High sales in the last quarter
AT&T (T) is expected to report its annual financials for 2014 on January 27, 2015. In this series, we’ll analyze what AT&T’s fourth quarter may look like. The last quarter of the year usually presents high retail sales due to the holiday season.
The anticipated increase in sales from Apple’s (AAPL) iPhone 6—launched in September 2015—in 4Q14 was particularly significant for AT&T. The company has a strong iPhone subscriber base.
Currently, all of the national carriers—Verizon (VZ), Sprint (S), and T-Mobile (TMUS)—sell iPhones. However, AT&T was the first carrier to sell the smartphone in the US. The first iPhone was released in 2007. The company expected a surge in sales—both year-over-year, or YoY, and sequential—during 4Q14.
AT&T’s 4Q14 revenue
In the 3Q14 conference call, AT&T mentioned that it expects consolidated revenue to grow in the range of 3–4% YoY in 2014. According to this guidance, AT&T’s revenue in 4Q14 should be in the range of ~$35–36 billion. Management’s revenue guidance is significantly higher than the company’s consensus quarterly revenue of $34.2 billion—projected by the Wall Street analysts.
AT&T is the second largest US telecommunications company. Vanguard Telecommunication Services ETF (VOX) had a significant 23% holding in AT&T at the end of 3Q14.
Performance in 3Q14
In 3Q14, the company recorded a ~2.5% YoY growth in revenue—driven by its wireless and consumer wireline segments. In wireless, the growth was primarily due to higher equipment—mobile devices—revenue. The company’s wireless service revenue declined due to lower post-paid average revenue per user, or ARPU, in the quarter on a YoY basis.
During the quarter, the growth in the company’s wireline revenue remained flat YoY. A decline in the company’s largest wireline segment—AT&T Business Solutions—was offset by the growth of its Consumer Markets—also called consumer wireline. Within AT&T Business Solutions, strategic services’ data revenue grew significantly during the quarter. These services largely include IP services, Ethernet, cloud, and security services.