AT&T Inc. continues to benefit from its association with Apple as the first carrier to offer the iPhone 6, having beat analysts’ expectations in the fourth quarter of 2014 with a bump from sales of the new device during the holidays. But the carrier may have a tough time repeating those results when it reports first-quarter earnings on Wednesday, as customers search for deals and cheaper plans.
The quarter ending in March is typically slow for telecom carriers across the board since many customers purchase new devices in October through December. AT&T added a net of around 423,000 wireless subscribers during its most recent quarter, predicts Goldman Sachs. Many new subscribers coming in during the first quarter purchased tablets instead of smartphones, a situation Verizon Communications also faced during Q1.
Verizon announced its earnings results Tuesday and reported an increase of 820,000 4G tablets, while the network added 621,000 4G smartphones.
Meanwhile, T-Mobile led U.S. carriers in net subscriber gains with about 930,000 wireless customers added to its network in the past quarter. The carrier adheres solely to an installment plan business model and has used price cuts and special programs to lure subscribers for nearly two years.
Analysts agree that the heavy deals and discounts offered by T-Mobile and Sprint in recent quarters have forced AT&T and Verizon to rely on other products like tablets and in-car systems for subscriber gains and profits. “The industry is maturing. Verizon and AT&T can no longer offset subscriber losses to T-Mobile with gains from Sprint,” Macquarie Securities analyst Kevin Smithen told Bloomberg.
Accounts using AT&T’s Mobile Share data plans doubled year-over-year in 2014, which is expected to hurt the network in the first quarter. AT&T offers discounts on many of its higher data tiers with the hopes that customers will add more devices to their accounts and upgrade. That was not apparent during the first quarter, but the outlook for AT&T remains positive as the use of LTE devices grows across all mobile networks.
AT&T also is gaining more customers for its AT&T Next equipment installment plans, which aren’t counted as long-term contracts in the way two-year contracts are counted. Next plans aided AT&T in garnering a 72.3 percent increase in device revenues during the fourth quarter, even while service revenues declined 3.7 percent year-over-year. AT&T, Verizon and Sprint are all seeing significant increases in customers opting to purchase phones through an installment plan over a traditional two-year contract.
Wall Street analysts expect AT&T to report on Wednesday earnings of $3.26 billion, or 62 cents a share, an 11.6 percent decline compared with $3.65 billion, or 70 cents per share profit, in the year-prior quarter. Revenue is expected to remain at about $32.84 billion, which compares with revenue of $32.48 billion a year ago.
Verizon has scheduled a conference call to discuss its first-quarter results Wednesday at 4:30 p.m. EST.