ATandT Hints at iPhone Refresh During Quarterly Earnings Report

By Michelle Maisto  |  Posted 2010-04-21

ATandT Hints at iPhone Refresh During Quarterly Earnings Report

AT&T reported consolidated revenues of $30.6 billion April 21 for its first quarter of 2010, representing a growth of 0.3 percent, or $78 million, from a year earlier. The carrier additionally added 1.9 million wireless subscribers-the highest first-quarter total in its history-for a total of 87 million subscribers. (Competitor Verizon Wireless, which will report its earnings April 22, currently has more than 91 million subscribers.)
AT&T's profits, however, were another matter. The newly passed health care reform laws eliminated a long-term tax break, which companies have to pay the entire cost of in the quarter that the law took effect. For AT&T, this meant anteing up $995 million, causing earnings to drop by 21 percent.
Net income for the carrier, then, was $2.5 billion, or $0.42 a share, down from $3.1 billion, or $0.53 a share, from the first quarter of 2009.
"I'm pleased to be able to say that we had a terrific start to the year," AT&T Chief Financial Officer Richard Lindner said during the conference call with investors. "Earnings per share before the non-cash charge was up double digits. Consolidated revenues were up, margins expanded, cash flow was strong and I think all of these reflect good execution on the plans that we outlined for you in January."
New focus has additionally been turned on the carrier due to rumors that Apple may be working on a device for Verizon, which would leave AT&T without its prized possession: exclusive rights to the iPhone. Before that happens, though, AT&T is expected to enjoy one more iPhone refresh in June. Lindner perhaps hinted at this, saying the carrier will have "new products and product refreshes we're excited about."
During the quarter, AT&T activated 2.7 million iPhones, more than a third of which were owned by new customers to AT&T. Additionally, wireless data revenues were up $947 million over the year, for a total of more than $4 billion for the quarter.
Lindner said mobile data represented an over-$16 billion annualized revenue stream for AT&T, and explained that driving this type of growth required three things, the first of which is a great data network. 

New Category: Connected Devices

"We carry about half of all the wireless data traffic in the United States today," Lindner said. "Second, you need a broad, data-capable device lineup. We have that today, and you should expect to see us continue rolling out terrific devices as we go through this year. We have twice the number of smartphones on our network as any of our competitors. And third, you need rich access to applications. Again, an area where we lead."
In its new "connected devices" category, which includes e-readers such as the Kindle 2, GPS devices and soon the Apple iPad, it added 1.1 million customers, for a total of 5.8 million. Lindner said this was an important new area for the company, explaining, "We believe the range of the devices that will be connected wirelessly in the future will be both broad and deep."
Analyst Roger Kay of Endpoint Technologies agreed it was a good quarter for the carrier.
"Bringing its subscribers up to within a scootch of Verizon's is great for AT&T. The iPhone has definitely been a boost," Kay told eWEEK. "At this point, AT&T needs to continue to build out its network to accommodate the slew of data-heavy endpoints that will follow the iPhone's lead."
Kay added, "The company took an image hit when its service couldn't keep up with the increased data usage, but overall the relationship with Apple has been beneficial and should stand AT&T in good stead as more Apple competitors join the battle."
In all, the carrier was positive about past efforts, as well as plans to reinvigorate its relationship with current iPhone customers before its exclusive relationship with the device ends.
"In January we outlined a plan for you, and I believe what you've seen in our results today is that we delivered what we said we would-hopefully what you see is we delivered a little more than what we said we would," Lindner said in closing remarks.
"We had a terrific start to the year. Wireless growth was excellent. Best ever churn, best ever post-paid ARPU, best-ever first-quarter net ads, strong data growth and I think even more importantly we have a terrific technology path going forward, to continue to delivery wireless growth," Lindner said. "We're already seeing solid improvements in data download speeds, and we've got a lot more to come there."

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