REG - AT & T Inc. - 1st Quarter Results 2017 8-K <Origin Href="QuoteRef">T.N</Origin> - Part 2
23/05/2017 16:05
- Part 2: For the preceding part double click ID:nRSW0137Ga
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
2017 2016 Change
Linear Video Connections
Satellite 21,012 20,112 4.5 %
U-verse 4,020 5,232 -23.2 %
Total Linear Video Connections 25,032 25,344 -1.2 %
Broadband Connections
IP 13,130 12,542 4.7 %
DSL 1,164 1,749 -33.4 %
Total Broadband Connections 14,294 14,291 - %
Voice Connections
Retail Consumer Switched Access Lines 5,533 6,888 -19.7 %
U-verse Consumer VoIP Connections 5,470 5,225 4.7 %
Total Retail Consumer Voice Connections 11,003 12,113 -9.2 %
Three Months Ended
March 31, Percent
2017 2016 Change
Linear Video Net Additions1
Satellite - 328 - %
U-verse (233 ) (382 ) 39.0 %
Total Linear Video Net Additions (233 ) (54 ) - %
Broadband Net Additions
IP 242 186 30.1 %
DSL (127 ) (181 ) 29.8 %
Total Broadband Net Additions 115 5 - %
1 Includes the impact of customers that migrated to DIRECTV NOW.
CONSUMER MOBILITY
The Consumer Mobility segment provides nationwide wireless service to consumers and wholesale and resale wireless subscribers located in the U.S. or in U.S. territories. We utilize our U.S. wireless network to provide voice and data services, including high-speed internet, video, and home monitoring services.
Segment Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
2017 2016 Change
Segment Operating Revenues
Service $ 6,609 $ 6,943 -4.8 %
Equipment 1,131 1,385 -18.3 %
Total Segment Operating Revenues 7,740 8,328 -7.1 %
Segment Operating Expenses
Operations and support 4,528 4,912 -7.8 %
Depreciation and amortization 873 922 -5.3 %
Total Segment Operating Expenses 5,401 5,834 -7.4 %
Segment Operating Income 2,339 2,494 -6.2 %
Equity in Net Income of Affiliates - - - %
Segment Contribution $ 2,339 $ 2,494 -6.2 %
Segment Operating Income Margin 30.2 % 29.9 % 30 BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
2017 2016 Change
Consumer Mobility Subscribers
Postpaid 26,510 28,294 -6.3 %
Prepaid 13,844 12,171 13.7 %
Branded 40,354 40,465 -0.3 %
Reseller 10,549 13,313 -20.8 %
Connected Devices 961 896 7.3 %
Total Consumer Mobility Subscribers 51,864 54,674 -5.1 %
Three Months Ended
March 31, Percent
2017 2016 Change
Consumer Mobility Net Additions1
Postpaid (66 ) (4 ) - %
Prepaid 282 500 -43.6 %
Branded 216 496 -56.5 %
Reseller (588 ) (378 ) -55.6 %
Connected Devices 19 (26 ) - %
Total Consumer Mobility Net Additions (353 ) 92 - %
Total Churn1 2.42 % 2.11 % 31 BP
Postpaid Churn1 1.22 % 1.24 % -2 BP
1 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.
INTERNATIONAL
The International segment provides
entertainment services in Latin
America and wireless services in
Mexico. Video entertainment services
are provided to primarily
residential customers using
satellite technology. We utilize our
regional and national wireless
networks in Mexico to provide
consumer and business customers with
wireless data and voice
communication services. Our
international subsidiaries conduct
business in their local currency and
operating results are converted to
U.S. dollars using official exchange
rates.
Segment Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
2017 2016 Change
Segment Operating Revenues
Video entertainment $ 1,341 $ 1,130 18.7 %
Wireless service 475 455 4.4 %
Wireless equipment 113 82 37.8 %
Total Segment Operating Revenues 1,929 1,667 15.7 %
Segment Operating Expenses
Operations and support 1,759 1,588 10.8 %
Depreciation and amortization 290 277 4.7 %
Total Segment Operating Expenses 2,049 1,865 9.9 %
Segment Operating Income (Loss) (120 ) (198 ) 39.4 %
Equity in Net Income (Loss) of 20 14 42.9 %
Affiliates
Segment Contribution $ (100 ) $ (184 ) 45.7 %
Segment Operating Income Margin (6.2 ) % (11.9 ) % 570 BP
Supplementary Operating Data
Subscribers and connections in
thousands
Unaudited March 31, Percent
2017 2016 Change
Mexican Wireless Subscribers
Postpaid 5,095 4,404 15.7 %
Prepaid 7,244 4,445 63.0 %
Branded 12,339 8,849 39.4 %
Reseller 267 364 -26.6 %
Total Mexican Wireless Subscribers 12,606 9,213 36.8 %
Latin America Satellite Subscribers
PanAmericana 8,090 7,094 14.0 %
SKY Brazil 5,588 5,342 4.6 %
Total Latin America Satellite 13,678 12,436 10.0 %
Subscribers
Three Months Ended
March 31, Percent
2017 2016 Change
Mexican Wireless Net Additions
Postpaid 130 116 12.1 %
Prepaid 517 450 14.9 %
Branded 647 566 14.3 %
Reseller (14 ) (37 ) 62.2 %
Total Mexican Wireless Net Additions 633 529 19.7 %
Latin America Satellite Net Additions1
PanAmericana 52 28 85.7 %
SKY Brazil 39 (101 ) - %
Total Latin America Satellite Net Additions 91 (73 ) - %
1 In 2017 we updated the methodology used to account for prepaid video connections. The impact of this change is excluded.
SUPPLEMENTAL OPERATING INFORMATION - AT&T MOBILITY
As a supplemental discussion of our operating results, for comparison purposes, we are providing a view of our combined domestic wireless operations (AT&T Mobility).
Operating Results
Dollars in millions Three Months Ended
Unaudited March 31, Percent
2017 2016 Change
Operating Revenues
Service $ 14,538 $ 14,798 -1.8 %
Equipment 2,629 3,156 -16.7 %
Total Operating Revenues 17,167 17,954 -4.4 %
Operating Expenses
Operations and support 9,998 10,624 -5.9 %
Depreciation and amortization 1,997 2,056 -2.9 %
Total Operating Expenses 11,995 12,680 -5.4 %
Operating Income 5,172 5,274 -1.9 %
Operating Income Margin 30.1 % 29.4 % 70 BP
Supplementary Operating Data
Subscribers and connections in thousands
Unaudited March 31, Percent
2017 2016 Change
AT&T Mobility Subscribers
Postpaid 77,349 77,138 0.3 %
Prepaid 13,844 12,171 13.7 %
Branded 91,193 89,309 2.1 %
Reseller 10,625 13,378 -20.6 %
Connected Devices 32,400 27,758 16.7 %
Total AT&T Mobility Subscribers 134,218 130,445 2.9 %
Domestic Licensed POPs (000,000) 325 322 0.9 %
Three Months Ended
March 31, Percent
2017 2016 Change
AT&T Mobility Net Additions
Postpaid (191 ) 129 - %
Prepaid 282 500 -43.6 %
Branded 91 629 -85.5 %
Reseller (582 ) (400 ) -45.5 %
Connected Devices 2,572 1,552 65.7 %
Total AT&T Mobility Net Additions 2,081 1,781 16.8 %
M&A Activity, Partitioned Customers and Other Adjustments (2,723 ) 24 - %
Total Churn1 1.46 % 1.42 % 4 BP
Branded Churn1 1.71 % 1.63 % 8 BP
Postpaid Churn1 1.12 % 1.10 % 2 BP
Postpaid Phone Only Churn1 0.90 % 0.96 % -6 BP
1 2017 excludes the impact of the 2G shutdown, which was reflected in beginning of period subscriber counts.
SUPPLEMENTAL SEGMENT RECONCILIATION
Three Months Ended
Dollars in millions
Unaudited
March 31, 2017
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution
Business Solutions $ 16,848 $ 10,176 $ 6,672 $ 2,312 $ 4,360 $ - $ 4,360
Entertainment Group 12,623 9,601 3,022 1,419 1,603 (6 ) 1,597
Consumer Mobility 7,740 4,528 3,212 873 2,339 - 2,339
International 1,929 1,759 170 290 (120 ) 20 (100 )
Segment Total 39,140 26,064 13,076 4,894 8,182 $ 14 $ 8,196
Corporate and Other 225 221 4 31 (27 )
Acquisition-related items - 207 (207 ) 1,202 (1,409 )
Certain Significant items - (118 ) 118 - 118
AT&T Inc. $ 39,365 $ 26,374 $ 12,991 $ 6,127 $ 6,864
March 31, 2016
Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Equity in Net Income (Loss) of Affiliates Segment Contribution
Business Solutions $ 17,609 $ 10,802 $ 6,807 $ 2,508 $ 4,299 $ - $ 4,299
Entertainment Group 12,658 9,578 3,080 1,488 1,592 3 1,595
Consumer Mobility 8,328 4,912 3,416 922 2,494 - 2,494
International 1,667 1,588 79 277 (198 ) 14 (184 )
Segment Total 40,262 26,880 13,382 5,195 8,187 $ 17 $ 8,204
Corporate and Other 273 377 (104 ) 17 (121 )
Acquisition-related items - 295 (295 ) 1,351 (1,646 )
Certain Significant items - (711 ) 711 - 711
AT&T Inc
Discussion and Reconciliation of Non-GAAP Measures
We believe the following measures are relevant and useful information to investors as they are part of AT&T's internal
management reporting and planning processes and are important metrics that management uses to evaluate the operating
performance of AT&T and its segments. Management also uses these measures as a method of comparing performance with that of
many of our competitors.
Free Cash Flow
Free cash flow is defined as cash from operations minus Capital expenditures. Free cash flow after dividends is defined as
cash from operations minus Capital expenditures and dividends. Free cash flow dividend payout ratio is defined as the
percentage of dividends paid to free cash flow. We believe these metrics provide useful information to our investors
because management views free cash flow as an important indicator of how much cash is generated by routine business
operations, including Capital expenditures, and makes decisions based on it. Management also views free cash flow as a
measure of cash available to pay debt and return cash to shareowners.
Free Cash Flow and Free Cash Flow Dividend Payout Ratio
Dollars in millions Three Months Ended
March 31,
2017 2016
Net cash provided by operating activities $ 9,218 $ 7,900
Less: Capital expenditures (6,015) (4,669)
Free Cash Flow 3,203 3,231
Less: Dividends paid (3,009) (2,947)
Free Cash Flow after Dividends $ 194 $ 284
Free Cash Flow Dividend Payout Ratio 93.9% 91.2%
EBITDA
Our calculation of EBITDA, as presented, may differ from similarly titled measures reported by other companies. For AT&T,
EBITDA excludes other income (expense) - net, and equity in net income (loss) of affiliates, as these do not reflect the
operating results of our subscriber base or operations that are not under our control. Equity in net income (loss) of
affiliates represents the proportionate share of the net income (loss) of affiliates in which we exercise significant
influence, but do not control. Because we do not control these entities, management excludes these results when evaluating
the performance of our primary operations. EBITDA also excludes interest expense and the provision for income taxes.
Excluding these items eliminates the expenses associated with our capital and tax structures. Finally, EBITDA excludes
depreciation and amortization in order to eliminate the impact of capital investments. EBITDA does not give effect to cash
used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other
discretionary uses. EBITDA is not presented as an alternative measure of operating results or cash flows from operations,
as determined in accordance with U.S. generally accepted accounting principles (GAAP).
EBITDA service margin is calculated as EBITDA divided by service revenues.
When discussing our segment results, EBITDA excludes equity in net income (loss) of affiliates, and depreciation and
amortization from segment contribution. For our supplemental presentation of our combined domestic wireless operations
(AT&T Mobility) and our supplemental presentation of the Mexico Wireless and Latin America operations of our International
segment, EBITDA excludes depreciation and amortization from operating income.
1
These measures are used by management as a gauge of our success in acquiring, retaining and servicing subscribers because
we believe these measures reflect AT&T's ability to generate and grow subscriber revenues while providing a high level of
customer service in a cost-effective manner. Management also uses these measures as a method of comparing segment
performance with that of many of its competitors. The financial and operating metrics which affect EBITDA include the key
revenue and expense drivers for which segment managers are responsible and upon which we evaluate their performance.
Management uses Mexico Wireless EBITDA in evaluating profitability trends after our two Mexico wireless acquisitions in
2015, and our investments in building a nationwide LTE network by end of 2018. Management uses Latin America EBITDA in
evaluating the ability of our Latin America operations to generate cash to finance its own operations.
We believe EBITDA Service Margin (EBITDA as a percentage of service revenues) to be a more relevant measure than EBITDA
Margin (EBITDA as a percentage of total revenue) for our Consumer Mobility segment operating margin and our supplemental
AT&T Mobility operating margin. We also use wireless service revenues to calculate margin to facilitate comparison, both
internally and externally with our wireless competitors, as they calculate their margins using wireless service revenues as
well.
There are material limitations to using these non-GAAP financial measures. EBITDA, EBITDA margin and EBITDA service margin,
as we have defined them, may not be comparable to similarly titled measures reported by other companies. Furthermore, these
performance measures do not take into account certain significant items, including depreciation and amortization, interest
expense, tax expense and equity in net income (loss) of affiliates. Management compensates for these limitations by
carefully analyzing how its competitors present performance measures that are similar in nature to EBITDA as we present it,
and considering the economic effect of the excluded expense items independently as well as in connection with its analysis
of net income as calculated in accordance with GAAP. EBITDA, EBITDA margin and EBITDA service margin should be considered
in addition to, but not as a substitute for, other
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