AT&T slides to nearly $4 billion quarterly loss on hefty costs, but revenue tops expectations

Industries Associated Press

AT&T booked a nearly $4 billion loss for the fourth quarter because of a slew of one-time expenses that included a loss on benefit plans, but its revenue grew 4 percent to top expectations.

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The nation's second-largest wireless carrier posted a loss of $3.98 billion, or 77 cents per share, for the final three months of 2014. Excluding multiple one-time items, it earned 55 cents per share in the latest quarter. Revenue grew to $34.44 billion from $33.16 billion, helped by an 8 percent jump in wireless revenue. The company added 1.9 million wireless subscribers — twice as many as in the year-ago quarter.

The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 55 cents per share and revenue of $34.26 billion.

AT&T Inc. is facing pricing pressure from smaller rivals T-Mobile and Sprint in a competitive environment in which most Americans already have a cellphone. To keep growing, AT&T is looking at beyond cellphones — to tablets and connected cars, for example. It is also working to expand overseas. The company announced this week that it is Nextel Mexico from NII Holdings for about $1.88 billion, minus the company's debt.

The deal, expected to close in mid-2015, will give AT&T companies that operate under the name Nextel Mexico and hold all of the wireless properties in Mexico held by NII Holdings Inc. That includes spectrum licenses, network assets, retail stores and about 3 million subscribers. AT&T has also agreed to buy DirecTV and CEO Randall Stephenson said in a statement that the two transactions "will make us a very different company."

The rise of tablets and other connected devices gives wireless carriers additional revenue sources. For example, adding a tablet to a phone plan means an additional $10 in monthly service fees. Although that's less than the $15 to $40 that AT&T gets for a new phone, the company doesn't have to subsidize the cost of the tablet, the way it often does when customers buy a new phone under a two-year contract.

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At the same time, Dallas-based AT&T is trying to wean customers off equipment subsidies and shift them toward installment plans in which they ultimately pay full price for a phone — $650 for an iPhone 6, for example, compared with $200 under subsidy pricing. That shift means it books less service revenue in the short term, as the company offers monthly discounts of $15 or $25 per phone.

As of Tuesday's market close of $32.81, AT&T's stock is down about 2 percent since the start of the year. In comparison, the Standard & Poor's 500 index is just about flat. Over the past 12 months, AT&T's shares lost less than 2 percent of their value, while the S&P 500 has gained 15.5 percent. The stock rose 54 cents or less than 2 percent in aftermarket trading after Tuesday's report.

AT&T reported full-year revenue was $132.45 billion, up 3 percent from a year earlier. In October, the company trimmed its outlook for full-year revenue growth to a range of 3 percent to 4 percent, compared with about 5 percent as previously forecast.

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Elements of this story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on T at http://www.zacks.com/ap/T

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Keywords: AT&T, Earnings Report, Priority Earnings