AT&T CEO Randall Stephenson pointed to tax reform as a potential stimulus for investment and customer activity on Wednesday as the carrier’s earnings report revealed shrinking mobility and service revenues.
According to AT&T’s report, consumer mobility revenue dropped by 3.8 percent year over year and service revenue declined 5.6 percent. While Business Wireless revenues edged up 1.9 percent year over year, that increase was drowned out by a 4.6 percent dip in Business Wireline revenue. Overall, consolidated organic revenue dipped 0.7 percent to $41.8 billion and wireless revenue of $18.8 billion was down from $18.9 billion the year prior.
But Stephenson said tax reform under the new presidential administration could give AT&T – and businesses across the board – a boost.
“If tax reform does happen this year, the biggest payoff to AT&T, more than just the tax rates is what happens on the business side,” Stephenson said. “If a tax rate cut caused all businesses to think about investment the way AT&T is thinking about it, and all businesses begin to invest, that has nothing but a stimulative effect to our customer base. We have a very large enterprise business customer base. So, we think this is nothing but positive.”
“I’m actually of a mindset that if we get a tax reform, we could exit this year doing something better than what is in this plan,” he continued. “If we get tax reform, I do think that there is upside to these economic forecasts. And if we get tax reform, I would suggest that maybe upside to these guidance that we are giving you but it’s wait and see.”
For now, AT&T said it expects consolidated revenue growth in the low-single digits and capital expenditures in the $22 billion range in 2017.
By the numbers
In terms of other metrics, AT&T’s report gave deeper detail around some of the figures it revealed in a recent 8-K filing.
The carrier lost 67,000 postpaid phone subscribers in the fourth quarter. But while it marked the ninth consecutive quarter of postpaid losses for the carrier, the figure was an improvement over the 268,000 postpaid subs it lost in the third quarter and the 220,000 losses forecasted by Wells Fargo.
Overall, postpaid wireless net additions stood at 520,000, while prepaid came in with 406,000 net additions. Including 1.3 million connected device adds during the quarter, AT&T said wireless adds totaled 1.5 million, but noted it lost 672,000 reseller subscribers due to the shutdown of its 2G network.
Postpaid churn hit 1.16 percent in the quarter, rising above Verizon’s 1.1 percent, but postpaid phone churn was down 9 basis points to 0.98 percent for the quarter.
Stephenson noted upgrade rates stalled during the quarter, hitting just 6.3 percent at AT&T in comparison to Verizon’s 8.3 percent despite the launch of a new device. Stephenson observed the upgrade trend was one that could impact equipment revenues in the future.
“We did see a year-over-year slowdown in handset upgrades, even in the fourth quarter, even with the launch of a new device, an iconic new device,” Stephenson said. “So, we are learning about what the customers want. We’ve given them their choice; they shown up with more BYOD; they chosen to hold their devices longer and pay off their equipment installment plans in full. And that’s all been good for us; it’s been good for our retention, for our customer accounts, for our churn, but quite frankly it will impact depending upon how popular sales are, how many upgrades we have, the revenues going forward from the equipment sales.”