AT&T exec: U-verse success shows Project VIP will succeed

The ongoing success of U-verse broadband and IPTV is an indicator that AT&T (NYSE: T) will succeed with its multibillion-dollar wireless/wireline broadband expansion, Project VIP, John Stephens, senior executive vice president and CFO said during prepared remarks about the company's second quarter earnings.

During the second quarter, U-verse IPTV added 233,000 subscribers and now, like Verizon (NYSE: VZ) FiOS, has more than 5 million total subs. U-verse broadband did even better, adding 641,000 subscribers to a total universe that now covers 9.4 million users.

"U-verse is now a nearly $12 billion annualized revenue stream, not bad for a business that was just started seven years ago. And it also shows clearly that we know how to build and scale new businesses as we move forward with Project VIP," Stephens told analysts.

It's a good thing U-verse is doing so well because the historic wireline business continues to slide and the commercial wireline business--outside of U-verse--was again battered by a "challenging" economy that is "not providing any assistance to our efforts here," Stephens said.

Again, though, he said U-verse is helping out.

"The one encouraging piece is … how well our teams have done in beginning to put U-verse or high-speed broadband into our small business space," Stephens continued.

U-verse will be a direct beneficiary of Project VIP which is, on the surface, intended to drive wireless broadband to all areas of the AT&T footprint and below the surface to improve wireline broadband. In both instances, AT&T is planning to use the improved broadband connections to feed high-speed data and IPTV customers either via wires or wireless.

"Our network upgrades are on track and we expect to boost top U-verse speeds up to 45 megs per second in the next few months," Stephens said. "And we are moving towards speeds of 75 megs and 100 megs in the near future."

The carrier added about 500,000 U-verse video consumer locations during the first quarter of the year to go with 1.3 million U-verse broadband-only locations.

"This gives us more than 50 million U-verse broadband customer locations across our wireline footprint," Stephens said, noting that AT&T is "on track to hit our goal of reaching approximately 75 percent of our customer locations within our wireline footprint with wired high-speed broadband by the end of 2015.

Without providing specific numbers, AT&T, in its earnings release, said that U-verse posted consumer and business revenues that were 30.1 percent higher year-over-year and 9 percent sequentially. These helped offset losses and resulted in total wireline revenues that were down 0.9 percent year-over-year and 0.8 percent seasonally. U-verse, the carrier said, accounts for 51 percent of the $5.6 billion in consumer revenues derived from residential customers. A year ago that was 41 percent and "two years ago U-verse was less than a third of consumer," Stephens concluded.

For more:
- AT&T issued this earnings press release
- and Morningstar has this earnings call transcript

Special Report: Wireline telecom earnings in the second quarter of 2013

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