AT&T dials up an earnings beat as it uses promos to offset slowing upgrades
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Making an earnings call… AT&T phoned in strong quarterly results yesterday. America’s No. 2 wireless provider added 419K monthly-paying wireless subscribers (Wall Street expected 285K). AT&T's gained an edge by offering relatively affordable unlimited phone plans. Its churn rate (think: the % of people who canceled their service) was the second lowest ever for Q2. But the telecom giant’s sales ticked down to $29.8B, missing expectations as slowing phone upgrades weighed on device revenue.
Other line: This week Verizon said it added a better-than-expected 148K monthly-paying customers. But while revenue inched up, profit slipped as upgrades slowed.
Upgrade fatigue… Having the latest iPhone model isn’t as important as it used to be (think: marginal camera upgrades). Americans are holding onto their phones for longer, and carriers have lost billions in revenue as smartphone sales sag. In May, Apple iPhone sales sank 10%, their biggest drop since 2020. That’s bad news for carriers as they usually depend on flashy new or “free”-phone promotions to lock customers into plans. Now some are upselling premium services (like: extra data, 5G speeds) to dial up profits. A recent survey found that 76% of cellphone users pay for an unlimited-data plan.
Fee flare: AT&T, Verizon, and T-Mobile have all raised prices (or added fees) this year for customers who’ve held onto legacy unlimited plans.
Deals are the new devices… Wireless carriers are getting creative because their old trick of attracting customers with new phones isn’t working as well. One option is bundling services and offering special deals to rope in subscribers. For example, AT&T said nearly 40% of its fiber-internet households also have wireless plans. These tactics have been driving the strongest growth in years for monthly plans.