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AT&T revenues belie product sales

Despite a huge jump in cash flow and pickup in margin, AT&T's Broadband show signs of wear in its new product sales.

Even adjusting for system acquisitions and sales for the three months ended September, AT&T Broadband's revenues increased a strong 15% to $2.4 billion and cash flow a huge 70% to $602 million. That's in large part because layoffs and other restructuring moves are paying off.

AT&T Broadband's cash flow margin reached 25.5%, up from the 23.5% the company bragged about in the second quarter, (or the more realistic 19.5% the division actually generated.) And its far better than the 14% at which the division bottmed out last fall. But the new margin still remains 15-20 points less than what other operators typically generate.

The real bad news is the pace of growth in new product sales has stalled. After losing basic subscribers during the first and second quarters, AT&T did post a modest gain of 1% annualized. But the company only signed up 76,000 new cable telephone customers, half the growth rate of the second quarter (which was supposedly seasonally slow).

Digital adds totalled 260,000 units, versus 274,000 in the second quarter and 320,000 in the first. High-speed internet connections slowed to 111,000 customers, down from 129,000 during the second quarter and 196,000 during the first quarter. - John M. Higgins