AT&T: Economy squeezing broadband

AT&T is seeing some consumers terminate home broadband connections for economic reasons, CFO Rick Lindner told analysts today when discussing AT&T’s third-quarter earnings. Those results reflect a tale of three companies: a growing wireless business, a recovering commercial business and a consumer wireline operation in flux. News from two of the three was quite good, but the third leg of that stool is showing some cracks.

AT&T continues to bleed access lines and could not cover that lost revenue with improved broadband sales. Despite adding a net 170,000 AT&T U-verse TV customers and growing consumer IP revenues for TV and Internet access by 19.3%, AT&T’s overall consumer revenues fell 2.1% to $5.6 billion, as the company’s total consumer connections dropped by 900,000 in the quarter. AT&T added a net 46,000 broadband connections, seeing slower growth in that segment as well.

Lindner, who is also a senior executive vice president, attributed much of the second quarter numbers to seasonality – the end of the school year prompts service shutdowns – and to economic weakness that has affected the housing industry and consumers in general. Lindner also talked up the ability of U-verse, AT&T’s IPTV service, to help in voice line retention and broadband expansion.

“Beyond normal seasonality, we are seeing some economic impacts,” Lindner said. “We are not seeing significant increases in non-paid disconnects and churn – it’s been a very small impact; our non-paid disconnects are up maybe 2%. We are seeing more weakness in terms of inward orders.”

Some of the customers who are disconnecting broadband are “indicating they are not going to a competitor,” Lindner said. “These tend to be more customers that are in the value segment, customers that have more incidental usage of broadband and Internet in the home, and as a cost-cutting measure, they are saying ‘We will use wireless access or Internet access at the office.’”