By Thomas Gryta
AT&T Inc. is having to work harder to keep its wireless
subscriber count growing as tough competition prompts more
customers to leave for rivals and cuts into its profit margins.
Chief Financial Officer John Stephens said at an investor
conference Tuesday that the company's fourth-quarter churn, a
measure of service cancellations, would be higher than it was a
year earlier. Still, the company expects to add net postpaid
connections in the quarter compared with a year earlier.
He also said the carrier's wireless-service margins would take a
hit in the fourth quarter, though for the full year they would be
equal to or better than they were a year earlier.
The warning comes after rival Verizon Communications Inc. said
late Monday that its own profit is under pressure because of the
promotions needed to get customers to sign up and stick around.
Verizon said more of its customers were leaving for other carriers
this quarter than in the last quarter or last year as smaller
rivals push their own deals.
Verizon, which had been slow to participate in the industry's
ongoing price war, also said the promotions would hurt its
profitability.
AT&T cut prices for many of its customers earlier this year,
leaving it in a better position to fend off rivals offering cheaper
plans.
AT&T's debt level is rising as the carrier pursues
acquisitions of satellite broadcaster DirecTV, Mexican carrier
Iusacell and airwave licenses in an unexpectedly expensive U.S.
government-spectrum auction.
The carrier will focus its use of cash on dividends and getting
indebtedness back in line with its target for the next three years,
Mr. Stephens said. The move is a shift for AT&T, which has
spent billions of dollars in recent years using cash to repurchase
its own stock.
Corrections & Amplifications
AT&T said adjusted wireless service margins would show an
"impact" from competition in the fourth quarter, but that full-year
margins would be comparable or better than a year earlier. A
previous version of this story incorrectly said the carrier's
wireless-service margins for the quarter would be comparable or
better than a year earlier.
Write to Thomas Gryta at thomas.gryta@wsj.com
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