updated 08:40 am EDT, Wed October 22, 2008
ATT Q3 2008 and iPhone
AT&T today reported results for its summer quarter that reveal the company owing a significant portion of its cellular business to the iPhone 3G. About 2.4 million iPhones were activated on the carrier's network between its July launch and the end of September; the number is actually higher than the 2 million net gain of total customers during the year, 1.7 million of which were subscription customers. The latter is the largest increase for any quarter in AT&T's history, the company says. It now claims a total of 74.9 million cellular customers of any kind.
The provider also touts the iPhone 3G as particularly valuable to taking customers from rival networks and to its bottom line. A full 40 percent of buyers are new to AT&T, while all customers typically generate more revenue per person for the company and are less likely to cancel service and contribute to churn, or the amount of subscriber turnover as previous subscribers are simply replaced with new ones.
Sharp spikes in wireless data revenue and smartphone usage can also be attributed to the iPhone. The intake for data use grew 50.5 percent versus summer 2007 due to Internet access and text messaging; 22 percent of AT&T subscribers now have smartphones, or "integrated devices," versus 10.5 percent just one year earlier.
AT&T nonetheless describes the iPhone as partly dampening its earnings for the three-month span. The company's adjusted earnings are down year-over-year from 71 cents per share to 67 cents after including roughly 10 cents of "pressure" from the iPhone 3G launch, or $900 million in related expenses. The company is also positive about an ongoing strong demand for the iPhone and that it will ultimately dilute its pre-depreciation operating income estimates from their original 39 to 40 percent down to 37 percent as subsidies create an initial impact.
The addition rate for iPhones reveals the greatly reduced dependence on US iPhone sales for Apple, which sold a total of 6.9 million iPhones during the summer across its much broader market. American sales now account for just 34.8 percent of the total iPhone market and are likely to dilute further as the company expands sales to Africa and the Middle East.
AT&T's gains come as both T-Mobile and Verizon are launching their own iPhone rivals, the Android-based G1 and the BlackBerry Storm.