* Q4 adjusted EPS 55 cents vs Street view 54 cents
* Adds 400,000 subscribers vs analyst view 504,000
* Rev $31.36 billion vs Street view $31.47 billion
* Sees 2011 earnings up in mid-single-digit range
* AT&T shares down almost 3 pct
(Adds executive quotes, share price update)
By Sinead Carew
NEW YORK, Jan 27 With only days remaining until
it loses its grip over U.S. iPhone sales, AT&T Inc (T.N) warned
of a "rocky" start to 2011.
AT&T's shares fell nearly 3 percent in response to a
disappointing profit outlook for the year, further unnerving
investors about its growth prospects once market leader Verizon
Wireless launches an Apple Inc. (AAPL.O) iPhone next month.
Chief Executive Randall Stephenson, even while forecasting
"healthy" customer growth, acknowledged that the new iPhone
would make life tougher, at least initially.
"It may be rocky in the beginning of the year, kind of
volatile, hard to predict, but we think as we work through it
and the market stabilizes, we'll be able to grow through it,"
Stephenson said during the company's quarterly conference call
in which he seldom takes part.
The company, heavily dependent on iPhone, forecast 2011
earnings per share growth in the mid-single-digit percentage
range. Analysts expected growth of about 10 percent.
"I suspect they're coming to grips with the reality of the
iPhone exclusivity wearing off," said Avian Securities analyst
Gerard Hallaren. He described it as "a slow bleed" for AT&T.
Adding to negative sentiment, AT&T's net additions of
400,000 valuable contract customers in the fourth quarter
compared poorly with almost 504,000, the average expectation
from eight analysts contacted by Reuters.
AT&T's figure was also less than half the 872,000 new
contract customers reported by Verizon Wireless, a venture of
Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L).
"These results coming on the heels of Verizon's, really
demonstrate Verizon's leadership position in the (contract
customer) segment," Mizuho analyst Michael Nelson said.
AT&T's wireless profit margin was thinner than expected,
too. The margin remained at 37.6 percent, in line with the
third quarter, counter to AT&T's promise for an improvement.
The prospect of a Verizon iPhone has set the tone for the
telecoms industry this earnings season. Motorola Mobility
(MMI.N), which makes phones including the Droid for Verizon,
acknowledged on Wednesday that its sales would be hurt by the
arrival of iPhone. Its shares dropped almost 12 percent on
But AT&T noted that it still managed to activate 4.1
million iPhones in the quarter on top of 5 million activations
in the third quarter, despite widespread speculation about the
Verizon Wireless iPhone's arrival.
"With all that hype going on, we sold over 9 million
iPhones," Chief Financial Officer Rick Lindner told Reuters.
"We've a very solid loyal customer base with the vast majority
with long-standing family or business relations."
Piper Jaffray analyst Christopher Larsen also found some
positive news in AT&T's addition of 442,000 customers using
tablet computers, including Apple's iPad. AT&T also cited sales
of tablets based on Google Inc's (GOOG.O) popular Android
"That's one of the things they're doing," Larsen said.
"They're not just about iPhones. They're selling a lot of other
Excluding unusual items, AT&T earned 55 cents per share
compared with the average analyst estimate for 54 cents a
share, according to Thomson Reuters I/B/E/S.
Operating revenue rose 2.1 percent to $31.36 billion.
Analysts were expecting revenue of $31.47 billion.
AT&T said it sees consolidated revenue growing this year at
a similar rate to its 1.4 percent growth in 2010. It said
earnings per share growth would be helped by improvements in
both wireless and wireline profit margins.
It forecast capital spending for the year would be in the
low-to-mid $19 billion range and wireless spending increases
would be offset by lower wireline capital expenses.
AT&T shares fell 86 cents or just under 3 percent to $27.87
on the New York Stock Exchange after the report.
(Additional reporting by Ritsuko Ando; editing by Derek Caney,
Dave Zimmerman and Gunna Dickson)