AT&T Spends $560M on FirstNet in Third Quarter
Wednesday, October 24, 2018 | Comments

AT&T reported third-quarter financial results. Wireless results in the third quarter included positive postpaid phone net adds, strong prepaid phone gains and growing service revenues.

Third-quarter net income attributable to AT&T was $4.7 billion. Cash from operating activities was $12.3 billion, and capital expenditures were $5.9 billion. Capital investment included about $560 million in First Responder Network Authority (FirstNet) capital costs and reflects no FirstNet reimbursements.

“I’m pleased with the progress we made on a number of fronts in the third quarter,” said Randall Stephenson, AT&T chairman and CEO. “Our U.S. wireless business is growing, and it’s the single biggest contributor to our earnings and cash flow. … We’ve accomplished all this while staying focused on managing our debt portfolio. We’re on track to get to the 2.5 times debt-to-EBITDA (earnings before interest, tax, depreciation and amortization) range by year-end 2019.”

For the quarter, AT&T has 4.3 million total North America wireless net adds with 3.4 million in U.S. and 907,000 in Mexico. A day earlier, the mobile carrier reported 250,000 FirstNet public-safety subscribers.

AT&T's consolidated revenues for the third quarter totaled $45.7 billion versus $39.7 billion in the year-ago quarter, up 15.3 percent, primarily because of the Time Warner acquisition partially offset by the impact of ASC 606 and the netting of about $920 million of Universal Service Fund (USF) revenues with operating expenses. Without the accounting change, revenues were $46.6 billion, an increase of 17.5 percent primarily because of the Time Warner acquisition. Declines in domestic video, legacy wireline services and Vrio were offset by growth in wireless equipment and services, WarnerMedia and Xandr.

Operating expenses were $38.5 billion versus $33.9 billion in the year-ago quarter, primarily because of the Time Warner acquisition partially offset by the netting of USF and other regulatory fee revenues and the deferral of commissions under ASC 606. Excluding those impacts, operating expenses were $39.9 billion, an increase of about $6.1 billion due to the Time Warner acquisition, higher wireless equipment costs and Entertainment Group content cost pressure, partially offset by cost efficiencies.

Versus results from the third quarter of 2017, operating income was $7.3 billion, up 25.2 percent; and operating income margin was 15.9 percent versus 14.6 percent. On a comparative basis, operating income was $6.7 billion and operating income margin was 14.3 percent. When adjusting for amortization, merger- and integration-related expenses and other items, operating income was $10 billion, or $9.4 billion on a comparative basis, versus $7.5 billion in the year-ago quarter, and operating income margin was 21.9 percent, or 20.3 percent on a comparative basis, versus 18.8 percent in the year-ago quarter.

Free cash flow — cash from operating activities minus capital expenditures — was $6.5 billion for the quarter. The company is managing near-term maturities and refinancing risk and expects to have retired or refinanced about $28 billion of near-to-intermediate term maturities by the end of 2018.

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