Earnings at AT&T Inc. fell 23.6 percent in the fourth quarter, narrowly missing analyst estimates, as rising costs offset strong performance in the wireless business.
The country’s largest telecommunications provider said Wednesday it earned $2.404 billion, or 41 cents per share, in the last three months of 2008. That’s down from $3.14 billion, or 51 cents per share, a year earlier.
Excluding items, AT&T earned 64 cents per share, missing the average estimate of analysts polled by Thomson Reuters by a penny.
Revenue rose 2.4 percent to $31.1 billion from $30.35 billion a year ago. The latest results were slightly short of analyst expectations at $31.3 billion.
AT&T added 2.1 million wireless subscribers, more than the 2 million added in the third quarter and ahead of expectations. It ended the quarter with 77 million subscribers.
The major draw for customers was Apple Inc.’s iPhone, for which AT&T is the exclusive U.S. carrier. It added 1.9 million iPhone subscribers in the quarter, down from 2.4 million in the third quarter, when the latest iPhone model was released.
However, AT&T pays hundreds of dollars in subsidies for each iPhone it sells. It aims to make that money back in service fees over the two-year contract attached to each phone, but the upfront costs are steep: iPhone subsidies reduced earnings by $450 million, or 5 cents per share.
Hurricane repair costs further reduced earnings by $120 million, or 1 cent per share, and the rising dollar reduced the value of earnings brought home from overseas operations by $90 million, or 1 cent per share.
While wireless revenue grew 13.2 percent from a year ago to $12.9 billion, revenue at AT&T’s traditional wired phone company business declined 3.3 percent to $17.1 billion as customers kept defecting to cable phone services or opted to get rid of their landlines to use only their cell phones.
Unlike Verizon Communications Inc., AT&T hasn’t yet managed to stem declining revenue in the segment by selling broadband and TV services.
AT&T did add 357,000 broadband customers (a figure that includes wireless laptop cards) and 264,000 TV customers to its U-Verse service. Both figures were up from the third quarter.
For all of 2008, AT&T earned $12.9 billion, or $2.16 per share, up from $11.95 billion, or $1.94 per share, for 2007. Revenues rose 4.3 percent to $124 billion from $118.9 billion.
AT&T said it expects to stay on track this year, growing revenue by a low single-digit percentage and keeping its overall margins stable, excluding pension and retiree benefit costs.
AT&T expects pension charges to cut its full-year earnings by 19 cents per share, as the declining stock market has reduced the value of its funds.
The company expects to cut capital spending by 10 percent to 15 percent from the $19.7 billion it spent in 2008. Since AT&T accounts for about a third of spending by U.S. carriers on telecommunications equipment, this has implications for equipment vendors like Alcatel-Lucent and Ciena Corp. Analysts had been expecting an 11 percent reduction in capital expenditures.