U-verse success bolsters AT&T wireline business

It's official: U-verse now dominates AT&T's (NYSE: T) residential wireline business.

Click image to enlarge. Source: AT&T Investor Update, 4Q 2012

"U-verse is now a $10 billion annualized revenue stream, growing at 38 percent for the full year. And IP data revenues, driven by U-verse, now represent 61 percent of consumer revenues, up from 53 percent just a year ago," John Stephens, senior vice president and CFO, said during an analysts' call discussing the carrier's fourth quarter earnings. "But we believe the best is yet to come."

Sheer numbers would support the fact that things continue to get better. U-verse added 192,000 IPTV subscribers and 609,000 high-speed Internet subscribers during the quarter. AT&T now has 4.5 million U-verse IPTV subscribers and 7.7 million HSI subscribers "helping offset losses from DSL," the carrier said in the earnings press release.

U-verse triple-play average revenue per user (ARPU) climbed to over $170 as approximately 70 percent of AT&T U-verse TV subscribers now take three or four services from the carrier. U-verse TV penetration of customer locations was at 18.7 percent at the end of the fourth quarter, and that number should increase as AT&T, through Project VIP, follows through on expansion plans to bring U-verse to 75 percent of its wireline base.

"Penetration rates are just starting to climb so the runway is long," said Stephens.

What's also strong is the influence U-verse now exerts over the entire AT&T wireline business. Stephens cited fourth quarter consumer wireline customer revenue of $5.5 billion--a 3 percent year-over-year increase--as "our best performance in more than four years" as, "for the first time, our consumer high-speed IP broadband subscribers outnumber our legacy broadband customers," he said.

Click image to enlarge. Source: AT&T Investor Briefing, 4Q 2012

AT&T reported in the press release that overall wireline broadband subscriber numbers were flat, but total broadband ARPU was up more than 10 percent year-over-year. U-verse-driven IP data revenues now comprise 61 percent of consumer revenues, up from 53 percent year-over-year and from 45 percent two years ago, the company said in the earnings press release.

"Increased AT&T U-verse penetration and a significant number of subscribers purchasing multiple services drove 17.7 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice) and 4 percent sequential growth," the carrier said.

For more:
- AT&T issued this fourth quarter earnings press release
- Morningstar had this earnings call transcript

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