10/22/2009
TheStreet.com
NEW YORK (TheStreet) — The Apple iPhone continued to drive wireless growth for AT&T, helping the telco post record subscriber growth for the third quarter.
Ma Bell activated 3.2 million new iPhone customers in the quarter, and netted a total of 2 million new mobile phone customers including 1.4 million post-paid contract customers. And despite the high cost of subsidizing between $300 and $500 of each iPhone sale, AT&T managed to widen its wireless operating margin to 24.6%, up from 23.8% in the second quarter and much fatter than the 18.9% margin in the year-ago quarter.
The strength of the wireless business, with an 8% revenue increase, helped offset the 7% sales decline in AT&T’s wireline unit.
AT&T posted an adjusted profit, excluding one-time items, of 54 cents a share, down from 55 cents a year ago and better than the analysts’ consensus target of 50 cents.
Sales for the third quarter were $30.8 billion, down 1.6% from $31.3 billion in the year-ago quarter and in line with analysts’ expectations.
“We delivered a terrific wireless quarter, IP data growth was strong, and execution across the business continues to be solid,” CEO Randall Stephenson said in a press release.
AT&T shares rose 84 cents, or 3%, to $26.78 in premarket trading Thursday.
While the popularity of the iPhone is great for AT&T while it lasts, the other players in the sector are feeling the squeeze.
Verizon is expected to have added about 1 million net new subscribers, and other players like Sprint and Deutsche Telekom’s T-Mobile are expected to have lost customers in the third quarter.
This have-and-have-not scenario is expected to kick off a brutal price war when T-Mobile launches its “Project Black.”
A big part of the T-Mobile plan, according to industry speculation, is the introduction of unlimited calling plans that could be as low as $40 a month, and unlimited everything plans — calling, text and data — for as low as $60 a month.
A price war would be damaging to AT&T and Verizon, which have equivalent plans priced at $130 a month.
