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Apr. 23, 2009

As many wireless industry analysts had been predicting, the iPhone continued to help AT&T’s balance sheet in the first quarter.

About 1.62 million of Apple's iPhone 3G mobile devices were activated in Q1, adding to AT&T’s high-value customer base.

Overall, it's been proven in the past 6 to 8 months that iPhone customers have significantly lower churn rates and deliver ARPU (average revenue per user) that is approximately 1.6 times higher than the company’s overall postpaid subscriber base.

Actually, 41.3 percent of all the new iPhone activations were by new customers that came from other wireless operators.

The iPhone also contributed to a whopping 38.6 percent increase in wireless data revenue, which hit $3.2 billion as text messaging, mobile apps and Web usage soared. Postpaid ARPU rose for the 5th consecutive quarter to $59.24.

Almost 41 percent of AT&T’s postpaid wireless subscribers had a 3G device by the end of the first quarter, more than double last year’s figure of 19.5 percent.

AT&T’s subscriber base hit 78.2 million on a 23.9 percent net increase in postpaid customer additions. The company added 1.2 million net customers in the quarter. However, churn rates held steady at 1.2 percent.

In a conference call with analysts, AT&T CEO Randall Stephenson said that the company “had some impact in gross sales from new offerings in the marketplace.” AT&T would be testing some new low-cost plans in select markets, he said, but would proceed with caution.

“We’ll be very careful not to do something that could cannibalize our post-paid base, that’s really where our bread and butter is coming from these days,” added Stephenson.

On average, AT&T posted net income of $3.2 billion, or 53 cents per diluted share, compared to 2008’s numbers of $3.52 billion, or 57 cents per diluted share. Retiree benefits cut into profits by $400 million, or 5 cents per diluted share. Revenue dipped 0.6 percent, to $30.6 billion.

Analyst James Brehm at Frost and Sullivan says "AT&T is becoming more like a public utility during recessionary times. More people are using AT&T services more efficiently and more people simply cannot lose the connectedness they are receiving."

Still, the company hasn't been completely immune to recessionary pressures. AT&T now faces increased competition from low-price mobile carriers like Leap Wireless International and MetroPCS, whose discount plans are attractive to cash-strapped consumers.

AT&T has struggled to offset declines in its wireline segment, which have accelerated as cash-conscious consumers cancel home phones in an effort to cut household expenses.

AT&T is shutting down its Web-based Call-Vantage phone service, making "U-Verse" AT&T’s only VoIP offering.

The service will be completely disconnected by the end of 2009. The termination of the service was expected since AT&T stopped offering it to new subscribers in August 2008.

It appears that so far, Apple's decision to allow AT&T to be the exclusive distributor of the iPhone in the U.S. to be a good one, and now both companies are reaping the benefits.

But will that continue after 2010? No one seems to know for now.

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    This article was featured on Business 5.0 and on Tech Blog.

Source: AT&T.