AT&T sees big benefit from tax law

AT&T Inc. (NYSE:T) expects to keep an extra $20.42 billion in cash for 2018 thanks to new federal tax cuts, a windfall the company said it plans to spend on network enhancements.

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The corporate tax overhaul, long a goal of Chief Executive Randall Stephenson, helped AT&T book a $19 billion gain on paper, though its fourth-quarter revenue fell by 0.4%.

The No. 2 U.S. wireless carrier by subscribers has struggled in recent years with a shrinking revenue base as low-cost competitors lure away customers. Conditions are no better in its landline business, while DirecTV division struggles with cost-conscious TV viewers opting to cut the cord.

Shares were up 3% after hours.

The satellite-TV business lost 147,000 subscribers in the fourth quarter, while the U-verse fiber optic service lost 60,000 video customers. Online-only DirecTV Now helped cushion the blow, netting 368,000 new customers.

The wireless business gained 221,000 postpaid phone customers. The company ended the year with 90.4 million domestic wireless subscribers as it added more customers on prepaid plans.

Overall, AT&T posted a $19 billion profit, or $3.08 a share. Overall, AT&T posted a $19 billion profit, or $3.08 a share. Adjusted EPS was 78 cents, above the 66 cents in the year-ago period and beating analysts' expectations.

Revenue fell to $41.7 billion from $41.84 billion a year earlier.

The Dallas company already said it will spend an additional $1 billion on capital spending as it maintains and enhances its network of telephone lines, wireless radio equipment and other infrastructure. That will push its capital expenditures up to $25 billion in 2018.

Telecom companies were among the biggest winners of the U.S. tax bill that cut the federal corporate tax rate to 21% from 35%. The legislation also gave corporations a few years to deduct the value of new equipment right away rather than over time, an incentive to boost infrastructure investments in the short run.

Rival Verizon Communications Inc. last week said the new tax law could net it $3.5 billion to $4 billion in cash savings this year. It also booked a one-time $16.8 billion paper gain after the new law allowed it to slash its deferred tax bill.