AT&T's Q2 iBoost

AT&T Inc. (NYSE: T)'s pay-as-you-go subscriber numbers for the second quarter were revitalized thanks to the success of the Apple Inc. (Nasdaq: AAPL) iPad tablet on the operator's 3G network, but it appears that even the continued success of the iPhone can't stop questions about the growth of AT&T's monthly user base.

Overall, the company had an "organic net gain of 1.6 million wireless subscribers" for the quarter. The company, however, only added 496,000 net new monthly contract customers rather the 550,000 or so that financial analysts had been expecting.

Basically, new additions from the iPhone appear to be keeping AT&T's post-paid monthly subscriber numbers afloat.

The company says that it had 3.2 million iPhone activations for the three months ending in June, which is "the most quarterly iPhone activations ever." Around 27 percent of these are customers who are "new to AT&T."

Analyst firm Technology Business Research Inc. (TBR) suggests that, but for continued strong iPhone growth, AT&T would have posted a decline in postpaid net additions in the second quarter. Analyst Kate Price writes that the iPhone provided a much-needed boost to the postpaid monthly contract segment:

AT&T posted just 496,000 postpaid net additions, down 56% year-to-year. The company added approximately 860,000 iPhone net additions, implying that non-iPhone postpaid customer net additions fell by approximately 360,000 in the quarter.

This shouldn't initially be a worry for AT&T, since CFO Rick Linder said on the call that pre-orders for the iPhone 4 this year were ten times higher than demand for the iPhone 3GS in 2009. "That demand will likely drive strong growth in 3Q," TBR's Price writes.

Nonetheless, AT&T could be in a vulnerable position in its postpaid business if it loses its exclusive deal with Apple at the end of 2010, Price notes.

Apple's iPad also gave AT&T's pay-as-you-go business a kick in the pants. The company added 300,000 users this quarter after losses through 2009, a bump that appears to be almost single-handedly attributable to the iPad, which launched at the end of April on the AT&T network. (See Apple Sells Over 3M iPads, Nets 78% Profit Jump.)

"In the quarter, we did 400,000 to 500,000 3G iPads," Linder said on the call. Over 75 percent of iPad users signed up for the more expensive plan capped at 2GB of data for $25 a month. "[Data usage] is above our typical iPhone customer but below our typical Laptop Connect customer," Linder said. (See Bye, Bye Unlimited iPad Data Plan and AT&T Intros Mobile Data Caps.)

Overall, AT&T said its net income rose to $4.02 billion, or $0.68 a share, in the quarter, from $3.2 billion, or $0.54 a share, a year ago. Revenue was $30.8 billion, compared with $30.7 billion a year ago.

— Dan Jones, Site Editor, Light Reading Mobile

joset01 12/5/2012 | 4:29:10 PM
re: AT&T's Q2 iBoost

All this begs the question, what can AT&T do to cut its reliance on Apple? A single major supplier is never a great idea...

FredStein 12/5/2012 | 4:29:09 PM
re: AT&T's Q2 iBoost

Sort of answering your question, Dan:

AT&T's top line up $100M, bottom line up $800M. So to address Apple opening iPhone to VZ, ATT needs to spend money now to upgrade the RAN. The data says that ATT can afford to pay for the upgrade from the incremental fees charged to iPhone users.

It is the smart business. It is an implied obligation.

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