AT&T slows U-verse buildout, remains committed to video

AT&T will slow down its U-verse buildout by a year, focusing on selling services to the 17 million living units it currently passes, company officials said today during its fourth-quarter earnings call. But AT&T still expects U-verse to be “a multibillion-dollar business” and sees the service as the heart of its consumer strategy, given that customers who buy U-verse also tend to buy broadband and voice from AT&T, Chairman and Chief Executive Officer Randall Stephenson said.

By slowing deployment down, AT&T can avoid adding employees and costs and then shedding many of those employees when the buildout is complete, Senior Executive Vice President and Chief Financial Officer Rick Lindner told analysts.

“This is a more elegant build plan,” Stephenson said.

AT&T had its best-ever quarter for U-verse net adds with 264,000, but the cost of customer acquisition and relative lack of scale for the service means U-verse is still a drag on AT&T margins and earnings per share, Lindner said. AT&T has decided to push its target of passing 30 million homes from 2010 to 2011.

“We’ve got 17 million households passed, and a lot of those were turned up in this past year,” Lindner said. “That is a good base of homes to sell into to start with. Between homes already passed and those we will build in the next year or so, we are hitting the markets with highest priority.”

The new buildout plan “gets us to our 30 million homes, allows us to manage the build and rollout of markets in a smooth fashion with our current resources,” Lindner said. “This way, we can complete this build and this investment without a lot of ups and downs in terms of force required and resources required to do this.”

Lindner said AT&T would focus on building out U-verse into the Southeast, the former BellSouth territory, where AT&T expects to benefit from selling wireline video for the first time.

AT&T’s consumer revenues were down 5% for the fourth quarter, a fact largely attributed to declining voice revenues and access lines. But where U-verse is succeeding, AT&T is reversing those trends, Lindner said.

“U-verse continues to pull through with voice,” Lindner said. “We are seeing clear improvements in access-line retention when consumers subscribe to U-verse, and the broadband attach rate for U-verse is greater than 90%.”