AT&T 'Transition' To Take A Year Or More, Analysts Say

AT&T Inc.'s (NYSE: T) reduced revenue outlook for 2014 reflects "a transition period" that will require a year or more to complete, according to an analyst Wednesday.

Citi's Michael Rollins said AT&T's lower guidance that accompanied its third-quarter earnings report Thursday reflects the role of accounting for installment plans rather than "organic performance."

The company is shifting away from subsidizing customers' mobile phones in exchange for long-term contracts.

It seeks instead to offer "attractive pricing" without the subsidized device for its so-called Mobile Share plans, which now represents 45 percent of the company's subscribers.

This shift is part of a transition that "unfortunately, we believe will take at least another 12-to-18 months to show progress," said Rollins, who maintains a Neutral rating on AT&T.

So far the strategy is showing success, with an additional 785,000 wireless subscribers and 601,000 high-speed Internet subscribers in the recent period.

But Canaccord's Greg Miller pointed out that its growth pace is outstripped by Verizon Communications Inc. (NYSE: VZ). Moreover, AT&T's growth is likely to slow in the face of fierce competition, according to Miller, who maintained a Hold rating.

Taking a more sanguine view, Credit Suisse's Joseph Mastrogiovanni said AT&T's pricing strategy "will shield it to some extent from heavier competition."

Mastrogiovanni maintained an Out Perform rating on AT&T, but cut his 2014 estimate, citing the shift to Mobile Share as well as the cost of promotions and competition.

AT&T closed Thursday down more than 2 percent at $33.66.