AT&T tops subscriber estimates as bundled plans, iPhone promotions lift demand

By Harshita Mary Varghese (Reuters) -AT&T added more wireless subscribers than expected in the third quarter, as bundled plans and heavy promotions around the latest iPhone launch helped it attract more customers in a fiercely competitive market. Shares of the company slipped about 2% in morning trading on Wednesday after the U.S. wireless carrier slightly missed estimates for quarterly revenue on lower-than-expected equipment sales in its mobility business. The quarter ended September is a critical period for U.S. wireless carriers, with competition peaking around Apple's annual iPhone launch. Like all other carriers, AT&T has also rolled out lucrative promotions for the iPhone 17 series to lock in new subscribers and encourage existing users to upgrade to pricier plans. Equipment revenue from its mobility unit grew 6.1% in the quarter to $4.79 billion, missing Visible Alpha estimates of $4.93 billion. Operating costs in the division rose 3.8%, driven by higher expenses from selling more pricier phones and increased spending on marketing and promotions. AT&T said that the fourth quarter typically brings a seasonal uptick in customers switching carriers and higher device upgrade activity during the holiday period. Analysts at MoffettNathanson said higher upgrade rate in the fourth quarter would likely be a larger impact for AT&T and could significantly pressure margins going forward. "The wireless industry has benefited from an inordinately low upgrade rate in recent years. Just seeing a normalization would be a stiff headwind for churn, ARPU, and margins," the brokerage said. Each upgrade cycle costs the carriers a small fortune in subsidies and typically leads to higher churn as customers are more likely to switch providers when they are getting a new handset. AT&T added 405,000 monthly bill paying wireless subscribers, compared to expectations for 334,100 additions, according to FactSet. By packaging wireless and fiber broadband services together for a discount, AT&T has encouraged more customers to take multiple offerings and reduce customer exits. More than 41% of fiber households have also opted for mobile plans. Third-quarter total broadband net adds of 558,000 were the highest for AT&T in more than eight years. Revenue from its business wireline unit fell 7.8% in the quarter, hurt by declines in legacy voice and data services. On an adjusted basis, AT&T earned 54 cents per share, largely in line with estimates, according to LSEG data. Total third-quarter revenue stood at $30.7 billion, missing estimates of $30.87 billion. (Reporting by Harshita Mary Varghese in Bengaluru; Editing by Arun Koyyur and Sriraj Kalluvila)

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