U-verse is driving average wireline revenue per household

A closer look at AT&T’s wireline segment – 4Q14 performance (Part 5 of 10)

(Continued from Part 4)

Consumer wireline revenue per household

Earlier in this series, we learned that the consumer wireline segment supported AT&T’s (T) adjusted revenue growth during 4Q14. The revenue was adjusted for the impact of the sale of the company’s Connecticut operations to Frontier Communications (FTR).

Also, we learned that U-verse is AT&T’s core offering in consumer wireline. We saw that the consumer wireline segment’s growth was primarily due to an increase in its adjusted unit household revenue. Now, we’ll analyze this metric to understand how consumer wireline is managing its growth.

Higher unit revenue from U-verse

As you can see in the above chart, the company’s served households continued to decline sequentially during 2014. This was largely due to the decrease in its voice subscribers. We discussed this trend of wireline voice subscribers moving to wireless and Voice over Internet Protocol, or VoIP, services in the earlier parts of this series. Apart from AT&T, other wireline telecommunications companies—like Verizon (VZ) and CenturyLink (CTL)—are facing this trend.

However, AT&T’s adjusted consumer wireline revenue per household grew 6% year-over-year, or YoY, in 4Q14. This was largely due to the growing base of U-verse subscribers. During 4Q14, U-verse’s contribution to AT&T’s adjusted consumer wireline revenue was 67%—compared to 57% in 4Q13.

U-verse subscribers provide high revenue per user. Since U-verse video subscribers usually opt for bundled services, they have a much higher revenue contribution per unit subscribers. The average revenue per user, or ARPU, of U-verse’s triple-play was more than $170 during 4Q14. This is much more than AT&T’s $103 consumer wireline revenue per household during the quarter.

On average, the company’s households had ~1.9 connections. This translated into an estimated consumer wireline ARPU of $54 for the quarter.

You can get diversified exposure to AT&T by investing in the Technology Select Sector SPDR ETF (XLK). XLK held ~4.4% in AT&T at the end of January 2015.

Continue to Part 6

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Source Article from http://finance.yahoo.com/news/u-verse-driving-average-wireline-000601644.html

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