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AT & T adds record number of iPhones, posts tax gain

Thu, 10/21/2010 - 6:20am
The Associated Press

NEW YORK (AP) -- AT&T Inc. sold a record number of iPhones in the latest quarter, continuing to siphon subscribers from other wireless carriers in a tightening industry.

The country's largest telecommunications company on Thursday said it activated 5.2 million units of Apple Inc.'s phone, roughly 400,000 more than analysts had expected.

The iPhone 4 went on sale on June 24, just before the start of the quarter. Apple's worldwide sales figures, reported Monday, had already shown the device to be a blockbuster hit, despite early complaints about reception problems.

Dallas-based AT&T is the exclusive U.S. carrier for the iPhone, but news reports have said Verizon Wireless is getting it early next year. The companies haven't confirmed that. If that is the case, AT&T is in the last quarters of loading up on high-paying iPhone customers before it has to share the phone.

Across all types of phones, AT&T added a net 745,000 subscribers on contract-based plans, matching analyst expectations. That's much less than it has in previous years, but still strong considering growth in the industry has stalled now that nearly everyone has a phone.

The success in subscriber recruitment didn't immediately translate into a corresponding jump in profits for AT&T, since it subsidizes every new smart phone by hundreds of dollars. It makes that money back through service fees over a two-year contract, but the launch of a new iPhone model in the summer reliably holds back AT&T's earnings.

AT&T ended the quarter with 92.8 million wireless subscribers.

Excluding a gain on a tax settlement and the effects of the sale of a subsidiary, AT&T's income was 55 cents a share, up 3.8 percent from a year ago, despite having 14 percent more wireless subscribers and getting higher fees out of its smart phone subscribers each month. The earnings matched Wall Street expectations.

Including the settlement and unit sale, net income rose to $12.3 billion, or $2.08 per share, for the three months ended Sept. 30. That compared with $3.2 billion, or 54 cents per share, a year earlier.

Revenue climbed 3 percent to $31.58 billion from $30.7 billion a year ago. Analysts were expecting revenue of $31.25 billion, according to a poll by Thomson Reuters.

AT&T shares fell 32 cents to $28.29 in morning trading.

AT&T continued to take the lead in adding non-phone devices like e-readers and GPS units to its wireless network. It added 1.16 million such devices in the quarter. That figure excludes Apple's iPad tablets, for which AT&T is also the exclusive U.S. carrier.

On the wireline side, which accounts for nearly half of AT&T's revenue, results have been on a long slide as consumers give up their landlines in favor of relying on their cell phones or phone service from cable companies.

For the quarter, AT&T touted a slight increase in wireline consumer revenues, the first such gain in more than two years. That's due to U-Verse, a cable-TV-like service it offers in some areas where it's upgraded its phone network.

AT&T also posted a net increase in broadband subscribers, reversing the previous quarter's first-ever loss.

AT&T continued to trim its overall work force during the quarter, cutting 4,730 jobs to end at 267,720.

AT&T is the first major telecommunications company to report results for the quarter. Verizon Communications Inc. weighs in on Friday morning.

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