ATandT Lessens Its iPhone Reliance With Robust Data Revenue Strategy

AT&T has the iPhone to thank for attracting millions of subscribers. But now, with data revenue rising thanks to LTE, a diverse portfolio and upcoming data share plans, it's found a way to lessen its reliance on the iconic device.

AT&T's new, strategic initiatives will help the carrier to grow data revenue by 18 percent year over year in the third quarter of 2012, according to a June 24 report from Technology Business Research (TBR).

Apple's iPhone was a business changer for AT&T, which for years was the only U.S. carrier to offer the device. Sprint's CEO has called the iPhone the predominant reason that customers churn€”consumers go to where the iPhone is€”and consequently the carriers have pursued the device with their every resource (and even a few borrowed ones).

Moving into the second half of 2012, however, AT&T's plan to lessen its reliance on the iPhone€”if not the iPhone's control over it€”is coming to fruition, TBR analyst Eric Costa suggests in the new report.

During the second half of the year, TBR expects AT&T to drive data revenue growth by further diversifying its device portfolio, driving a more connected and data-focused strategy with its Mobile Share plans€”which it will begin selling in late August€”and continuing to grow its LTE (Long-Term Evolution) 4G network.

"AT&T has embraced the way people really want to utilize its services to drive its future growth," Costa wrote in the report. "The carrier is now packing a one-two punch€”a diversified device lineup and more flexible data plans€”to build a strong portfolio that will accelerate its revenue growth by attracting more customers."

During its second quarter, AT&T announced early on July 24, it grew its wireless data revenues by $1 billion, compared to a year ago, and saw its earnings increase by 10 percent. By the end of the quarter, nearly 62 percent of its postpaid subscribers had smartphones, up from nearly 50 percent a year ago, and more than one third of its postpaid smartphone subscribers had 4G-capable devices.

"As smartphone penetration rises, AT&T will increase data consumption which will drive data revenue growth," wrote Costa.

He noted that the percentage of AT&T's smartphones that are iPhones will dip, due to the adoption of high-end Android devices like the Samsung Galaxy S III and upcoming LTE Windows 8 devices.

While AT&T sold 5.1 million smartphones this quarter, with 3.7 million or 72.5 percent of total smartphones comprised of iPhones, noted Costa, this was a "significant improvement" over the first quarter, when iPhones comprised 78 percent of AT&T's total smartphone sales.

"Despite the lower percentage, AT&T still remains reliant upon the iPhone to drive subscriber additions and remains the leading U.S. iPhone carrier, beating out Verizon's 2.7 million 2Q12 iPhone sales," wrote Costa.

As for the role of AT&T's upcoming Mobile Share plans, TBR expects them to drive data usage and data revenue expansion (as AT&T also expects), in addition to improving customer loyalty by allowing customers to choose between the new shared-data plans and its existing tiered plans. Verizon, by contrast, did away with its tiered pricing plans once the Share Everything plans were in place.

Finally, the role of LTE in loosening the iPhone's grip, is that it, too, will drive data revenue growth.

"The faster AT&T can deploy LTE, the faster it can take advantage of its growing LTE device portfolio and drive increased data usage," wrote Costa. "This will allow AT&T to better draw from its LTE revenue stream."

Follow Michelle Maisto on Twitter.