Oppenheimer GIves Earnings Preview For AT&T

Oppenheimer estimates that AT&T T will report recurring 4Q10 EPS of $0.54, which matches consensus. Most notably, it is forecasting that T's wireless margins will recover from the 3Q iPhone subsidy hit, increasing by 100bps sequentially to 38.6%. However, this may prove optimistic if the company activates more than 4M iPhones in the quarter. Conversely, if T's iPhone sales are stronger than anticipated, then its wireless net add estimate may prove conservative. Oppenheimer is forecasting a record 2.8M net adds for the quarter, with 550K of these postpaid. It expects overall ARPU of just under $49.50 to be slightly down sequentially, while churn should be flat sequentially at 1.3%. On the wireline side, Oppenheimer expects customer volumes to be stronger given seasonality. We are projecting positive broadband net adds of 170K versus 148K in 3Q10 as the company has engaged in promotions during the quarter. Oppenheimer expects slightly pressured EBITDA margins of 31.9% versus 32.5% in 3Q, mainly due to the higher acquisition costs. Of most interest during the call will be management's commentary on iPhone and iPad sales and the company's strategy going forward given the end of iPhone exclusivity. T closed Tuesday at $28.76