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AT&T Thrives in Growing Wireless Business

Thursday, 22 Oct 2009 04:24 PM

AT&T’s net income dipped in the third quarter as revenue from traditional landlines fell faster than the company could cut costs. But in the growing wireless industry, AT&T is thriving, adding a record 3.2 million iPhones.

AT&T, the country’s largest telecommunications provider, said Thursday that it had added two million wireless subscribers in the quarter, matching the pace of a year ago despite a general slowdown in industry growth because most people already have a cellphone.

Analysts had expected AT&T to add about 1.5 million wireless subscribers. The fact that it blew past these expectations bodes poorly for the other major wireless carriers, because any gain for one carrier is likely to come at the expense of others.

AT&T is the first major telecommunications company to report for the quarter. Verizon Communications will post its results Monday.

AT&T earned $3.19 billion, or 54 cents a share, compared with $3.23 billion, or 55 cents a share, in the period a year earlier.

Analysts polled by Thomson Reuters had on average expected a profit of 50 cents a share.

AT&T’s revenue fell 1.6 percent, to $30.86 billion, matching analyst expectations.

Shares of AT&T, which is based in Dallas, were up 60 cents, or 2.3 percent, to $26.55 in early trading.

Wireless generates most of AT&T’s profit, while landlines is still where most of the revenue comes from. That revenue is shrinking rapidly as people switch to phone service from cable companies or give up on landlines entirely. AT&T is cutting jobs to save money, but it’s difficult to scale back a century-old business in a cost-efficient fashion. It lost nearly 1 million home phone lines in the third quarter.

While the wireless results were strong, they continued to demonstrate AT&T’s reliance on Apple’s iPhone, for which it is the sole United States carrier. The company’s big focus is on increasing revenue from data services by selling more phones that encourage e-mail use and Web surfing. It added 4.3 million such phones in the quarter, but iPhones accounted for three-quarters of them.

Neither AT&T nor Apple have revealed how long their exclusive deal lasts. Apple doesn’t seem to consider exclusive carrier contracts a long-term strategy in many countries, there are now multiple iPhone carriers.

Also, AT&T has to subsidize the purchase price of the phone heavily, so each new wave of buyers costs the company money up front. Heavy data traffic generated by the phone is clogging AT&T’s wireless network, forcing infrastructure upgrades.

Meanwhile, other carriers are trying to position their phones as worthy competitors to the iPhone. Verizon Wireless last weekend introduced a TV ad campaign for the Droid, a new phone from Motorola that runs Google’s software. The ad aggressively aims at the iPhone, listing features it lacks and the Droid has

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AT&T’s net income dipped in the third quarter as revenue from traditional landlines fell faster than the company could cut costs. But in the growing wireless industry, AT&T is thriving, adding a record 3.2 million iPhones.AT&T, the country’s largest telecommunications...
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2009-24-22
 

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