AT&T Inc. Posts Solid Earnings, Stock Falls on Weaker Subscriber Growth

AT&T Inc (NYSE:T), the second largest wireless telecommunications provider in the United States posted strong financial results for the fourth quarter of 2013. The company delivered $6.9 billion profit or $1.31 earnings per share compared with its $3.86 billion losses or $0.68 losses per share in the same period a year ago.

Excluding special items, the company said its EPS was $0.53, an increase of 20% from $0.44 in the same period in the previous year.

AT&T, Inc (NYSE:T) said its revenue was $32.58 billion, higher than the $33.06 billion consensus estimate of Wall Street analysts. The company said its service margin rose from 29.1% to 37.4%.

Weaker wireless subscriber growth

Despite the solid quarterly financial performance of AT&T, Inc (NYSE:T), its stock price dropped nearly 2% after hours to $33.10 per share. The decline was due to its weaker wireless subscriber growth compared with its peers in the industry.

AT&T, Inc (NYSE:T) added 566,000 new wireless subscriber during the quarter. The figure missed that 636,000 consensus estimate of Wall Street analysts. It is also lower than the 1.6 million subscribers added by Verizon Wireless and 869,000 new subscribers added by T-Mobile US Inc (NYSE:TMUS).

During the quarter, the company repurchased 54 million shares worth $1.9 billion. The company ended the period with $2.5 billion free cash flow.

Marketing rivalry against T-Mobile

Investors were concerns about the strong competition confronting AT&T, Inc (NYSE:T) particularly from T-Mobile US Inc (NYSE:TMUS). The two companies are trying to lure each other’s subscribers.

T-Mobile’s recent marketing campaign was directed towards AT&T wherein it offered to pay early termination fees for customers who will break up their service with AT&T and trade-in their device. On the other hand, AT&T offered to pay as much as $450 to T- Mobile customers who will transfer their service to the company.

Financial outlook

For the fiscal 2014, AT&T, Inc (NYSE:T) expected to deliver robust revenue (2% to 3%) and earnings per share (mid-single digit) growth with stable margins. The company expects to return substantial value to shareholders.