iPhone 3GS Launch was ATandT’s ‘Best Day Ever’

Wireless services revenue, and for-now-exclusive rights to the Apple iPhone, again saved the day for AT&T, which reported results for the second quarter of fiscal year 2009 on July 22.
“For the full second quarter, AT&T iPhone activations totaled more than 2.4 million,” said AT&T Chief Financial Officer Rick Lindner, on a conference call with investors and media.
“Thirty-five percent of those activations were for customers who were new to AT&T. Better than half of the upgrades previously had no data plan. Better than 80 percent of the upgrades were from a non-iPhone device or a 2G iPhone, increasing ARPU [average revenue per user] and, in the case of 2G upgrades, eliminating our revenue share with Apple.”
AT&T’s overall results for the quarter remained essentially flat-a good showing, in a difficult economy. Consolidated revenues for the quarter were $30.7 billion, down 0.4 percent year over year and up 0.5 percent sequentially.
The carrier’s wireless segment accounted for 43 percent of revenue for the quarter. Wireless subscriber gains were 1.4 million for the quarter and 6.7 million over the past year. Wireless service revenues were 9.4 percent year over year and 2.7 percent sequentially, and total wireless revenues were 10.1 percent year over year and 3 percent sequentially.
“I think these results clearly demonstrate the ability to continue wireless growth through penetration of integrated and emerging devices, which are driving wireless data,” Lindner said. “Integrated device growth in the second quarter was led by a strong launch for the iPhone 3GS, which started June 19. The day of the launch was the best sales day ever for our retail stores, and our Website, AT&T.com, had its largest order day ever.”
Lindner said over the past year the number of integrated devices on the network more than doubled, which is critical, as ARPU for integrated devices is 1.8 times that of AT&T’s nonintegrated device base.
Lindner added that 60 percent of AT&T’s integrated devices were on a family plan, and roughly a third were purchased through business relationships. “Both of these factors,” he said, “strengthen customer retention.”
AT&T announced first-quarter results on April 22, revealing that, overall, profit had dropped 9.7 percent from the previous year. The company’s wireless division, however, showed a net gain of 1.2 million subscribers-a 24.1 percent increase from the first quarter of 2008.
On June 19, Apple released the anticipated iPhone 3GS exclusively on the AT&T network in the United States. Though some users have reportedly found fault with the smartphone and its new operating system, iPhone OS 3.0, including instances of overheating, poor battery life and erratic Wi-Fi connectivity, the updated iPhone has been a rousing success, with 1 million iPhone 3GS handsets selling in the first three days alone.
Analysts comparing the Palm Pre-which came out on the Sprint network on June 6 and was positioned as an “iPhone killer”-with the iPhone have noted that Sprint’s service fee for the Palm Pre includes texting, while AT&T’s for the iPhone does not.
AT&T saw the happy results of this, particularly as it reported that users sent 108 billion text messages in the second quarter of 2009-nearly double from the same quarter in 2008.
Sustained wireless data growth was up 37.2 percent, with wireless data revenue for the second quarter of 2009 lifting to $3.4 billion, from $3.2 billion in the first quarter and $3.1 billion in the fourth quarter of 2008.
In a difficult economic environment, Lindner said, AT&T has been aggressively managing costs and preparing for when things turn around.
“We continue to invest and grow in key areas like wireless broadband, advanced business services and our AT&T U-verse platform. Our goal is to make sure that when the economy turns, we’re stronger financially and stronger operationally, with solid momentum in the areas that will lead future growth.”
Finally, Lindner discussed the initiative AT&T has under way to boost its data network speeds ahead of 4G.
“Beyond great devices, the ecosystem for wireless data growth includes a great spectrum position, a robust network, and access to terrific applications and content, and AT&T has all of these components,” Lindner said.
“Our network handles more integrated devices and more data traffic than any of our competitors, and network performance will be enhanced, as we execute the HSPA 7.2 initiative we announced in the second quarter.
“This effort will increase capacity and significantly increase wireless speeds ahead of 4G-something no other major carrier in the U.S. is doing. The work is already under way, and our iPhone 3GS customers will be able to realize benefits as soon as 7.2 is turned up.”
A firm date for when 7.2 would be “turned up” was not given.