AT&T: 3.7 Million iPhones Activated Last Quarter

Continued strength in sales of the iPhone and other smartphones and growth in mobile data revenue were key factors in AT&T’s better-than-expected earnings.

More than three-quarters of new customers are choosing a smartphone, with 3.7 million iPhones added to its network during the quarter. AT&T is also seeing higher profit margins and lower customer defections. The company saw a benefit on the profits side from a stricter policy on when customers can upgrade. AT&T activated 5.1 million smartphones in its latest quarter, down from 5.5 million in the same period a year ago. Much of the decline came because AT&T subscribers are holding on to their phones longer: the company said the rate of upgrades to new phones was at a record low. That's good news for the company because the company subsidizes each smartphone by hundreds of dollars to be able to sell it to customers for $99 or $199. IPhones, in particular, are expensive to sell, because Apple charges an average of around $650 for each one. More than half of the new subscribers were tablet users, who pay less than smartphone users. Also, AT&T continues to lag Verizon Wireless, which already has more subscribers. Last week, Verizon reported adding 888,000 subscribers to its rolls in the quarter. Revenue edged up 0.3 percent to $31.6 billion. Analysts were expecting $31.7 billion. If it weren't for the sale of its phone-books business in May, revenue would have risen 2 percent.

AT&T pulled in 155,000 new U-verse TV subscribers in the second quarter of 2012, while the nation's No. 1 telco dropped a whopping 649,000 DSL subscribers in the period for a net loss of 96,000 broadband customers. For the three months ended June 30, AT&T's U-verse revenue grew 38% to $2.3 billion, representing 57% of consumer wireline revenue for the period. Overall, consumer wireline revenue increased far less at 1.7% year over year, to $5.5 billion -- although that was the segment's strongest growth in more than four years, according to the company. Cramping AT&T's wireline growth were its substantial DSL losses, which it blamed partly on "seasonality." The company's U-verse High Speed Internet service had a quarterly net gain of 553,000 subscribers to reach a total of 6.5 million, which wasn't enough to offset losses from DSL. Total wireline broadband connections dropped 0.2% year over year, to 16.43 million. In addition, AT&T lost a net 1 million legacy wireline voice connections in the quarter, to stand at 36.8 million (down 10.8% from 41.3 million last year). AT&T now has 4.15 million U-verse TV subscribers in service, with a 17.3% penetration rate of eligible living units. About three-fourths of TV subscribers have a triple- or quad-play option, with average revenue per subscriber for U-verse triple-play customers about $170, up slightly year over year.