that one. Our boss and co-workers who actually use att have to leave our building to get a signal. I'm sure there are other building that people have to do that for Verizon, but thankfully I'm not in one of them!
10-22-2009 @ 1:59PM
Paul said...
Let me tell you about the slick re up of a three year extended contract, only after switching to VONAGE I called att&t and they informed me that my bill [final] had a $20.00 dollar fee for early with drawel, I do not recall that the slick sales guy told me 3 years ago and it auto renewed my account for another 36 months. No where was there any mention of that, and they side tracked me with a new junk fee of 19.95 for USB-1 that I had to call every month for 5 months [ much like verizon and there junk fees] oh you better comb your VERIZON bills because if they slip 1- 9.99 junk fee times oh 25 million cell phone acountts, do the math. 250 million dollars intoo the coffers of verizon. [had to baby sit this bill for 10 months last year] . So I will duke it out with att&t and I am glad I am free from verizon too. every body should go to metro pcs for 49.00/month completly unlimited. boycot At&t and verizon to.
Paul Reardon Atlanta, Ga
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10-22-2009 @ 1:43PM
J.R. said...
Vishesh, are you sure you are not a Verizon employee
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10-22-2009 @ 1:59PM
Paul said...
Homeowners you already own your home you just do not know it yet. Do not be so quick to vacate because they are driving people out of their home by foreclosure mill where they sit and sign [ forge] affidavits and then go to the clerk of the county you live in and file foreclosure on you illegally. Fact is that 80% of victims of get tossed out and do not even appear in court. Just because you may live in a non- judicial State does not make it legal for the pretender lenders to fraudulently steal your home!
Do you know that your loan was paid in full right after closing and it was then sold as securities bundled up, cut up and sold multiple times with out your knowledge, and now they are hiding the true investor because there illegal actions will be putting hundreds of banksters and wall street thugs in jail.
The bankster's, congressmen,brokers,tittle [ capitalization omitted on purpose] insurers,closing attorneys, will have a great holiday season worrying if the next time the door bell rings it may by the Feds, or local authorities to take them to jail.
Do not give up your fight for your home, I can and will help any one in this situation no charge just facts. please stand and fight, question every thing and every one involved, you may already own your home.
Paul Reardon Atlanta, Ga.
Go to Neil Garfields "livinglies.wordpress.com", I give all the credit for any and all information as I am just sharing his web site and some of the info there.
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10-22-2009 @ 2:01PM
Paul said...
J.R.
No I am not a Verizon or At&t x employee, I am however a small business man and have been since 1977, and I am tired of the BS these big company's can pull on the very people they depend on to fill their coffers.
P.R.
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10-22-2009 @ 3:12PM
Stephen Nechtow said...
AT&T is the worst telecommunication company I have ever dealt with in my 40 years in business.
They are like a MONOPOLY. They do not care about there systems or their customers.
Did you ever try to call information with AT&T? You say the name of the city. You say the name of the business. Then their operator answers since their system does not understand English. What a waste of time for the customer. The sad thing is that the customer is paying for the information call and the customer wastes all that time and the customer gets NO SERVICE. That is how AT&T makes money. Charges a fee and provides NO SERVICE>
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10-22-2009 @ 3:30PM
Dave Ex said...
Vishesh,
Isn't time to feed your camel?
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10-22-2009 @ 4:36PM
Mike said...
AT&T.........sucks! Back to White Castle dude...
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10-22-2009 @ 6:04PM
Dean said...
Verizon is by far the best carrier.The problem is they like to gouge you with fees on your monthly bill.You have to call them on it.They will do something about it,and the customer ends up on the plus side.
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10-22-2009 @ 6:11PM
cessnatx said...
I've been with ATT for about 17 yrs or longer....Never a problem that couldn't be easily resolved...no issues with service to speak off...I've seen other carriers...changes plans..no support..cheapo phones that wouldn't work 1/2 the time..So I don't get the author's statement..I guess it's another case of an author with his own agenda...since when is that new? By the way...I don't care how cheap I've heard of other carriers being...even this new Walmart deal( I like Walmart but facts are facts) only match but don't beat ATT by but some change if that...And I'm sure the switchers from ATT are going to regret it..
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10-22-2009 @ 6:54PM
baby-g said...
T-Mobile is the best service I ever had . Never had a problem with T-Mobile I tried Sprint they suck and for more expensive
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10-22-2009 @ 6:59PM
nnika said...
im hoping this isnt true about at&t as i am getting ready to switch to them from verizon. ive been with verizon for over 2 yrs. no problems with there service at all. just cant afford their unlimited plan at the moment. with the fees and all my bill runs $154 bucks a month. i cant do a pay per minute plan cause i text and talk too much for that. at&t is now offering unlimited talk and text for $60 bucks with tax/fees my bill should be right around $70 bucks. That's a savings of $900+ a year. i told the customer rep i just hope their service is as good as verizons if not then i will have to go back to verizon.
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10-23-2009 @ 1:30AM
steve said...
I dont recommend AT&T, their svc has drastically worsen because of extreme stress on their network, also unlimited voice, text and web is $150 a mo+ another $15-$25 in taxes depending on where you live.
10-23-2009 @ 11:01AM
dan said...
stay away from at&t especially if you have a medical condition. they do not care.
10-22-2009 @ 6:58PM
David Lopata said...
Try asking ATT for a written break down of all their riduculous surcharges, government fees, taxes, and other fee charges. "We don't have anything written down on such information". What a crock. They basically have a monopoly which should be expunged and castrated.
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10-22-2009 @ 7:40PM
davidrep1 said...
I've been a customer of AT&T for years, back when they were AT&T, and then Cingular, and then AT&T again. And wherever I go in the USA, I've NEVER had any issues with my phones. NEVER!
I hear all of the horror stories with other people with Verison, T-Mobile, Sprint, US Cellular and the rest of them, but I've never experienced any of those issues. I'm a fairly heavy user of my cell phone, since it is my ONLY phone, and I surf the internet quite a bit with it. I am a very satisfied customer with AT&T, and no, I do not work for them.
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10-22-2009 @ 8:14PM
Kris Marshall said...
I had a basic sprint phone for years which I recently lost. I went ahed and moved up to a smart phone from Sprint . (Samsung Instinct S30 ). I have been quite satisfied with the service, and the $70/month (plus taxes of course) includes unlimited text, web, and cell to cell time (any companies cell phone). The only charge would be be for over 450 minutes of daytime voice usage to non-cell phones. What does AT&T charge for that? or Verizon?
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