AT&T exceeds wireless subscriber estimates on demand for pricey unlimited plans

(Reuters) – AT&T (NYSE:T) gained more wireless subscribers than expected in the third quarter, driven by the steady adoption of its higher-tier unlimited plans that come with perks including increased hotspot data.

The U.S. telecom firm said on Wednesday it had added 403,000 net monthly bill-paying wireless phone subscribers in the July-September period, above Visible Alpha estimates of 393,430 additions.

Premium plans have helped AT&T stay competitive in the saturating U.S. telecom market where rivals Verizon (NYSE:VZ) and T-Mobile are bundling their offerings with streaming services such as Netflix (NASDAQ:NFLX) and Max to attract customers.

Demand has also been growing for AT&T’s convergence plans that allow customers to combine its high-speed fiber data with its wireless phone service. The company said 40% of customers that use fiber also opt for its wireless plans.

To sharpen focus on its main business, AT&T agreed last month to sell its entire 70% stake in satellite TV provider DirecTV to private equity firm TPG for $7.6 billion, exiting from a costly foray into the media business. 

Postpaid phone churn, or the number of customers canceling AT&T’s service monthly, was 0.78% in the third quarter, helped by the company’s smartphone plans that offer new and existing customers the same promotions.

But revenue of $30.2 billion missed estimates of $30.44 billion, according to data compiled by LSEG, as the company’s mobility equipment revenue took a hit from lower phone upgrade volumes.

Rival Verizon also reported a quarterly revenue miss on Tuesday due to the lull in phone upgrades. 

AT&T’s fiber business added 226,000 customers, missing expectations of 257,860 additions, according to Visible Alpha. This was mainly driven by a work stoppage that began in August in its southeast region and impacted fiber installations.

Free cash flow, which helps investors determine dividend sustainability, came in at $5.1 billion, above Visible Alpha estimates of $4.7 billion.