AT&T Tops Profit Estimates as DirecTV Deal Nears Completion

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AT&T Inc. topped analysts’ profit estimates as gains in tablet customers cushioned the loss of phone subscribers, while the company awaits regulatory approval of its $48.5 billion acquisition of DirecTV.

Second-quarter earnings excluding some items were 69 cents a share, Dallas-based AT&T said Thursday in a statement. That exceeded the 64-cent average of estimates compiled by Bloomberg. The wireless profit service margin rose to a record 48.5 percent from 42.6 percent a year earlier.

With DirecTV, AT&T would become the top U.S. pay-TV provider and expand its business beyond the increasingly saturated wireless industry. Smaller carriers Sprint Corp. and T-Mobile US Inc. have been fighting for subscribers with price cuts, phone rentals and free music streaming, forcing larger operators like AT&T and Verizon Communications Inc. to respond.

“Investors can now look ahead to the benefits of the DirecTV deal,” said Kevin Roe, an analyst with Roe Equity Research LLC, based in Dorset, Vermont.

AT&T, the second-largest U.S. wireless carrier, rose as much as 2.6 percent to $34.80 in late trading, after closing down 1 percent to $33.93 in New York. The stock has gained 1 percent this year.

The company added a total of 410,000 monthly subscribers, short of the 460,000 average of seven analysts surveyed by Bloomberg. While the company lost more than 200,000 phone subscribers it more than made up for it with 600,000 new tablet users. Analysts projected a loss of 117,000 phone customers and a gain of 552,000 tablet subscribers.

Monthly Bills

Revenue rose to $33 billion, in line with projections. The average user’s monthly bill was $61.26, exceeding the $57.96 average of estimates, though lower than the $62.28 from a year earlier.

AT&T, which for years has lagged behind Verizon in revenue growth is starting to pull ahead. Analysts predict AT&T will have a 3 percent to 4 percent increase in sales growth over the next two years, compared with a 0 percent to 1 percent estimated for Verizon, according to estimates compiled by Bloomberg. DirecTV also will help it gain a deeper reach into Latin America.

Verizon, AT&T’s biggest competitor, has kept its focus on mobile including a new video service coming later this summer, and advertising through its $4.4 billion acquisition of AOL Inc. Meanwhile, AT&T will add a new service to its product bundle and push even further into Latin America with DirecTV.

AT&T has said that soon after it closes the DirecTV deal it will give analysts and investors an outlook for the newly combined company.

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