Dec. 4 (Bloomberg) -- AT&T Inc. may defy the recession, posting faster subscriber growth this holiday season by tempting shoppers to unclench their wallets for luxury brands like the iPhone even as consumers scrimp elsewhere.

AT&T probably will be the lone carrier to show accelerating growth this quarter, gaining 1.5 million contract customers, said Will Power, an analyst at Robert W. Baird & Co. That compares with 1.2 million a year earlier. Growth at Verizon Wireless, which debuted the BlackBerry Storm last month, may be little changed from 2007, adding 1.5 million subscribers.

Apple Inc.’s iPhone and other name brands have snatched the spotlight as the biggest U.S. carriers face the worst holiday sales growth since at least 2005. That has forced smaller rivals such as T-Mobile USA and Sprint Nextel Corp. to offer everything from free travel to $1,000 savings on call plans to catch up.

“People still want those iconic devices and are willing to pay up for them,” said Dallas-based Power. “Look at wireless and consumer behavior generally, this also applies to the lower- income demographics.”

AT&T said today that it will cut 12,000 jobs, or 4 percent of its workforce, because of economic pressures and a changing mix of businesses. The carrier plans to keep adding workers to its mobile-phone division to meet demand, shifting resources as more customers abandon home-phone lines.

T-Mobile, a unit of Bonn-based Deutsche Telekom AG, is giving away plane tickets to customers who sign up for two-year agreements. Sprint rolled out an ad campaign last week saying its family plans, where multiple people use phones under the same contract, cost $240 to $1,000 less every year than competitors.

Surf and Spend

Power projects that Sprint, the third-place U.S. wireless carrier, will lose 1 million contract customers this quarter. T- Mobile USA, offering the first phone featuring Google Inc.’s Android operating software, probably will add 483,000, trailing last year’s 733,000.

Users of smart phones like the iPhone spend more on surfing the Web and downloading music, making them more profitable customers. IPhone users at AT&T, the biggest U.S. phone company by subscribers, spend 1.6 times as much as the average person.

“Even in this economy, amazingly enough, people are still spending on what we’d call high-end phones,” said Jennifer Fritzsche, a Chicago-based analyst with Wachovia Securities Inc. “People are not backing away from this.”

Total sales in November and December will grow at the slowest pace in six years, according to the International Council of Shopping Centers. Those months typically give carriers a bump in revenue as consumers give new phones as holiday gifts.

Economic Slowdown

This week, Research In Motion Ltd., the maker of the BlackBerry, posted subscriber gains for the quarter ended Nov. 29 that trailed analysts’ projections, blaming the slumping economy and delays in getting products out. Still, the Storm and the BlackBerry Bold helped boost customer additions in the past few weeks, the company said.

U.S. carriers are grappling with an economic slowdown as consumer spending drops and the unemployment rate climbs to its highest level in 14 years. Mobile phone sales will fall next year for the first time since 2001, dropping by a “low single-digit” percentage worldwide, researcher Gartner Inc. said last week.

AT&T’s total fourth-quarter sales growth will be the slowest since 2004, according to the average of estimates compiled by Bloomberg. Verizon Communications Inc., which co-owns Verizon Wireless, may post the slowest growth since 2005.

Verizon Communications, based in New York, fell $1.04 to $32.15 at 4 p.m. in New York Stock Exchange composite trading. Dallas-based AT&T fell 91 cents to $28.17. Sprint fell 7 cents to $2.50.

IPhone Sales

To capture valuable data users, AT&T is running ads for the $199 iPhone 3G and BlackBerry Bold, coupled with separate promotions for prepaid and mid-priced phones, wireless chief marketing officer David Christopher said.

Apple sold a record 6.9 million iPhones 3Gs last quarter, compared with 6.1 million BlackBerry devices over the same period. The company, which had pledged to sell 10 million iPhones in 2008, has already surpassed that goal, according to Chief Executive Officer Steve Jobs.

The iPhone 3G surpassed Motorola Inc.’s Razr as the most popular handset for adults in the U.S. last quarter, according to researcher NPD Group Inc.

AT&T sold more iPhones than projected last quarter, contributing to a 4 percent increase in sales from a year ago. Profit missed analysts’ estimates as AT&T subsidized the new phones. IPhones probably cost AT&T $600 each, leaving the company with a $400 subsidy to bring the price down, Fritzsche said.

Verizon’s BlackBerry

Verizon has answered with the $199.99 BlackBerry Storm smart phone, and will devote the bulk of its advertising to promoting touch-screen smart phones over the holidays, spokeswoman Brenda Raney said.

“The war, currently, is more on the handset side -- who can get the most attractive handset in the customer’s hands at the lowest price?” said J.P. Morgan Securities Inc. analyst Michael McCormack. “It’s a tough balancing act because you want to get higher-end users who are spending more money.” New York-based McCormack rates AT&T and Sprint “neutral” and Verizon “overweight.”

Still, competing wireless carriers have introduced ads in the past few weeks that tout mid-priced phones with less expensive data plans for cash-strapped customers seeking bargains.

“We’ve got a full line of products and promotions, and they were all very much driven around the idea of providing consumers opportunities to get information,” said Sajal Sahay, director of handset innovation at Bellevue, Washington-based T-Mobile USA. “Consumers are starting to adopt the Web in a pretty major way.”

Even AT&T will roll out separate ads for mid-priced and prepaid phones, Christopher said.

“There aren’t that many new subscribers to be had,” said Forrester Research Inc. analyst Charles Golvin in Los Angeles. “It’s mostly about stealing good customers from your competitors and preventing your own good customers from leaving.”

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

Last Updated: December 4, 2008 16:28 EST