Verizon and AT&T See Slight Impact from Marketing Wars, Apparently

With first quarter financial reports now in from both AT&T and Verizon Communications, it is possible to say that both firms seem to be holding up rather well, despite the heavy marketing pressure in the mobile segment of their businesses.

Churn rates are stable, average revenue per account is stable and gross revenue is up, though operating income dipped, year over year.

For the quarter ended March 31, 2015, AT&T's consolidated revenues totaled $32.6 billion, up 0.3 percent versus the year-earlier period.

More to the point, however, AT&T had first quarter mobile revenues of $18.2 billion, up 1.8 percent over the same quarter of 2014.

Some might point profits that were down 12 percent to $4.4 billion, but that is largely an accounting artifact, caused by the continuing shift of revenue to “Mobile Share” no-subsidy plans that result in higher device revenues but lower recurring service revenues.

Churn rates suggest AT&T and Verizon are not suffering as much as observers might have guessed from attacks by T-Mobile US and Sprint.

AT&T, for example, reported its best-ever first-quarter churn at 1.02 percent, down from 1.07 percent for the first quarter of 2014.

Still, margins are under slight pressure, in part because operating costs are higher. Compared to the first quarter of 2014, AT&T operating expenses were $27.1 billion versus $26.2 billion; operating income was $5.5 billion versus $6.3 billion; and operating income margin was 16.7 percent versus 19.3 percent.

Verizon grew total revenues 6.9 percent year-over-year, with a 35 percent operating income margin.

Verizon’s first-quarter 2015 operating income reached $8.0 billion, an 11.2 percent increase compared with the first quarter of 2014.

Verizon consolidated operating income margin was 24.9 percent in first-quarter 2015, compared with 23.2 percent in first-quarter 2014. Cash flow from operating activities increased to $10.2 billion in first-quarter 2015, compared with $7.1 billion in first-quarter 2014.

Verizon added 565,000 net retail postpaid connections in the quarter and had postpaid churn of 1.03 percent.

One might conclude it is difficult to ascertain the impact of current mobile marketing wars on the mobile business.

The issue: where is the account growth at T-Mobile US coming from, if not from AT&T and Verizon?