AT&T Looks From iPhone to LTE to Increase Subs

AT&T Inc. (NYSE: T) has carved a path from the iPhone to Long Term Evolution (LTE) to ensure it doesn't start feeling the squeeze from sharing the Apple Inc. (Nasdaq: AAPL) smartphone with Verizon Wireless . (See AT&T's iPhone Growth Continues.)

During a conference call to discuss first-quarter earnings, AT&T executives admitted they were worried about what effect the Verizon iPhone would have on their business, but maintained that they were confident in their plans. Rightly so, too, as the carrier continued to add smartphone subscribers in the quarter.

"The impacts were significantly less than many in the financial community and media expected, and frankly, the impacts were less than we expected," retiring CFO Rick Linder said on what will be his last earnings call.

Growth may not be so easily won going forward, however. AT&T added only 62,000 retail postpaid subscribers -- the valuable kind that sign contracts -- in the quarter, down from 512,000 this time last year. Verizon and Sprint Corp. (NYSE: S) will continue to put the squeeze on AT&T during the rest of the year as it prepares to absorb T-Mobile US Inc. . (See Sprint: AT&T's Misleading on Merger Talk.)

That's why AT&T is moving ahead rapidly with LTE. AT&T Mobility CEO Ralph de la Vega said AT&T will have markets up and running in mid-to-late 2011, with handsets and devices ready to go. Until then, he expects AT&T's lineup of BlackBerry, Windows Phone 7 and Android to tide consumers over. In fact, de la Vega said that around 40 percent of smartphone sales were in these three operating systems, and Android monthly sales have doubled in the past six months.

"Once customers get to see the mobile broadband strategy that AT&T has, where you get a great LTE experience with these new devices, but then you fall back to our HSPA+ capability, so that the transition from the high speed of LTE to high speed HSPA+ is almost seamless, it's something they're going to love ... it puts us in an even better position than in this quarter," de la Vega said.

AT&T is also still benefiting from contract customers, but as Technology Business Research Inc. (TBR) analyst Kate Price points out, that won't be a sustainable advantage as contracts come up for renewal and customers have a choice.

De la Vega did say that AT&T's network performance is getting better and faster with its HSPA+ rollout, but that may not at the forefront of most consumers' minds -- making its move to LTE all the more important.

"AT&T is working to improve its network, though poor service and capacity constraints remain fresh in many subscribers' minds, which could cause them to churn," Price wrote in a research note. "With this in mind, AT&T is rapidly upgrading its network to LTE and is adding compelling new devices, with a renewed commitment to Android-based devices, in order to retain customers."

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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