AT&T Q2 Profit Falls Short, but Registers Strong Subscriber Gains

AT&T fell shy of second-quarter profit expectations but posted significant subscriber gains amid a fierce battle for new mobile customers.

Earnings per share at the nation’s second-largest wireless carrier fell to 62 cents, excluding certain items, from 67 cents a year earlier. Revenue rose 1.6 percent to $32.6 billion in the quarter ending June 30. That failed to meet the expectations of analysts, who anticipated earnings per share of 63 cents on revenue of $33.2 billion.

AT&T told investors in June that it expected to post major gains in the number of postpaid subscribers — adding in excess of 800,000 net new customers, a 45 percent gain over the same time a year ago.

The company added 1 million new postpaid customers in the second quarter — its strongest gain in nearly five years, according to the company. Most of these new subscribers were smartphone customers, who are more lucrative for carriers. These subscriber gains build upon the company’s first-quarter momentum, when it added 625,000 postpaid subscribers.

The company’s Mobile Share plans, which come without an annual service contract and allow multiple devices to share data but require customers to finance the cost of a new phone or bring their own, now account for 56 percent of its postpaid subscribers.

More than half of the smartphone additions — roughly 3.1 million — came from AT&T’s Next installment payment program.

The industry is rapidly moving away from its long-standing practice of carriers subsidizing smartphone purchases in exchange for a two-year contract. Instead, carriers offer installment payment plans for customers to purchase their own phones.

In June, AT&T cautioned investors that these plans — which counter some of T-Mobile’s “uncarrier” initiatives — would result in higher revenue from equipment purchases but lower service fees.

The company said its average revenue per user fell by 4.7 percent for postpaid customers who purchased their phones through the Next plan. AT&T said that as customers upgrade using the Next program, it expects monthly billings to increase even as the company reduces churn.

Updated at 2:48 p.m. Ralph de la Vega, president and chief executive of AT&T Mobility, said during a call with analysts that the Mobile Share and Next plans are helping retain postpaid customers. The company achieved a churn rate of 0.86 percent, its lowest ever, he said.

Shares of AT&T fell 1.62 percent in after-hours trading to $35.30 on the New York Stock Exchange.

This article originally appeared on Recode.net.