AT&T Wireless 2014 Annual Report Download - page 21

AT&T INC. | 19
ABS Operating Revenues
Our ABS operating revenues increased $2,754, or 4.0%, in
2014 and $2,980, or 4.5%, in 2013. For the year ended
December 31, 2014, mobile solutions represented almost
52% of total ABS revenues, up from 49% in 2013 and
45% in 2012.
Wireless revenues increased $3,670, or 10.9%, in 2014
and $4,037, or 13.7%, in 2013. Growth in ABS postpaid
subscribers of 11.0% and 10.2% contributed to total
revenue growth in 2014 and 2013, respectively. ABS
wireless revenues consist of services provided to business
as well as revenue from wireless customers who pay
lower negotiated rates through their employers.
Revenue increases in 2014 reflect the impact of
equipment installment plans, which resulted in equipment
revenue growth of 78.1% compared to prior-year growth
of 20.9%, and service revenue growth of 1.9% compared
to prior-year growth of 12.7%.
Wireline revenues decreased $916, or 2.6%, in 2014
and $1,057, or 2.9%, in 2013. The decline in revenues
reflects migrations to alternative technologies, increasing
price competition and sustained economic pressure.
These declines were partially offset by growth in our
strategic business services, including the continued
success of our VPN and Cloud services. While our
wholesale revenues continue to be negatively impacted
by increasing competition and our strategic decisions
to change offerings, we are experiencing lower revenue
declines than in prior years for services provided to
small and medium-sized businesses, and for 2014,
we have grown revenues for services provided to large
national and multinational enterprises.
OPERATING ENVIRONMENT AND TRENDS OF THE BUSINESS
2015 Revenue Trends We expect our operating
environment in 2015 to be challenging as we face
competition, especially in the wireless area, slow economic
conditions and a regulatory environment that appears
increasingly unfriendly to investment in broadband services.
Despite these challenges, we expect our consolidated
operating revenues in 2015 to grow, driven by continuing
growth in our wireless data and IP-related wireline data
services, including U-verse. We expect our primary driver
of growth to be wireless data services from smartphones,
tablets and other services (such as wireless home services
and mobile navigation, including automobile-based services).
We also expect that robust competition in the wireless
industry will continue to pressure service revenue and ARPU.
Our AT&T Next program is expected to generate strong
equipment revenue, which has the corresponding impact
of lower service revenues. We expect that all our major
customer categories will continue to increase their use
of Internet-based broadband/data services. We expect
continuing declines in traditional access lines and in
traditional telephone service revenues. Where available, our
U-verse services have proved effective in stemming customer
losses, and we expect to continue to expand our U-verse
service offerings in 2015. We expect our pending acquisitions
of DIRECTV and NII Holdings Inc. (NII), upon completion, and
our recently completed acquisition of GSF Telecom Holdings,
S.A.P.I. de C.V. (GSF Telecom) wireless properties in Mexico
to increase revenues, although we expect to incur significant
integration costs in the same period.
2015 Expense Trends We expect expanding wireless,
wireline and consolidated operating income margins in
2015 as growth in AT&T Next is reducing subsidized handset
costs over time and we have essentially completed Project
Velocity IP (Project VIP). Expenses related to growth areas
Supplemental Operating Information
As a supplemental discussion of our operating results, we are providing a view of our AT&T Business Solutions (ABS)
business revenues which includes both wireless and wireline. This combined view of ABS presents a complete revenue
profile of the entire customer relationship, and underscores the growing importance of mobile solutions to serving our
business customers.
AT&T Business Solutions
Operating Revenues
Percent Change
2014 vs. 2013 vs.
2014 2013 2012 2013 2012
ABS operating revenues
Wireless $37,278 $33,608 $29,571 10.9% 13.7%
Wireline 34,594 35,510 36,567 (2.6) (2.9)
Total ABS Operating Revenues $71,872 $69,118 $66,138 4.0% 4.5%