iPhone Sales Soar, Profits Flat for ATandT

Apple's exclusive iPhone deal with AT&T again proves a savior for AT&T as the telecom giant saves a mediocre third quarter with 3.2 million iPhone activations.

Despite a record number of iPhone sales and activations, AT&T posted flat third quarter profits Oct. 22 as revenue fell 1.6 percent to $30.86 billion. The iPhone sales were driven by the introduction of the iPhone 3G just prior to the start of the third quarter and Apple's subsequent price cuts to as low as $99 for the device.
For the quarter, AT&T, the exclusive U.S. provider of iPhones, activated 3.2 million iPhones, the telecom giant's largest quarterly total to date. Nearly 40 percent of the iPhone activations were for new customers.
With the record number of iPhone activations, AT&T also enjoyed a 3.8 percent increase in customers signing annual contracts with the average customer spending $61.23 a month. In the second quarter, AT&T reached an average monthly bill of $60 for the first time.
"We delivered a terrific wireless quarter, IP data growth was strong and execution across the business continues to be solid," said Randall Stephenson, AT&T's chairman and CEO.
AT&T also saw data services revenue jump almost 34 percent in the third quarter. Wireless data revenues from messaging, Internet access, access to applications and related services increased $916 million, or 33.6 percent, from the year-earlier third quarter to $3.6 billion, more than double the company's total in the third quarter two years earlier.
Data represented 29.4 percent of AT&T's third-quarter wireless service revenues, up from 24.2 percent in the year-earlier quarter and 18.4 percent in the third quarter of 2007. Wireless text messages on the AT&T network exceeded 120 billion, nearly double the total for the year-earlier quarter.
AT&T's traditional wireline business, though, continued to decline. In the third quarter, the company's wireline business fell 7.1 percent to $16.3 billion. The number of AT&T local land lines fell 11 percent to 25.2 million from 28.3 million a year ago.
For the quarter ended Sept. 30, AT&T's consolidated revenues totaled $30.9 billion, compared with $31.3 billion in the year-earlier quarter, as growth in wireless and advanced wireline data services in large part offset declines in voice, legacy data and print advertising products.
Overall earnings totaled 54 cents a share in the third quarter, as opposed to 55 cents a share a year earlier.
AT&T also saw U-verse TV subscribers increased by 240,000 in the third quarter to reach 1.8 million, up more than one million over the past year. AT&T U-verse TV's broadband attach rate continues to run well above 90 percent, and its U-verse Voice attach rate continues to run above 60 percent. More than three-fourths of U-verse TV subscribers have a triple or quad-play option from AT&T.
At the end of the third quarter, AT&T's U-verse deployment passed more than 20 million living units. Companywide penetration of eligible living units was above 12 percent, and across areas marketed to for 24 months or more, overall penetration now exceeds 20 percent. AT&T's total video subscribers, which combine the company's U-verse and bundled satellite customers, reached four million at the end of the third quarter, representing 14.9 percent of households served.
"As the economy works to regain its footing, we are keenly focused on cost improvement as well as continued leadership and investment in key areas that will drive future growth. We have moved forward aggressively to further expand in mobile broadband," Stephenson said. "AT&T U-verse has good traction and is redefining our wired consumer experience. Our advanced business products have proven to be resilient, and we continue to expand our capabilities in areas like network security and global Wi-Fi coverage."