AT&T’s wireline segment had lackluster performance in 4Q14

A closer look at AT&T’s wireline segment – 4Q14 performance (Part 1 of 10)

AT&T’s wireline revenue

In a previous series, we discussed AT&T’s (T) 4Q14 results for the wireless segment. In this series, we’ll look at the performance of the company’s wireline segment during the quarter. Despite a decline in size—over the years—wireline remains a vital part of the company. At the end of 4Q14, wireline contributed to 42% of AT&T’s revenue.

In 4Q14, the company’s wireline revenue declined by 1% year-over-year, or YoY. However, when adjusted for the sale of the Connecticut operations, the company’s wireline revenue largely remained flat. The revenue increased marginally by 0.4% during the quarter.

The segment’s performance dampened AT&T’s overall revenue growth for the quarter. The company’s adjusted consolidated revenue grew by ~4.5% YoY in 4Q14.

Data segment marginally offset the decline in voice services

Despite data services’ modest performance, AT&T’s wireline revenue growth was subdued by declining legacy voice services. In 4Q14, revenue from AT&T’s data segment grew by 4.5% YoY. Also, these services’ contribution to AT&T’s topline in the wireline segment increased during the quarter. In 4Q14, they represented ~61% of the company’s wireline segment—compared to ~58% in 4Q13.

As you can see from the above chart, the revenue from legacy voice services in wireline fell sequentially throughout 2014. In 4Q14, voice revenue fell by ~13.6% YoY. However, declining voice revenue isn’t unique to AT&T.

US wireline telecommunications companies continue to face this trend. Voice customers continue to move from wireline telecommunications to wireless and Voice over Internet Protocol, or VoIP, services.

Other wireline telecommunications companies including Verizon (VZ), Windstream (WIN), and CenturyLink (CTL). They’re also facing this trend. Please read Investor must-know: Major trends in the wireline industry to learn more.

You can get diversified exposure to AT&T, Verizon, Windstream, and CenturyLink by investing in the SPDR S&P 500 ETF (SPY). SPY held a total of ~2.2% in these telecommunications companies as of February 5, 2015.

Continue to Part 2

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