Heads turned on Wall Street on Thursday as AT&T executives tempered earlier statements about how forceful the impact of lower consumer and business spending would be on their business.
On Jan. 8, shares of AT&T slid 4.5 percent after Randall L. Stephenson, the chief executive, said in a conference that some customers were having their phone service turned off because of unpaid bills, indicating a weakening economy. But in a conference call following the release of AT&T's earnings on Thursday, the company downplayed those concerns. It emphasized instead the predictable nature of telephone company stocks, which are less vulnerable than luxury goods makers or real estate companies during a recession.
Rick Lindner, the chief financial officer, said AT&T, like other communications companies, was indeed seeing the impact of a softer economy on its operations. But, he added, "they are not very severe at this point." Even in a downturn, consumers are going to want to stay connected, either online or on the phone. "I think for us that continues to point to more of the defensive nature of our business," he said.
AT&T reported strong fourth-quarter earnings that met analysts' expectations, with net income rising 63 percent, in large part because of the growth in wireless communications. Revenue hit $30.3 billion in the quarter ended Dec. 31, up from $15.9 billion for the same period in 2006. The increased revenue reflects AT&T's acquisition of BellSouth and the consolidation of its wireless operations. The company has 70.1 million customers.
AT&T gained 2.7 million new wireless customers in its fourth quarter, up 13.5 percent from a year earlier. Lindner said 40 percent of customers buying Apple's iPhone, which is sold exclusively through AT&T, are new to the company. Wireless data revenue increased 57.5 percent from a year earlier as customers sent more e-mail messages by phone, downloaded videos and surfed the Internet.
Analysts say wireless operations will continue to be a driver of growth. But if consumers get worried about the economy and cut nonessential spending, communications companies may see the impact in ways they do not expect.
Lisa Pierce, a vice president for Forrester Research in Cambridge, Mass., said consumers could decide to forgo spending on mobile music and ringtone downloads. Such services are moneymakers for companies like AT&T, which have watched the number of phone lines installed in homes shrink.
"Wireless has been part of the reason that revenues have been growing rapidly," Pierce said. "Those companies want that to keep going."
If consumers do shy away from consuming entertainment on their phones, it could have a ripple effect through the media industry. Industry executives, pundits and analysts have been betting on mobile media to follow the trajectory of media on the Internet. As with anything in an uncertain economy, Pierce said, "we'll have to wait and see."
AT&T shares fell 94 cents, to $35.75.