AT&T announces the results of its fiscal second quarter, in which it saw revenue of $30.8 billion, net income of $4 billion and activations of 3.2 million Apple iPhones-a mobility record for the carrier.
AT&T's second-quarter numbers once again highlight the importance of the
Apple iPhone to AT&T's bottom line.
During the quarter, which closed June 30, AT&T saw consolidated revenue
of $30.8 billion-up 0.6 percent, or $194 million, from a year earlier-and net
income of $4 billion, the company announced July 22.
Getting in before the quarter closed, Apple launched its long-awaited new
smartphone, the iPhone 4, on June 24, helping AT&T set a company record,
with 3.2 million iPhone activations during the quarter.
AT&T officials said preorder sales for the iPhone 4 were 10 times higher
than first-day preorder sales of the iPhone 3GS in 2009. Of those 3.2 million
iPhone activations, according to AT&T, 27 percent were for new customers.
AT&T has come under fire for the performance of its network, which has
strained to meet the needs of so many data-hungry iPhone users. AT&T Chief
Financial Officer Rick Lindner said during a conference call with analysts that
the carrier was "moving heaven and earth" to execute improvements to
the network, especially in New
York and San Francisco, which have been particularly challenging areas.
In New York, the carrier's
efforts are approximately 90 days ahead of those in San
Francisco, and during the quarter 3G dropped calls
were down by 23 percent in Manhattan
and 13 percent in the New York
metro area. Additionally, blocked calls were down 39 percent in Manhattan,
and in the New York metro area,
3G download speeds increased by 31 percent over the last six months.
There have been rumors for some time that competitor Verizon Wireless will
also begin carrying an iPhone, but analysts have lately begun discussing it as
a done deal. A Verizon iPhone is expected to arrive most likely at the start of
2011 to spearhead Verizon's planned 4G LTE (Long-Term Evolution) network.
Losing the competitive iPhone advantage it has had over its fiercest rival won't
be easy for AT&T, analysts agree, although AT&T in its revenue
statement pointed out that its business isn't solely driven by the iPhone.
Organic net gains in total wireless subscribers during the quarter were 1.6
million, boosting AT&T's customer base to 90.1 million. This growth,
according to the company, reflects an increase in prepaid subscribers, the "rapid
adoption of smartphones" and the growth of a "host of connected
devices such as e-readers, global positioning systems and alarm-monitoring
systems." Postpaid 3G integrated devices-phones with QWERTY or virtual
keyboards-were up 2.9 million, to 29.7 million, an increase of 98.2 percent
year over year. By the end of the quarter, 53.2 percent of AT&T's 67
million postpaid subscribers were using integrated devices.
Additionally, AT&T's U-verse television services saw their first
billion-dollar revenue quarter, following 32 percent growth in wire-line
consumer IP data revenue.
Lindner also emphasized the success AT&T is enjoying with the Apple iPad-which,
unlike the iPhone, has had no trouble quickly ingratiating itself with both
consumer and enterprise customers.
"When we first introduced the iPhone, businesses, and in particular
CIOs, were reluctant and kind of pushed back," Lindner said, adding that
things have since evolved and companies are now developing their own
applications for the iPhone. "Well, right from the beginning with the
iPad, we've had a number of our business customers express interest-a number of
them have trials going on, and they see a lot of opportunity to use the iPad
within their business."
In closing, Lindner said he was "fundamentally positive" about
AT&T's long-term position. As for the rest of 2010, he was still positive
but cautiously realistic.
"We've had two very strong quarters to start the year with double-digit
earnings growth. As you know, it's a volatile environment out there and we can't
commit to ... double-digit earnings growth each quarter," he said. "But
the first half of the year has given us confidence and visibility into what we
can do both in terms of revenues and margins in the second half, and I think we'll
continue to post strong earnings growth in the second half of the year."