Verizon Lags AT&T in Q2 Subs Game

The launch of the 3GS iPhone earlier this year helped push AT&T Inc. (NYSE: T) ahead of its major rival Verizon Wireless in the subscriber numbers game, for one quarter, at least.

Verizon revealed Friday, ahead of its full second-quarter earnings report, that it added 1.1 million new subscribers during the quarter. AT&T picked up 1.4 million new users in the same period, with over a third of them signing up with AT&T to get their hands on the shiny new iPhone 3GS.

By comparison, Verizon added 1.3 million wireless customers in the first quarter of this year, beating rival AT&T's 1.2 million net adds in the same period.

Basking Ridge, N.J.-based Verizon is still the nation's biggest wireless operator, with 87.7 million customers on its books, thanks to the recent acquisition of Alltel Corp. (NYSE: AT) AT&T, meanwhile, has nearly 80 wireless users to its name. (See Wireless Pumps Up Verizon in Q1.)

AT&T also saw its second-quarter profits decline by 15 percent because of upfront costs associated with the launch of the new iPhone. The carrier, however, is confident that the long-term returns will be worth the initial costs. (See AT&T's Q2 Profit Lowered by iPhone Launch.)

Both carriers' subscriber adds look impressive compared to their nearest rival, third-ranked U.S. cellular operator Sprint Corp. (NYSE: S). Sprint lost 182,000 customers overall in the first quarter, which was an improvement on the several previous quarters.

The big question for both AT&T and Verizon is how to keep the subscriber momentum going. Devices as popular as the 3GS iPhone don't happen every quarter. There has been some speculation about more consolidation in the cellular sector. Both Verizon and AT&T have been buying much smaller operators to add numbers, and Verizon splashed out $28 billion to buy Alltel. It isn't clear, however, if either operator would buy bigger right now. (See Vodafone Confirms $28.1B Alltel Takeover.)

Ironically, AT&T actually added 1.5 million rural subscribers during the quarter by buying up some Alltel assets. (See AT&T Buys Some Verizon-Alltel Assets.)

— Dan Jones, Site Editor, Unstrung

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