By Samrhitha A
(Reuters) -U.S. wireless carrier AT&T (NYSE:T) raised its annual free cash flow forecast on Thursday as promotions and phone upgrades boosted subscriber additions that trounced third-quarter estimates, sending its shares up more than 7%.
The company expects free cash flow of about $16.5 billion in 2023, up from its prior forecast of $16 billion or higher. Its third-quarter figure of $5.2 billion beat Visible Alpha estimates.
AT&T has in recent months tried to stand out in the competitive U.S. market with offers, including a hefty discount on the iPhone 15 series that some analysts consider to be one of the most aggressive in the industry.
"We saw the strongest iPhone preorders we've had in many years despite competing promotions," AT&T CEO John Stankey said on a post-earnings call.
The company is benefiting from a shift by customers to higher priced plans and also expects a boost in wireless service revenue from the transition to electric vehicles, which consume more data.
It added 468,000 net monthly bill-paying wireless phone subscribers in the third quarter, surpassing expectations for 398,200 additions, according to Factset.
"The company is seeing low levels of churn and continuing customer growth, even amid an increasingly mature and saturated market," Third Bridge analyst Jamie Lumley said.
Revenue came in at $30.4 billion, beating estimates of $30.19 billion, according to LSEG data. Adjusted earnings per share of 64 cents exceeded expectation of 62 cents.
The company raised its forecast for full-year adjusted core earnings growth to more than 4%, from a prior view of 3% or more.
AT&T has been clamping down on expenses and expanded its cost-cut plan by $2 billion in July after it achieved a $6 billion goal ahead of schedule.
A lower cost bill is crucial as AT&T needs a steady flow of cash to service its net debt of $128.7 billion and support a dividend that is among the highest for U.S. stocks.