'Soft' iPhone Sales Can't Dampen ATandT's Q1 Bottom Line

AT&T excitedly announced the results of a quarter that showed "gains in every customer category." Detractors, however, point to iPhone sales that were down 43 percent from the fourth quarter.

AT&T executives announced April 24 that everything was up, up, up!

The carrier sold 4.3 million Apple iPhones during the first quarter, 21 percent of them to subscribers new to the network, and saw €œgains in every customer category,€ according to a company statement.

Total smartphone sales during the quarter reached 5.5 million, blowing through a first-quarter sales record. AT&T also sold 240,000 tablets, helping to make its €œbranded computing€ category, which includes tablets, aircards, WiFi hotspots and other data-only devices, a winning one that contributed to earnings that, at $31.82 billion, edged past analyst predictions.

AT&T also added 726,000 new wireless subscribers€”just below the 734,000 Verizon Wireless added during its first quarter€”bringing its total customers to 103.9 million. Verizon, selling 3.2 million iPhones during its first quarter, raised its customer total to 93 million.

Wireless data revenues, helped by the iPhone, were up nearly 20 percent, or $1 billion, over the same quarter a year ago. And, as promised in January, AT&T began buying back shares€”67.7 million of them, to the tune of $2 billion.

€œWe had a terrific start to the year,€ AT&T CFO John Stephens told financial analysts. €œNo matter which metric you focus on, you see solid results.€

SeekingAlpha offered investors another perspective.

€œAT&T€™s Q1 report isn€™t good news for Apple, and is nearly as bad for rivals and smartphone chip makers,€ the Website reported 45 minutes before the start of the AT&T call. €œTotal smartphone sales fell 41 percent quarter-over quarter... thus, the 43 percent quarter-over-quarter drop in iPhone sales (worse than Verizon€™s 24 percent drop) only led to a modest share decline.€

Indeed, AT&T, during its fourth quarter€”traditionally a stronger-selling quarter than the first, across all players€”sold 9.4 million smartphones and activated 7.6 million iPhones.

Still, Stephens and AT&T Mobility CEO and President Ralph de la Vega were incredibly upbeat, pleased by their expanding 4G network, increasing smartphone usage, increasing data usage and the success of AT&T€™s tiered pricing plans. Approximately 61 percent of all AT&T smartphone subscribers are now on tiered data plans, compared with 38 percent a year ago, and more than 70 percent have chosen the highest-tiered plan.

In January, AT&T changed the pricing of its tiered plan, raising prices but also the data buckets attached to them. The effects of this were minimal, the pair shared, with impacts expected to be spread throughout the year as users update their plans. Changes to upgrade fees, also registering a hiccup on the AT&T radar, will likewise be nicely spread throughout the year.

Moreover, 88 percent of AT&T€™s smartphone subscribers are on FamilyTalk or business plans, which makes them €œvery sticky,€ said de la Vega€”or, unlikely to leave the network.

€œStrong smartphone sales drive strong data sales, and data drives this business,€ said de la Vega. He added that he believes the mobile Internet is on €œthe verge of a tipping point.€

€œFrom here on out, you can expect to see more and more increases in data use, with people accessing the Internet with their smartphones and tablets,€ he explained. €œCustomers are going to continue to access the mobile Internet in ways that we haven€™t seen before.€

SeekingAlpha, regarding AT&T€™s iPhone sales, added in its report, €œThe big question for Apple now is whether international sales made up for U.S. softness.€

Apple will announce the results of its most recent quarter later today, while Sprint, which also sells iPhones, will announce results tomorrow.