AT&T’s Margins Expected to Rise Despite Loss of 300,000 Phone Subscribers in Q4 2015

by Istvan Fekete on January 13, 2016

att-subsidyJust ahead of the carrier’s fourth-quarter earnings report, Wells Fargo Securities have adjusted its estimates for AT&T, predicting that the carrier will report fewer postpaid adds than previously expected, but higher EBITDA margins. The analysts argue that AT&T had a less aggressive marketing campaign in the holiday quarter, compared to previous years.

The firm forecasts that AT&T will report 800,000 net tablet subscriber adds for the three-month period between October and December 2015, but a net loss of 300,000 phone subscribers, totalling 500,000 overall net adds.

From Wells Fargo’s forecast, fewer net adds means higher EBITDA margins: 43.8% compared to the 42.7% previous expected.

The firm notes that the acquisition of DirecTV will bring various features and promotions this year. They understand AT&T’s recent launch of unlimited plans for DirecTV subscribers as a warm-up promotion for future sales.

“We estimate wireless service revenue of $15.1B, up 0.4% y/y, and equipment revenue of $4.6B, down – 4.5% y/y. Our EBITDA margin estimate is now 43.8% vs. 42.7% prior,” Wells Fargo wrote in a research note. “We estimate postpay upgrade rate of 8.75%, down y/y from 11.3%, as equipment installment plans (EIP) are suppressing upgrades overall.”

The firm’s estimate seems to be based on a statement from CEO Randall Stephenson, who in December said that the carrier would announce new capabilities, products, and pricing in January.

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