AT&T posted pretty strong financial results for the first quarter. For the quarter ended March 31, 2008, AT&T’s revenues totaled $30.7 billion, and net income totaled $3.5 billion. The net income increased 21.5% from the year-earlier first quarter. Revenue and income growth was fueled by several factors, including:
- 18.3% increase in wireless revenues; wireless data revenues from areas such as Internet access, messaging and media bundles up 57.3%
- 13.2% growth in broadband revenues; 491,000 net gain in broadband connections in the quarter to reach 14.6 million in service
- Enterprise revenues up 1.2% and enterprise service revenues up 2.1%, led by a 22.9% increase in revenues from IP based data services
- Continued ramp in AT&T U-verse TV subscriber totals, with a first-quarter net gain of 148,000 to reach 379,000 in service; on track to reach target of more than 1 million subscribers by year-end 2008
I suspect when Verizon reports, we’ll see similar revenue and growth patterns. Both AT&T and Verizon are seeing growth come from three key areas: wireless, broadband/IP, and enterprise services. Their cableco competitors, namely Comcast, Time Warner, and Cox only realistically possess one of those growth engines – broadband/IP. Cablecos are doing a good job in leveraging IP for growth services, particularly with voice service for both consumer and SMB markets. But their lack of wireless and comparable enterprise growth engines puts them at a disadvantage. While it’s true that telecom competitors can’t match, line for line, their wireline voice defections with video additions. They will continue to lose more voice lines than they gain in video “lines.” The reality is, at least for AT&T and Verizon, so what. They more than make up for those wireline losses through their wireless and IP growth engines. Both Verizon and AT&T stock prices are appreciating, while their cable competitor’s stock valuations are declining. All this despite growing cableco telephony market share at their expense.
For the time being, AT&T and Verizon appear to be in the driver’s seat for the future. They have assembled an offensive product suite which gives them the advantage for the long term. Cablecos certainly aren’t left for dead in this scenario. They have ample resources to put up a good fight and inflict targeted pain points. They could very easily concede wireless and enterprise, and build a solid business with video and telephony. But if they choose to rival their telecom competitors, they’ll have to develop and execute a wireless and enterprise strategy, or be placed at a pervasive competitive disadvantage.