Like Verizon, AT&T saw declining business revenue in the first quarter, as increased wireless sales to businesses and improved strategic service revenues failed to offset the decline in legacy services. However, its chief financial officer pointed to an improving trend in business revenues, with slower declines, and said the move to a software-defined network is beginning to pay off. (See AT&T on Track With 5G, Starts FirstNet Build and Verizon Biz Bucks Continue to Slide.)
Total business wireline revenues were $6.8 billion, down 7.9% year over year, or down 3.3% on a comparable accounting basis, according to AT&T Inc. (NYSE: T). Wireless business revenues were up nearly 4%, but wireline revenues were down 3% year over year, for an overall decline of 1.6% on a comparable basis.
This decline is "an improvement over recent quarters and similar to what we saw in the fourth quarter," John Stephens, AT&T CFO, told analysts in the earnings conference call. "This improving trend in wireline is encouraging, and this comes before any expected bump from business activity we might see as the result of tax reform."
Also, AT&T saw a "significant improvement in business wireline margins where EBITDA grew year over year and margins were up 190 basis points on a comparative basis," he noted, crediting the AT&T Business Solutions team with doing "a great job in driving cost management initiatives."
Some of those operating expense savings came from the move to a software-defined network, Stephens said, as 55% of network functions were virtualized by the end of 2017.
AT&T also touted gains in what it calls "strategic business services," which are the wireline offerings including virtual private networks, Ethernet, cloud, hosting IP conferencing, voice over IP, dedicated Internet, IP broadband and security services. Revenues in those areas grew about 6% or $166 million and represented 44% of total business wireline revenues and an annual revenue stream of $12 billion.
That growth could not offset a $440 million decline in legacy business revenues, however, as AT&T, like other telecom operators, continues to see businesses either move to competing carriers or replace legacy services with more cost-efficient offerings.
— Carol Wilson, Editor-at-Large, Light Reading