AT&T (T) had 566K postpaid net adds in seasonally strong Q4, up from 363K in Q3. However, tablet net adds accounted for 440K of the additions. By comparison, Verizon had 1.6M postpaid net adds in Q4, and T-Mobile (once losing share to AT&T) 869K. 32K prepaid subs were lost.
However, wireless service revenue rose 4.8% Y/Y (better than Q3's 3.7%) thanks to a 16.8% increase in data revenue. Postpaid ARPU rose 2.1% Y/Y, and wireless op. margin (boosted by moderating subsidy spend) rose to 21.4% from 14.5% a year earlier. Churn rose 1 bps Y/Y to 1.43%.
77% of AT&T's postpaid base now uses smartphones, up from 70% a year ago.
AT&T is guiding for 2%-3% 2014 revenue growth, above a consensus for 1.9% growth. The carrier has set a 2014 capex budget of $21B, which compares with 2013 capex of $21.2B. Free cash flow is expected to fall to $11B in 2014 from $13.6B in 2013.
Wireline revenue continues to fall, declining 1.4% Y/Y after dropping 1% in Q3. Wireline data revenue rose 5.6%, but wireline voice fell 11%. Wireline op. margin fell to 9.9% from 12% a year ago.
U-verse Internet and TV sub adds fell to 630K and 194K in Q4 from 655K and 265K in Q3. Total U-verse revenue rose 27.9% Y/Y.
$1.9B was spent on buybacks in Q4, even with Q3 and down from $3.3B in Q2.