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AT&T narrows loss, but sees faster customer defections

January 28, 2015

An apple Inc. Iphone 6 displayed on a Nextel exhibit table inside a Nextel attention center branch store in Mexico city, Mexico on Tuesday, Jan. 27, 2015. Photographer: Susana Gonzalez/BloombergAn apple Inc. Iphone 6 displayed on a Nextel exhibit table inside a Nextel attention center branch store in Mexico city, Mexico on Tuesday, Jan. 27, 2015. Photographer: Susana Gonzalez/Bloomberg
AT&T is buying Mexico's Nextel for $1.88 billion.Photograph by Susana González — Bloomberg/ Getty Images

AT&T Inc (T) Tuesday posted a quarterly net loss that was slightly slimmer than Wall Street expected, as its mobile device deals attracted more customers, but its users switched to other networks at a higher rate.

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AT&T shares rose 1.6% in after-hours trading after closing at $32.81 on the New York Stock Exchange.

The second-largest U.S. wireless carrier posted a net loss of $4 billion, or 77 cents per share, in the fourth quarter, compared with net income $6.9 billion, or $1.31 per share, a year ago. Excluding items, AT&T earned 55 cents per share, a penny more than analysts’ forecasts.

The company said postpaid churn, or the rate of customer defections, rose to 1.22% and average revenue per phone user declined 10.7% from a year earlier.

Faced with intense competition and promotional activity, wireless carriers have moved from two-year contract plans to equipment financing plans, which reduce service fees and eliminate subsidies for devices.

Such no-subsidy plans along with aggressive price cuts to tackle competition from rivals T-Mobile and Sprint have squeezed profit margins. AT&T’s wireless profit margins, excluding certain items, narrowed to 36.7% from 42% a year earlier.

As the U.S. wireless market reaches saturation, the company has been expanding its footprint in Mexico to grow its business.

It said on Monday it would buy bankrupt NII Holdings Inc’s wireless business in Mexico for $1.875 billion.

In 2015, the company said it expects margin expansion along with adjusted earnings growth in “the low single-digit range.”

AT&T said it had added more than 2 million new wireless customers and 854,000 contract subscribers in the quarter.

Revenue rose to $34.4 billion from $33.16 billion a year earlier, fractionally ahead of consensus forecasts.