Wednesday, November 29, 2006

DSL Prime: AT&T Confirms Heavy DSL Churn

AT&T Confirms Heavy Churn Slow - Growth Explains Coming $10 promotion .........
AT&T was up 380,000 Q3, a little better than Q2 but almost 30% below last year. For three quarters, AT&T net adds are down 12% from the prior year. Randall had been trying to keep average prices in the $30’s while advertising $15 promotions, but the strategy wasn’t working. I wrote a month ago “AT&T churn has been high although the company does not provide a specific figure, partly because of ‘introductory offers’ that get customers mad when they find how high the true rate is.” CFO Rich Lindner notes “Gross sales in the quarter were strong; in fact, the best that we have had in four quarters, but we had some year-ago promotions plus a number of six-month contracts all expiring in the same quarter. … In early October, we simplified our pricing for DSL and added a new speed tier to our lineup and we expect that the convenience of simple, flat-rate pricing with no contract term, plus the added speed tier choice, will stimulate demand as well as enhance customer retention.” Current AT&T pricing is $15 - $35, so the churn rate should stabilize. Lindner calculates their 8.2 million DSL customers include 31% of primary lines, “and in our West region, it's over 35% (California.)” Assuming cable approximately matches the DSL take rate, that means 60% of homes have broadband, so some slowdown is inevitable. In addition, “42% of our consumer DSL base subscribe to higher-speed service, and that's up from 22% just a year ago.” That’s another data point that people want higher speeds, confirming the results from Germany and before that France and Japan. Lindner also confirmed previous DSL Prime reporting AT&T has resumed buildouts, at a modest rate of about 200,000 units per month. I’ve reports from Arkansas and Indiana that AT&T is reaching all the CO’s, which I assume they will extend across all their territory, whatever happens in the merger talks. (transcripts courtesy Seeking Alpha)

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