AT&T retreats as Q1 profit declines on higher expenses (Proactiveinvestors)

AT&T Inc. (NYSE:T), the largest U.S. phone company, dropped to the lowest in nearly a month  after reporting a decline in first-quarter profit, hurt by rising operating costs and income tax expenses.  

The shares slipped 3.6 percent to $34.99 at 9:57 a.m. in New York after touching $34.46, the lowest intraday price since March 25. The stock has lost 10 percent in the past 12 months.

Net income fell to $3.65 billion, or 70 cents per share, in the three months ended March 31, from $3.70 billion, or 67 cents per share, in the year-earlier period, the Dallas, Texas–based company said in a statement late yesterday.

First-quarter operating costs increased 3.1 percent to $26.2 billion, while income tax expenses increased 23 percent to $1.92 billion.

AT&T Inc.rred transaction-related costs of a penny per share related to Leap Wireless acquisition. The company said it expects to incur about $1.2 billion of integration costs over the next two years and estimates $0.05 of dilution to earnings in 2014. AT&T closed the $1.9 billion Leap acquisition on March 13.

Stripping out special items, the company earned 71 cents per share, slightly above the 70-cents estimate of 24 analysts tracked byThomson Reuters.

Revenue improved 3.6 percent to $32.48 billion from $31.36 billion a year earlier. Analysts on average were predicting $32.44 billion.

AT&T added 625,000 wireless postpaid subscribers in the January-to-March period, up from 296,000 last year and 566,000 in the October-to-December quarter. This was the best first-quarter subscriber additions in five years.

AT&T, together with Verizon Communications Inc. (NYSE:VZ), grapples with stiff competition  from T-Mobile US Inc. (NYSE:PCS) and Sprint Corp. (NYSE:S). The company's churn rate, which measures the number of customers who leave, increased to 1.07 percent in the first quarter from 1.04 percent last year.

Total wireless revenue, which includes equipment sales, increased 7 percent to $17.9 billion, while wireline revenue inched down 0.4 percent to $14.6 billion.

Looking ahead, the company expects revenue growth of 4 percent or greater for the full year, up from its previous growth forecast of 2 to 3 percent. Analysts currently expect full year revenue growth of 2.7 percent. The company raised its outlook to reflect the Leap acquisition and strong first-quarter growth.

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