AT&T lifts profit forecast on travel rebound, demand for pricier plans

9:58 am Thursday, October 20th, 2022

By Eva Mathews and Savyata Mishra

(Reuters) -AT&T Inc lifted its annual profit forecast after posting upbeat third-quarter results on Thursday, thanks to Americans opting for pricier wireless plans and a rebound in international travel.

After unwinding its efforts to become a media and entertainment company, AT&T is back to focusing on its wireless business in a highly competitive U.S. telecoms market.

The wireless carrier is now betting on the demand for broadband, international roaming, and monthly bill-paying subscribers to help pay off the nearly $134 billion debt on its balance sheet.

AT&T’s added 708,000 net new monthly bill-paying wireless phone subscribers in the third quarter and 338,000 new fiber internet customers.

Executives said bad debt was starting to return to pre-pandemic levels.

The company now expects adjusted profit per share for the full year to be $2.50 or higher compared with earlier expectations of $2.42 to $2.46 per share.

Analysts on average expect a profit of $2.56 per share for the year, according to Refinitiv data.  

Still, AT&T passed on some of the inflationary pressure to consumers when it increased prices of some plans and had to trim its annual free cash flow outlook due to late bill-payments in its enterprise-heavy business.

Analysts have also raised concerns on the effects of U.S. carriers’ aggressive promotion strategy in a bid to retain subscribers.

J.P Morgan analyst Philip Cusick said AT&T’s free cash flow for the quarter was “light”, but reiterated at $14 billion for the year, which would require a 50% quarter-on-quarter ramp to $6 billion in the fourth quarter.

AT&T reported an adjusted profit of 68 cents per share on revenue of $30 billion in the quarter ended Sept. 30, both above expectations of a profit of 61 cents on revenue of $29.86 billion.

Shares in AT&T rose 5.1%, while Verizon and T-Mobile shares gained about 0.5%.

(Reporting by Eva Mathews and Savyata Mishra in Bengaluru; Editing by Arun Koyyur)