CEO Randall Stephenson admits to reacting late to the return of unlimited, as telco loses 348,000 postpaid phone customers.

AT&T chief executive Randall Stephenson late on Tuesday admitted his company responded slowly to the return of unlimited plans, but insisted the telco has the requisite network capacity to cope with the expected rise in usage.

AT&T lost 348,000 lucrative postpaid phone customers during the first quarter. Similarly Verizon last week revealed it lost 289,000, as the aggressive pricing strategies of T-Mobile US and Sprint took their toll.

AT&T stopped offering unlimited tariffs to smartphone customers in 2010. It later rolled them out again, but only to customers who signed up to its U-verse or DirecTV services. It only began offering unlimited plans to all postpaid consumer and business customers in the second half of February.

"Our response to the unlimited data plans was probably a little slow," Stephenson admitted on an investor call. "We lost some share in the quarter."

AT&T’s first quarter wireless operating revenue fell to $17.17 billion (€15.74 billion) from $17.95 billion a year earlier. Service revenue declined to $6.61 billion from $6.94 billion, while equipment revenue fell to $1.13 billion from $1.39 billion. EBITDA fell to $3.21 billion from $3.42 billion.

"We had our lowest ever postpaid upgrade rate of 3.9% in the quarter," said AT&T finance chief John Stephens, on the investor call, adding that the company sold 1 million fewer handsets compared to last year.

In fact, handset sales have become so hard to predict that AT&T opted not to provide full-year consolidated revenue guidance.

AT&T’s mobile subscriber base, which includes phone users as well as mobile broadband and tablet users, increased to 134.22 million from 130.45 million. Its branded phone base grew to 78.55 million from 78.13 million, but the number of postpaid phone customers was down year-on-year to 64.71 million from 65.96 million.

Despite a tough first quarter, Stephenson said AT&T is well positioned to cope with intensifying mobile competition.

"What the return of unlimited really highlights is the industry’s position in terms of network capacity," he said. "If the industry is going to stay with unlimited, we’re prepared, and can probably sustain it better than anyone else because of our spectrum position."

However, it isn’t just mobile customers that AT&T is losing.

Its U-verse TV customer base fell by 233,000 during the quarter, while DirecTV subscriber additions were flat. Broadband customers increased by 115,000, as growth in high-speed connections offset ongoing declines in DSL lines. The company’s Entertainment Group ended March with 25.03 million video connections – down from 25.34 million in Q1 2016 – and 14.29 million broadband connections, flat compared to a year ago.

Entertainment Group’s revenue inched down year-on-year to $12.62 billion from $12.66 billion. EBITDA was $3.02 billion compared to $3.08 billion.

The picture was more encouraging outside the U.S.

AT&T’s International business, which includes mobile operations in Mexico and TV assets in various Latin American markets, grew revenue by 15.7% year-on-year to $1.93 billion.

Mobile customers in Mexico grew by 633,000 during the quarter to reach 12.61 million, up from 9.21 million a year ago. AT&T also added 91,000 TV customers, giving it 13.68 million in total, up from 12.44 million in Q1 2016.

At group level, first quarter revenue fell slightly to $39.37 billion from $40.54 billion last year. Operating expenses fell to $32.50 billion from $33.40 billion, while operating income narrowed to $6.86 billion from $7.13 billion.

Net profit attributable to AT&T fell to $3.47 billion from $3.80 billion.

In 2017 as a whole, AT&T expects adjusted earnings per share growth in the mid-single digit range, capex of around $22 billion, and free cash flow of around $18 billion.