Earnings reports

AT&T Drunk on iPhone Success

AT&T Inc. (NYSE: T) had a record-breaking third quarter for its wireless business, driven largely by its activation of 5.2 million high-ARPU iPhones, the most ever in a quarter, thanks to Apple Inc. (Nasdaq: AAPL)'s fourth version of the iconic device. (See AT&T Reports Q3 .)

Overall, for the quarter, AT&T's wireless revenue grew 11.4 percent as the Death Star added 8 million postpaid customers on integrated devices and 2.6 million total wireless subscribers, bringing its total to 92.8 million subscribers in service. Its postpaid subscriber base is pulling in $62.84 in ARPU, a number that has grown seven quarters in a row. Churn was only 1.32 percent, and wireless data revenues grew 30.5 percent over the previous year, to $1.1 billion.

For the iPhone, AT&T's 5.2 million activations was 62 percent more than its previous record of 3.2 million in the second quarter of the year. Plus, 24 percent were new customers to AT&T.

So overall, AT&T had reason to celebrate.

Even so, Ralph de la Vega, CEO of AT&T Mobility and Consumer Markets, and Rick Lindner, chief financial officer, spent the Q&A section of the call assuring investors the momentum would continue -- with the unspoken context of "after AT&T loses exclusivity of its wonder phone."

Without directly addressing the inevitable loss of exclusivity, de la Vega highlighted what else AT&T has going for it in terms of devices.

The wireless boss said that more than 80 percent of AT&T's sales were in integrated devices, what it defines as handsets with qwerty or virtual keyboards. He expects this trend to continue as AT&T leans heavily on Android, unveils new HSPA+ and Long Term Evolution (LTE) data cards, and continues to add emerging devices, like the iPad. (See 4G World: AT&T Learns Lessons From iPad.)

He also said he expects smartphone prices will continue to fall, a trend he said AT&T will follow if consumers appear to want it. He's expecting the price drop to be gradual.

When asked how AT&T will respond to competition in mobile phones, he said that the battle is over innovation cycles -- who can innovate most quickly. He highlighted AT&T's Android portfolio and Apple's quick innovation cycle, and he called out Microsoft Corp. (Nasdaq: MSFT)'s Windows Phone 7 devices and the updates it made.

"I like having a wide choice of operating systems," he said. He also added that improved network speeds with HSPA+ and eventually LTE will also make the phones more compelling. (See 4G World: AT&T to Go to 21Mbit/s HSPA+ in 2011?)

Lindner jumped in to bring investors back to the fact that AT&T is selling many integrated devices -- not just the iPhone. What that speaks to, he said, is the combination of features in the devices, along with the network speeds, that are turning phones into mobile computing devices.

"Increasingly, customers want to access applications and content via mobile devices," Lindner said. "That is really the real story here, and it leads us into a mobile broadband business for us that's approaching a $20 billion-a-year business and a business that's growing at 25 to 30 percent."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

sarahthomas1011 12/5/2012 | 4:20:50 PM
re: AT&T Drunk on iPhone Success

With 8 million smartphones activated in the quarter, that means around 65% were iPhones. That is a big chunk of the total, and I bet most of its new customer additions ONLY came for the iPhone. Yikes.

FredStein 12/5/2012 | 4:20:40 PM
re: AT&T Drunk on iPhone Success

Thanks for highlighting the back-story.


AT&T's coverage is still bad. Their support is bad, as in really bad. They will lose customers, a bigger issue than not getting new customers.


They're like Dell, who lost their market advantage due to horrible support.

sarahthomas1011 12/5/2012 | 4:20:39 PM
re: AT&T Drunk on iPhone Success

They're churn was really low this quarter, probably because people aren't going to give up their iPhones, even if they do hate AT&T. It'll be interesting how high that shoots up when people have a choice.

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