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In Focus: AT&T Wireless
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January 29, 2001: 3:32 p.m. ET
Tim Burke on the wireless carrier's 4Q revenue growth, overall outlook
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NEW YORK (CNNfn) - AT&T Wireless reported fourth-quarter revenue Monday before-the-bell of $2.97 billion that reflected a growth of $740 million, or 39 percent, from $2.23 billion in the year-ago quarter. Earnings were also up 33 percent, to $272 million.
Tim Burke, wireless and international telecom analyst at Edward Jones spoke on CNNfn's In Focus Monday about AT&T Wireless (AWE: Research, Estimates)' earnings released this morning.
In Focus airs daily on CNNfn's network at 12:10 p.m. The following includes comments made both during the show and in the pre-show interview.
CNNfn: AT&T Wireless' fourth-quarter revenue increased 39 percent to $2.97 billion, beating estimates of $2.7 billion -- did that surprise you?
Burke: No it didn't. If you look at the mean estimate, it was for a loss of .004 cents a share. Since July I've thought they would do 16 cents a share and the company came in at 22 cents a share, so they came in slightly better than we thought.
 CNNfn: Where were the strengths in the quarter?
Burke: We rate AWE a "hold" and we were encouraged by their growth. They added 865,000 new customers in the quarter. Historically the fourth quarter is strong for wireless because people give wireless gifts. They acquired new markets in Houston and LA, which were positive. Overall we continue to keep it a "hold" because it was a good quarter and overall a good year, but not a great year.
CNNfn: The upside surprise resulted from continued strong growth in mobility services driven by subscriber growth -- can that growth be sustained?
Burke: They gave guidance of 30-percent-to-35-percent revenue growth for next year and we think that's feasible. We believe that the size of the wireless industry in the U.S. will double in the next three to four years, so growing at 30-percent-to-35-percent a year is not outside of the realm of possibilities.
CNNfn: In November, AT&T Wireless announced they would be upgrading their network to 3G -- how much will that end up costing? How is that transition going?
Burke: They've talked about overall capital expenditures for next year being around $5 billion. They're starting to use the term 3G as a buzzword referring to new technology -- branding or marketing efforts -- as opposed to what 3G was intended to be when it was first brought out.
The industry won't be at 3G for another three to four years but companies like AT&T will have higher-speed data offerings that they will call 3G. They will start to label new wireless services 3G but 3G is about data and increased voice quality. That's all rolled into the $5 billion and for us that represents a risk for owning AWE because $5 billion is a lot of money to spend and if they don't deliver on promises later this year there are potential negatives for their share price.
 CNNfn: In January, NTT DoCoMo invested approximately $9.8 billion for a 16 percent interest in an AT&T Wireless Group tracking stock -- how much of that will go to the 3G buildout?
Burke: The $9.8 will be used to pay down some of the debt at the parent, AT&T, which still owns 85 percent of AWE. It all gets blended because AWE borrows from AT&T to fund cap ex and so I guess you could say some of that will go to help fund AWE's capital buildout, but the check won't go directly to AWE and it's not clear how much they will get.
CNNfn: The latest federal auction of U.S. airwaves just took place -- how did AWE do?
Burke: They did very well. They filled in holes in the network and they were able to increase the amount of spectrum in a few of their markets, which will allow them to expand their business in some of the major markets.
CNNfn: At $24.13 AT&T Wireless is still below its 52-week high of $36 -- what's your outlook for AWE?
Burke: We've had a "hold" on the stock since I initiated coverage in May of last year. We still feel there are better values in the wireless industry. We think there's still too much uncertainty in AWE as to where they're going to be for us to recommend the stock right now.
CNNfn: What's your outlook for the wireless sector?
Burke: Barring a worldwide recession, we're very confident that the whole group will continue to be driving the telecom service sector and we feel both in U.S. and worldwide, wireless growth will be one of the growth drivers for the industry overall.
CNNfn: What are your favorite stocks in the group?
Burke: Vodafone (VOD: Research, Estimates), Sprint PCS (PCS: Research, Estimates), Alltel (AT: Research, Estimates).
-- reported by Carmina Pere. 
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