AT&T Boosts Subscriber Rolls Even as Verizon Gains IPhone

AT&T Inc. (T), the second-largest U.S. wireless carrier, gained contract subscribers last quarter as promotions and new devices helped offset the loss of its exclusivity for the top-selling Apple Inc. (AAPL) iPhone.

AT&T said today it won 62,000 wireless contract users in the period. Tim Horan, an Oppenheimer & Co. analyst, forecast subscribers would be unchanged and JPMorgan Chase & Co.’s Philip Cusick predicted a loss of 100,000. Dallas-based AT&T also posted a 39 percent increase in first-quarter profit.

Verizon Wireless, the largest U.S. wireless carrier, began offering the iPhone in February. AT&T prepared for the loss of its exclusivity by cutting the price of the older 3GS model in January by half for contract customers and adding devices such as the Motorola Mobility Holdings Inc. Atrix. Last month, AT&T agreed to buy T-Mobile USA for $39 billion to add subscribers.

“AT&T was able to add 62,000 subscribers in the quarter, which was above expectations,” David Burks, a Hilliard Lyons Inc. analyst in Louisville, Kentucky, said in a Bloomberg Television interview. “We should also caution that Verizon was able to begin selling the product in early February, so this doesn’t represent a full quarter of competition.”

Wireline sales fell 3.2 percent to $15 billion as customers continued to abandon home-phone lines. That missed the estimate of $15.1 billion by James Ratcliffe, an analyst at Barclays Capital Inc. AT&T added 218,000 users to its U-verse TV and Web service, falling short of Ratcliffe’s 229,000 estimate.

AT&T lost 18 cents to $30.13 at 4 p.m. in New York Stock Exchange composite trading and has gained 2.6 percent this year.

Rising Wireless Sales

AT&T activated 3.6 million iPhones in the quarter, compared with 2.7 million a year earlier. Verizon Wireless gaining the iPhone ended four years of AT&T’s exclusivity for the device in the U.S., heating up the competition between the carriers. The iPhone 4 was the most purchased mobile phone by U.S. consumers in the fourth quarter, according to research firm NPD Group.

First-quarter net income advanced to $3.41 billion, or 57 cents a share, from $2.45 billion, or 41 cents, a year earlier. Analysts projected 57 cents, the average of estimates compiled by Bloomberg. Sales rose 2.3 percent to $31.2 billion, also matching the average analysts’ estimate.

Wireless sales rose 10 percent to $15.3 billion, helped by surging data revenue as users of devices such as the iPhone spent more browsing the Web and sending e-mail.

Customer departures, known as churn, increased compared with the previous quarter. Overall churn was 1.36 percent, compared with 1.32 percent in the fourth quarter. AT&T lost some users as it integrated assets it acquired from Verizon Wireless.

Churn among the more lucrative postpaid users, who spend more each month, was 1.18 percent, compared with 1.15 percent in last year’s fourth quarter.

The T-Mobile USA acquisition, announced March 20, would combine AT&T with the fourth-largest U.S. wireless provider. The deal needs approval from the U.S. Justice Department and Federal Communications Commission, and is to face hearings in Congress.

To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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