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Slowing Smartphone Upgrades Hurt AT&T’s Equipment Revenue

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AT&T’s equipment revenue

Mobile operators break down their wireless sales into equipment and service revenue. Wireless equipment revenue includes handset and tablet sales, while service revenue includes subscription charges for prepaid and postpaid customers. In this part, let’s look at AT&T’s (T) combined domestic wireless operations (or AT&T Mobility) equipment revenue trend over the last few quarters. In the fourth quarter of 2018, AT&T Mobility’s equipment revenue rose ~0.5% YoY to reach $4.9 billion.

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During the Deutsche Bank Media, Internet and Telecom Conference held on March 13, John Stephens, AT&T’s chief financial officer, talked about the impact of slowing smartphone upgrades on AT&T’s equipment revenues. Stephens stated that handset subscribers are continuing to hold onto their handsets for a longer period of time. As a result, “Our equipment revenue was $100 million higher in the first two months of 2018, than it has been in the first two months of 2019.”

Peer comparison

In the fourth quarter of 2018, Verizon’s (VZ) wireless equipment revenue rose ~5.3% YoY to $6.8 billion, while T-Mobile’s (TMUS) wireless equipment revenue rose ~8.6% YoY to $2.9 billion.

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