ATandT First Quarter Barely Marred by Verizon iPhone 4

AT&T had a first quarter full of bests. Despite the arrival of the iPhone 4 on Verizon, AT&T's iPhone activations increased by nearly 1 million year-over-year.

AT&T announced fiscal first-quarter 2011 results April 20 that were peppered with records. While many wondered whether the arrival of an Apple iPhone 4 on competitor Verizon Wireless' network in February would sound a death knell for AT&T-which during its four-year tenure as the exclusive provider of the iPhone had suffered loud complaints from customers regarding the quality of its network-in preparation it had stocked its mobile portfolio with a variety of devices, including Android-running smartphones, and it managed to sell 5.5 million smartphones and add 2 million new wireless subscribers during the quarter, both first-quarter bests for the company.

AT&T's iPhone activations also increased by nearly 1 million year-over-year to 3.6 million during the quarter, and it saw an overall profit of $3.4 billion-up from $2.5 billion a year ago-on consolidated revenues of $31.2 billion.

"We entered this quarter and this year with some questions and some uncertainty, primarily related to the change in iPhone exclusivity and the impacts that would have on our business. Hopefully, we've answered those," out-going AT&T CFO Rick Lindner said during an April 20 call with analysts and media.

"Was there an impact from another carrier launching the iPhone? The answer was yes, there was," Lindner continued. "We saw a very small increase in postpaid churn, and we saw a slight decline in overall flowshare. But the impacts were significantly less than many in the financial community and the media expected, and frankly the impacts were less than we expected. And we continued to grow our postpaid base. We continued to grow our iPhone base. We continued to grow postpaid ARPU [average revenue per user] and had significant growth in wireless data revenues."

Helping to drive ARPU, said Ralph de la Vega, president and CEO of AT&T's mobility and consumer markets division, were sales of RIM BlackBerry handsets, smartphones running Google's Android and Microsoft's Windows Phone OS, and AT&T's "fundamental strategy to drive customers into smartphones with higher data plans."

De La Vega said AT&T has been promoting low-cost smartphones, such as the HTC Inspire, as well as new Android phones like the Motorola Atrix-"which is selling very, very well"-and has seen an increase in customers moving from messaging devices and feature phones to smartphones.

AT&T also enjoyed an increase in tablet sales, with its "branded computing subscribers"-those using data-only devices, including aircards-doubling since the first quarter of 2010 for a total of 3.4 million subscribers. This growth, along with rapid smartphone sales, emphasizes AT&T's need to grow its mobile broadband network.

AT&T's growth, AT&T CEO Randall Stephenson said in a statement, is why the company's "agreement to acquire T-Mobile USA ... is so important. Combined, the two companies' spectrum and network assets will allow us to simultaneously address spectrum issues created by this increased demand and improve customers' network experience as volumes continue to grow."

Its proposed purchase of T-Mobile for $39 billion in cash and stocks has raised questions about the degree of competition that would remain in the industry, were the deal to be approved, and the Federal Communications Commission and other federal agencies have said they plan to consider and comb over it quite carefully.

AT&T, however, addressed the completion of the deal not so much as an "if" but a "when."

"Beyond 2011," Lindner said in his closing comments during the call, "we look forward to closing our acquisition of T-Mobile and to delivering all the benefits and all the promises of a strong, nationwide, wireless broadband network to our customers, to the nation and to our shareholders."