AT&T may have just been able to add close to $1 billion in its annual revenue by increasing a dubious surcharge included in the bills of millions of its wireless customers.
Fortune reports that the telecommunications giant has decided to raise a tiny line found at the bottom of the monthly bills of its nearly 64.5 million wireless users, called the “administrative fee,” which is purportedly used by the company for things such as “cell site maintenance” and “interconnection between carriers.”
The fee has been more than doubled from a paltry $0.76 to a very noticeable $1.99, meaning that AT&T will make $1.23 more from each of its wireless customers every month, increasing its annual revenue by a whopping $800 million. The company, apart from having provided what can only be termed as a generic reason for the sudden increase, has refused to get into details on how the raise is actually going to make the service better for its customers.
Analysts, however, have proposed a more obvious reason behind AT&T’s sneaky decision. According to BTIG Research analyst Walter Piecyk, who was also the one who first broke the news about the raise, AT&T is trying to recuperate some of the massive $108 billion it spent in stock, cash and assumed debt to acquire Time Warner in an effort to strengthen its entertainment avenues.
“Presumably the Administrative Fee is another way to help AT&T fund its network build and Time Warner acquisition going forward,” Piecyk said.
The purchase, which has rightly been dubbed as “one of the largest and priciest corporate consolidations in recent memory,” left AT&T with an additional $60 billion of net debt. Moody’s Investors Service rated the company as being “weakly positioned” in its ability to recuperate the debt, urging the telecommunications giant to ramp up its revenue by more “forceful and specific” means.
The discreet method of raising a dubious tiny line added to the bill of all of AT&T’s 64.5 million wireless customers appears to be an effort in this direction, but the company is not forthcoming about its actual motive, and has instead pointed out that the increase is necessary and would help AT&T better its telecommunications infrastructure.
AT&T is not the only telecommunications company to have increased its revenue by adding vague and unspecific tiny lines to the bills of its customers. There has been a quiet proliferation of such fees over the years, but last year T-mobile bucked the trend by eradicating two tiny lines present in the bills of its customers. Not surprisingly, then, AT&T’s move to increase the tiny line was blasted by T-Mobile CEO John Legere, who used the opportunity to entice AT&T’s customers away from the service.