Optical/IP Networks

AT&T: Another Bumper iPhone Quarter

AT&T Inc. (NYSE: T) this morning reported a slight decline in first-quarter revenues, due to the pressure on consumer and business wireline voice spending. But that sag was almost offset by strong wireless results, led by sales of 1.6 million Apple Inc. (Nasdaq: AAPL) iPhones in the quarter.

For the quarter ended March 31, 2009, AT&T reported revenue of $30.6 billion, versus $30.7 billion in the quarter 12 months ago. The 9 percent increase in wireless revenues for the quarter was in sharp contrast to wireline revenues down over 5 percent.

Net income for the quarter was $3.1 billion, or $0.53 per share, compared with $3.5 billion, or $0.57 a share, in the period a year earlier. AT&T said that the drop in earnings per share was related to one-time pension expenses.

The results once again indicate the important role the Apple iPhone plays in AT&T’s wireless business. AT&T CFO Rick Lindner said on the call that the carrier activated more than 1.6 million new iPhones in the quarter, with more than 6 million 3G units sold since the latest iPhone was launched last summer.

It is no wonder that AT&T is reportedly in talks with Apple to extend its exclusive rights to the iPhone until 2011. Lindner didn’t mention any talks or new iPhone-related productions during the call. “We continue to have a very good relationship with Apple,” he said. (See AT&T Seeks to Extend Exclusive iPhone Deal.)

The operator was keen, however, to address the margin concerns that some analysts had about the additional subsidies that AT&T pays for each activation of a 3G phone. “Dilution from the iPhone 3G initiative is down significantly,” Lindner said, as more units have been sold and more data consumed. (See iPhone Margin Munch.) And therein lies the appeal of the iPhone for AT&T. The average revenue per user (ARPU) derived from iPhone devotees is 1.6 times that which the carrier receives from other wireless subscribers.

The carrier added 1.2 million net wireless subscribers in the quarter to reach 78.2 million users in total. The carrier says that ARPU from monthly cellular subscribers was up 2.1 percent versus the year-earlier quarter to $59.21.

A 38.6 percent increase in wireless data revenues to $3.2 billion was driven by "messaging, Internet access, e-mail," and other applications. Lindner says that wireless data now represents a $13 billion a year business.

Some analysts on the call, however, did ask about signs of potential weakness in ARPU quarter-on-quarter as opposed to year-on-year. Some consumers, Lindner noted, are looking to “control spending” by moving to all-you-eat plans or cutting usage to save funds.

"We are looking at some things we can do with pricing there; we’d rather they moved to unlimited,” he noted.

The carrier also continued to see a growth in advanced broadband services in the first quarter. It added more than 471,000 new broadband subscribers through its U-Verse TV system and 3G cards.

Despite promising continued spending on 3G and advanced broadband services, however, the operator didn’t mention the next stage in the wireless development of such services -- namely Long-Term Evolution technology -- at all on the call. AT&T has said previously that it will start deploying LTE sometime in 2011. (See MWC 2009: AT&T Plots LTE in 2011.)

— Dan Jones, Site Editor, Unstrung

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