AT&T Inc. (T) Sees More Cost Synergies from DIRECTV (DTV) Acquisition

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AT&T Inc. (NYSE:T) said in the conference call that it is estimating cost synergies of $2.5 billion, from the acquisition of DIRECTV (NASDAQ:DTV), by the third year. This is higher than the $1.6 billion projected by it earlier. The company hopes to achieve through content, supply-chains and customer care efficiencies. It is also hoping to have a single billing, as well as collections, apart from a single truck roll to reduce its expenditures. The company expects the transaction to close in the current quarter.

Key Takeaways from Conference Call

AT&T Inc. (NYSE:T) said that it has started to close down the CDMA networks legacy and expects the process to be completed before the current year ends. Turning towards Mexico, the company indicated that it provided unique opportunity in the growth market. It has already established a near-nationwide footprint, with a leadership position in the spectrum. The company sees favorable macroeconomic trends, apart from attractive regulatory surroundings. It is also well placed for its investments, as well as DIRECTV and Nextel Mexico.

The telecom service provider said that nearly two-thirds of smartphone sales were on its Next, and another 5% brought their own device. Significantly, 70% of phone sales didn’t carry a subsidy in the March quarter. The company also said that retention was ahead of schedule, while churn was less than estimated. Above all, it was much lower than the historical levels before its ownership of Cricket. Incidentally, Cricket offerings produced strong results, along with robust prepaid.

Wireless Connections

AT&T Inc. (NYSE:T) said that the anniversary launch of its Next has passed. Therefore, it expects comparisons of year-over-year to improve in the upcoming quarters. The company said that strong take rate supported its drive for a sequential phone, ARPU. The company disclosed that ARPU with Next will continue to expand.

Net Additions

The telecom service provider witnessed 1.2 million total net additions in the first quarter, fueled by connected cars and tablets. Of this, 1,218,000 were postpaid net additions, including approximately 700,000 tablets. Similarly, 98,000 prepaid net additions were witnessed with strong Cricket smartphone sales.

Strong Subscriber Growth

AT&T Inc. (NYSE:T) said that it continues to witness strong demand for Wireline. Approximately 1.2 million branded smartphones were added to the base. This included 700,000 prepaid. The company said that margins were stabilizing. It’s free cash flow is $2.8 billion and it ended the quarter with a cash balance of $4.4 billion.

Revenue & Profit

The company reported 12.4% fall in net income, to $3.2 billion, from $3.6 billion, while earnings slipped 13%, to 61 cents a share, from 70 cents a share in the year-ago quarter. Adjusted earnings also dipped 11.3%, to 63 cents a share in the first quarter.

AT&T Inc. (NYSE:T) said that its adjusted consolidated revenues advanced 1.2%, to $32.6 billion, from $32.2 billion in the previous year quarter. The wireless segment has driven the revenue uptick by 1.8%, to $18.2 billion, fueled by a 36% jump in equipment revenues, to $3.4 billion.

Revenue and EPSOutlook

The company said that it is seeing some favorable signs in respect to fresh business starts, as well as growing sales of its fiber build. The company expects the migrations to ease in the remainder of the year and the related costs in connection with the conversions.

AT&T Inc. (NYSE:T) remained confident of achieving the guidance for the current year and ahead of it in several areas.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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