AT&T Inc. Earnings: New Sales Tactics Curb Profit Margins

Telecom giant AT&T just reported results for the third quarter of fiscal year 2014. Reacting to the news, shares fell as much as 3.4% in after-hours trading.

AT&T saw third-quarter revenues rise 2.5% year over year, landing at $33 billion. Diluted non-GAAP earnings fell 4.5% to $0.63 per share. Analysts were looking for earnings of $0.64 per share on $33.2 billion in total sales, so both results came in slightly below expectations.

The company added 2 million net net subscribers in the quarter, including 785,000 postpaid subscribers on long-term contracts. A year ago, AT&T added less than a million new subscribers and 363,000 postpaid users. Average revenue per user fell 8% compared with the year-ago period.

To put AT&T's subscriber figures into perspective, chief rival Verizon Communicationsadded 1.5 million postpaid subscribers in the equivalent quarter.

On the hardwired side of AT&T's business, gains in the U-Verse TV and Internet service outweighed subscriber losses in traditional copper-based voice services. All told, wireline sales increased 3% year over year.

Digging a little deeper into wireless results, AT&T added 466,000 million net new postpaid smartphones and 434,000 data subscriptions for tablets. In addition, 500,000 new cars were sold with included AT&T data plans this quarter.

"Our strategy is on track, and our investments in giving customers best-in-class service to access content everywhere and on any screen continue to pay off," said AT&T CEO Randall Stephenson in a prepared statement. This strategy involves revamping the wireless business model with more subsidy-free device sales and shared data plans.

These new wireless tactics are putting pressure on AT&T's profits. Wireless operating margins came in at 24.6%, down from 26.4% in the year-ago period.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days .We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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