AT&T may be facing a public relations situation following reports of the carrier’s move to significantly increase the administrative fees it levies against customers—actions that one analyst calculated could boost the carrier’s wireless revenues by almost $1 billion.
Wall Street analyst Walter Piecyk, from research firm BTIG, first noted the increase in a post yesterday. “AT&T increased its Administrative Fee twice during the quarter, which we estimate will lift its annual revenue by $800 million and boost post-paid ARPU by $1,” he wrote, noting the fee grew from 76 cents per customer to $1.99 over the course of three months.
Piecyk also noted the fee goes to pay for interconnections with other carriers and cell tower rent and maintenance. “It’s hard to believe that interconnection costs have increased in the past 6 months enough to justify this fee increase,” the analyst wrote. “In fact, wireless operators have been crediting LOWER interconnection costs when explaining why their cost of service was in decline. Not surprisingly, we don’t recall any reductions in Administrative Fees by AT&T or its peers associated with reductions in interconnection expenses.”
AT&T, for its part, said in a statement that “this is a standard administrative fee across the wireless industry, which helps cover costs we incur for items like cell site maintenance and interconnection between carriers,” adding that it hasn’t adjusted the fee in several years.
Perhaps not surprisingly, reports of the “sneaky” fee increase generated some complaints online. “This just sounds like a way to raise prices a touch without actually looking like you're raising prices,” wrote one Reddit user. “Honestly considering switching after being a customer for 13 years,” wrote another.
And T-Mobile’s John Legere wasted no time in blasting AT&T’s “really terrible” move:
Another example of @att putting their wallets ahead of their customers. Declining YoY service rev for 16Qs in a row will make you do some really terrible things to your customers, twice in one quarter… huh @att? Your customers need #TMobileONE. https://t.co/60hnve5NxY— John Legere (@JohnLegere) June 27, 2018
Importantly, AT&T’s action coincides with the carrier’s work to close its Time Warner acquisition, a move that Fortune noted has raised concerns about the operator’s net debt levels. Moreover, AT&T executives have promised that the operator will continue to improve its wireless service revenues with the goal of growing them by the end of the year.