AT&T Is Sneakily Raising Almost $1 Billion With a Higher Fee Buried on Wireless Bills
AT&T may have just increased its wireless revenue by almost $1 billion in a way many customers may not even notice.
The carrier quietly raised its “administrative fee,” a tiny line item at the bottom of monthly bills, to $1.99 from 76 cents, BTIG Research analyst Walter Piecyk noticed on Wednesday. With 64.5 million regular monthly customers who pay such vague and ill-defined fees tacked onto their bills, that could raise $800 million a year, Piecyk said. The fee doesn’t apply to prepaid accounts.
AT&T may be under pressure to find new sources of revenue after spending about $108 billion in stock, cash and assumed debt to acquire Time Warner and bolster its entertainment offerings. AT&T now owns the producer of HBO, CNN, and Turner Broadcasting, but also has piled on an additional estimated $60 billion of net debt, according to Piecyk. After the deal closed, bond rating agency Moody’s Investors Service said AT&T was “weakly positioned” to support its debt levels and urged the company to offer “more forceful, public and specific” means to strengthen its balance sheet. AT&T’s stock price is down 16% so far this year.
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The carrier said the fee was similar to levies at its rivals and had not been raised in several years. “This is a standard administrative fee across the wireless industry, which helps cover costs we incur for items like cell site maintenance and interconnection between carriers,” AT&T said in a statement to Fortune.
Vaguely defined fees have proliferated on the bills of cable, phone, and internet service customers for years. But T-Mobile last year stopped adding both the made-up fees and actual taxes as extra line items added to customers’ bills, resulting in an effective price cut of 5% to 10%. T-Mobile (TMUS) CEO John Legere and Sprint (S) executive chairman Marcelo Claure are scheduled to testify before Congress on Wednesday afternoon about their proposed merger and AT&T’s higher fee could give them more fodder to argue that more competition is needed in the wireless market.
Legere earlier blasted the move on Wednesday in a tweet. “Another example of @ATT putting their wallets ahead of their customers,”the CEO wrote. “Declining YoY service rev for 16Qs in a row will make you do some really terrible things to your customers.”
AT&T (T) says in its documentation that the administrative fee “helps defray certain expenses AT&T incurs, including but not limited to: (a) charges AT&T or its agents pay to interconnect with other carriers to deliver calls from AT&T customers to their customers; and (b) charges associated with cell site rents and maintenance.”
Neither of those costs have gone up much lately, analyst Piecyk wrote, concluding that the money will be used more generally. “Presumably the Administrative Fee is another way to help AT&T fund its network build and Time Warner acquisition going forward,” he said.