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DirecTV acquisition leads to 22% Q4 revenue growth for AT&T

MUMBAI: US telecom major AT&T has reported 2.8 million wireless net additions and double-digit revenue, adjusted operating margin, adjusted EPS and free cash flow growth for the fourth quarter.

AT&T’s consolidated revenues for the fourth quarter totaled $42.1 billion, up more than 22% versus the year-earlier period largely due to the acquisition of pay TV service provider DirecTV.

Compared with results for the fourth quarter of 2014, operating expenses were $34.6 billion versus $39.9 billion; operating income was $7.5 billion versus $(5.5) billion; and operating income margin was 17.9% versus 15.9% in the year-ago quarter. When adjusting for amortisation, merger- and integration-related costs and other expenses, operating income was $7.1 billion versus $5 billion; and operating income margin was 16.8%, up 230 basis points from a year ago.

Fourth-quarter 2015 net income attributable to AT&T totaled $4 billion, or $0.65 per share, compared to a net loss of $4 billion in the year-ago quarter. Adjusting for the $0.22 non-cash actuarial gain on benefit plans from the annual re-measurement process and $0.20 of costs primarily for merger- and integration-related items, earnings per share was $0.63 compared to an adjusted $0.56 in the year-ago quarter, an increase of 12.5 per cent.

Reported cash from operating activities was $9.2 billion in the fourth quarter, and capital expenditures totaled $6.1 billion, or $6.8 billion when including purchases in Mexico with favorable payment terms. Free cash flow — cash from operating activities minus capital expenditures — was $3.1 billion.

214,000 satellite video customers were added for DirecTV. But overall video subscribers fell by 26,000

Full-year results

For the year 2015, compared with 2014 results, AT&T’s consolidated revenues totaled $146.8 billion versus $132.4 billion, up by 10.8 per cent for the year. Operating expenses reflect actuarial gains and losses on benefit plans and were $122 billion compared with $120.2 billion, up by 1.5 per cent; net income attributable to AT&T was $13.3 billion versus $6.4 billion; and earnings per diluted share was $2.37, compared with $1.24.

With adjustments for both years, operating income was $27.7 billion versus $23.1 billion; operating income margin was 18.8 per cent versus 17.5 per cent and earnings per share totaled $2.71, compared with $2.56, an increase of 5.9 per cent.

AT&T’s full-year reported cash from operating activities was $35.9 billion, up from $31.3 billion in 2014. Capital expenditures, including capitalised interest, totaled $20 billion, or $20.7 billion when including purchases in Mexico with favorable payment terms, versus $21.4 billion in 2014.

Full-year free cash flow was $15.9 billion compared to $9.9 billion in 2014, a 60 per cent increase. The free cash flow dividend payout ratio for the full year was 64 per cent.

Outlook

AT&T provided long-term guidance following its acquisition of DirecTV, and there is no change to that guidance. Specifically, in 2016, the company expects:

· Double-digit consolidated revenue growth
· Adjusted EPS growth in the mid-single digit range or better
· Stable consolidated margins with ramp in Mexico investment
· Capital spending in the $22 billion range

AT&T chairman, CEO Randall Stephenson said, “We now have a unique set of capabilities that positions us for growth and also gives us a strategic advantage in providing consumers and businesses the integrated mobile, video and data solutions they want. Our DirecTV integration is going well, and the customer response to our new integrated mobile and entertainment offers is strong. Throughout this year, we plan to launch a variety of new video entertainment packages that give customers even more choices.

We’re also seeing terrific results from our expansion into the Mexican mobile market. Our LTE network now covers 355 million people and businesses, and in the quarter we had 2.8 million wireless net additions.”