FILE – In this Oct. 24, 2016, file photo, the AT&T logo is placed above one of the shops in New York. (AP Photo/Mark Lennihan, File) (Copyright 2016 The Associated Press. All rights reserved.)
(Copyright 2016 The Associated Press. All rights reserved.)
AT&T has been running an “administrative” fee the consumer must pay that should add nearly $1 billion to the company coffers, according to a Wall Street analyst.
The fee hike was first spotted on Wednesday by BTIG Research analyst Walter Piecyk, who wrote about it in a research note. AT&T increased the cost two more times in the quarter, according to Piecyk.
“We estimate that the addition of these other post-paid phones would lift sales by as much as $970 million,” Piecyk wrote. Post-paid refers to a typical carrier contract, when the customer is billed at the end of the cycle.
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Administration walks can be seen as a ‘sneaky’ way to raise revenue, because they can go unnoticed by the consumer, and because the reasons are often unclear. For example, AT&T came under fire for an increase of these costs in 2013, CNET reported.
AT&T says that it is a common practice. “This is a standard administrative fee about the wireless industry, which helps to cover the costs we incur for items such as cell site maintenance and the interconnection between the carriers,” an AT&T spokesperson told Fox News.
But AT&T may need the fee increase to the fund of $85.4-billion purchase of Time Warner. “Presumably the Administrative Costs is another way to help AT&T for the financing of its network and Time Warner acquisition to go forward,” Piecyk said in a research note.
The analyst added that by the acquisition of Time Warner, ATT’s net debt rose by more than $60 billion.
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Years of almost no change, then it is a leap
The fee hike comes after years of little change, according to BTIG. In 2013, the first Administrative Fee started at $0.61 per phone line, then rose to $0.76 for the next three years.
“The change went unnoticed by the investors and the media,” Piecyk wrote in a research note.
But to jump from $0.76 to $1.99 in three months, according to BTIG. “In April 2018, the Administrative expenses increased to $1.26, and in June it rose again to $1.99,” BTIG said in a research note.
Later on Wednesday, in an update to the original research note, the research firm added that tablets and watches that make use of mobile connections is also punishable with an Administrative fine, in addition to phones.
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Bundled with other costs
AT&T has a web page that explains fees and other costs, including administrative costs. But the short description given there is not as much.
“The Administrative fee helps cover certain costs of AT&T, including, but not limited to: (a) costs of AT&T or its agents pay to interconnect with other carriers to deliver calls from AT&T customers to their customers; and (b) charges associated with cell site rents and maintenance.”
BTIG expressed some skepticism about the walk in her report.
“It is hard to believe that interconnection costs have increased in the last 6 months enough to justify this fee increase,” Piecyk wrote. “In fact, mobile operators are crediting the LOWER operating costs when explaining why the cost of the service was in decline. Not surprisingly, we don’t remember that any savings in Administrative Costs by AT&T or one of her colleagues associated with a reduction in the interconnection costs.”