AT&T Reports 'Best Ever' Q3 Wireless Churn Rates As Partners And Customers Leave Landlines, Legacy Services Behind

Consumers and businesses are using their smartphones more, hanging on to them longer and staying put on AT&T's network, the carrier said during its Q3 2017 earnings call. That said, those same consumers and businesses are also leaving their landlines behind and relying more on mobile devices than desk phones.

The Dallas-based carrier touted Q3 2017 as its "best-ever third-quarter" for postpaid phone churn rate of 0.84 percent. The carrier's Q3 2017 churn rate beat Wall Street's 1.08 percent prediction for the important consumer metric.

The postpaid smartphone base increased to 59.3 million subscribers during the quarter, up from 58.7 million in Q3 2016, which the carrier attributed to its "successful" video and wireless bundling strategy. AT&T had 2.3 million total wireless net adds in the U.S. and 700,000 adds in Mexico during the third quarter, which includes prepaid, postpaid, and connected devices. The carrier's collective 3.0 million wireless net adds blew past the Wall Street expectations of 1.97 million expected net adds.

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At the same time, however, AT&T's Business Solutions revenues have declined modestly each quarter in 2017 when compared to 2016's numbers. For the third quarter, revenues slid 0.7 percent from $17.77 billion in Q3 2016 to $17.06 billion as legacy wireline and voice services revenues continue to shrink, the carrier said.

Partner Solutions revenues dipped during Q3 2017, which ended Sept. 30, from $1.52 billion in Q3 2016, down to $1.47 billion.

AT&T expects reseller revenues to ebb going into 2018, according to John Stephens, AT&T's senior executive vice president and CFO, who spoke during the Q&A session following the earnings call.

Business wireless revenues also slumped year over year to $9.69 billion in the quarter from $9.93 billion a year ago. Stephens said that similar to Q2 2017, lower wireless equipment revenues are impacting the third quarter's business sales.

AT&T's strategic services revenues, which includes Ethernet, cloud, VoIP and security services, climbed to $174 million during the quarter, growing 6 percent when compared to the year-ago quarter.

"Gains in strategic services helped offset some of the declines in legacy services, but we continue to drive hard on cost management initiatives while increasing the percent of revenues that come from wireless. This will drive higher margins," Stephens said.

AT&T on Monday extended its Oct. 22 deadline to close its proposed acquisition of media giant Time Warner due to pending regulatory approval. The carrier said during the call that the media giant continues to beat performance expectations and that the acquisition is still expected to close by the end of 2017.

AT&T reported diluted earnings of $0.49 per share on revenues of $39.67 billion, down from $0.54 per share and $40.89 billion in the year-ago quarter. The carrier attributed these drops to declining legacy wireline services and decreasing consumer phone upgrade rates and overage charges.

AT&T said that without the impact of hurricanes and earthquakes during the third quarter, revenues would have been $39.8 billion. AT&T's earnings missed Wall Street's revenue estimate of $40.10 billion.

Net income attributable to AT&T during the quarter was $3.0 billion, up from $3.33 billion during Q3 2016.

Turning its attention to politics, AT&T said during its earnings call that the country "desperately needs" lighter-touch regulations surrounding privacy rules and so-called net neutrality. The carrier also said that it would "step up" if investments if tax reform became law under the current administration.