3 Things AT&T Management Wants Investors to Know

By Daniel B. KlineFool.com

In its first post-earnings call with investors during which it has owned DirecTV for the entire period, AT&T highlighted some of the changes brought about by the acquisition.

The company reported a solidthird quarter, driven by a 19% increase in consolidated revenues to $39.1 billion, mostly because of its deal to buy the satellite-television company. There was some some weakness in subscriber numbers for its own U-Verse service, but that was made up by wireless and DirecTV.

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Because of costs related to the merger, the continued decommissioning of the network that once belonged to AT&T acquisition Leap, and other one-time costs, the company reported lower earnings per share ($0.50) versus the third quarter of 2014 ($0.60). Excluding those charges, EPS was $0.74 versus $0.65 a year ago, up nearly 14% year over year.

It was a decent quarter at a time when the cable industry faces increased pricing pressure and the company's wireless customers are being aggressively courted by lower-priced rivals led by T-Mobile .

AT&T's CEO offers his perspective on the quarter. Source: AT&T

It's a new companyCFO John Stephens kicked off the company's post-reporting call with analysts by delivering what he described as a "quick reset of what we have put in place at AT&T." He explained that the deal fundamentally changes the company, making it something unique in the U.S. market: "We are the first scaled communications and video provider to offer customers fully integrated nationwide products. Our focus is on profitable growth, and we believe that we have in place the products and the platforms that will enable our success."

The addition of DirecTV allows the company to bundle in ways its rivals cannot. That could, in theory, give it a pricing advantage over a wireless carrier such as T-Mobile, which only offers a single service, but AT&T has not yet pressed that advantage. The company does give people incentive for bundling services, but the savings relative to T-Mobile's much lower wireless prices remain small.

Reporting and investingIn addition to attempting to reset how people think of the company, AT&T has also changed how it reports results. Stephens said during the call, while explaining some of the company's expenditures:

The CEO specifically laid out how the company has invested in what he called "a deep spectrum position." He explained that AT&T's purchase in the most recent spectrum auction paired with its existing holdings should be enough to meet growing customer demand.

Spectrum has become increasingly important as customers use more wireless data and stream heavier things to their phones and tablets. AT&T has the second highest-rated mobile network, according to the most recent RootMetrics report, ahead ofSprint and, perhaps most importantly, T-Mobile.

Maintaining its network ranking is very important for AT&T, as it gives the company justification for its higher wireless prices compared with fast-growing T-Mobile.

A focus on profitabilityIn addition to growing its customer base and making needed capital expenditures, the CEO made it clear that "behind all this is our focus on profitability." He credited reducing costs and better management of its customer base with improving margins across the company's various segments.

Stephens also noted that the company has gotten smarter about growing revenues. He made it clear that increasing profitability was not just about pricing or cutting headcount:

AT&T, with the addition of DirecTV, is now uniquely positioned to offer wireless, pay television, Internet service, and even landlines very efficiently. For example, the company can combine back-office functions, customer support, and more for all of its brands.

It will take time to do that, and while it's happening, AT&T will face pricing pressure in cable from cord cutters, in wireless mainly from T-Mobile, and in Internet from the wired cable companies. Still, AT&T, which already commands high prices, may have room to discount while maintaining margins by offering better prices on bigger bundles.

The article 3 Things AT&T Management Wants Investors to Know originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. He thinks milk-based hot beverages are underrated. The Motley Fool recommends Verizon Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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