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AT&T (NYSE:T) is expected to report its Q1 2011 earnings tomorrow (Apr 20). Here we provide a road-map for investors ahead of the call, highlighting key trends to watch. AT&T competes with Sprint (NYSE:S) and Verizon (NYSE:VZ) in the mobile and landline business.

Our price estimate for AT&T’s stock stands at $36.14, about 15-20% ahead of market price.

Possible Slowdown in Net Subscriber Additions

AT&T has had some very good recent quarters in terms of subscriber additions. For example, in Q4 2010 the company added around 2.8 million net subscribers. However out of this, about 1.5 million were connected devices that have low ARPU (average monthly revenue per user). [1] The net wireless subscriber additions for Q3 2010 stood at a healthy 2.6 million. [2]

However, upcoming earnings might be slightly different as net subscriber additions could slow down a bit. The culprit? The iPhone is no longer exclusively with AT&T, a change that has two notable effects on the company. First, new subscribers that were previously drawn to AT&T because of the iPhone might opt for Verizon instead. Second, some existing AT&T customers might also defect in favor of Verizon.

Charts created using Trefis' app

Expect Continued Data ARPU Growth

With tablets rising in demand and smartphones making up a larger chunk of new phone sales, we expect data revenues to continue to demonstrate healthy growth. However, the average data revenues per user could be pressured, as devices like e-readers tend to have low ARPU’s. Still, we expect this effect to be offset by smartphone upgrades and higher-priced tablet data plans.


No Impact of T-Mobile Deal

AT&T recently announced its acquisition of T-Mobile. But we will not see any impact of this in upcoming earnings since the deal is expected to close in 12 months. The benefit of greater price control as a result of reduced competition will likely be realized in the longer term after the deal closes.

Notes:

  1. AT&T’s Investor Briefing for Q4 2010, Available on AT&T’s official website
  2. AT&T’s Investor Briefing for Q3 2010, Available on AT&T’s official website

Disclosure: No positions

Source: AT&T Earnings Preview: 3 Trends to Spot