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AT&T Profit Meets Estimates on Rising IPhone Demand

AT&T Sales Beat Analysts’ Estimates on Rising IPhone Demand
AT&T Inc., the second-largest U.S. mobile-phone carrier, posted third-quarter sales that beat analysts’ estimates on rising demand for Apple Inc.’s iPhone. Photographer: Daniel Acker/Bloomberg

AT&T Inc., the largest U.S. phone company, posted third-quarter earnings that matched analysts’ estimates as demand for Apple Inc.’s iPhone helped offset revenue declines at the traditional landline business.

Earnings, excluding one-time items, rose to 55 cents a share, meeting the average of estimates compiled by Bloomberg. Sales rose 2.8 percent to $31.6 billion, Dallas-based AT&T said in a statement today. Analysts projected $31.2 billion.

AT&T, the exclusive U.S. carrier for the iPhone, activated a record 5.2 million of the devices in the quarter, helping the company boost sales as customers abandoned landline phones in favor of mobile handsets. The carrier is also facing stiffer competition after Verizon Wireless debuted smartphones running Google Inc.’s Android software and Sprint Nextel Corp. rolled out a network with faster data speeds.

“This was a good quarter for iPhone sales and the overall revenue growth is impressive in this environment,” Rick Franklin, an Edward Jones analyst in St. Louis, said in an interview. “AT&T is still not seeing any growth in its wireline business.”

Revenue from AT&T’s wireline services, which comprise about half of total sales, fell 3 percent to $15.3 billion. Wireless revenue rose 11 percent to $15.2 billion.

AT&T, the second-largest U.S. wireless carrier, gained a net 2.6 million new mobile customers including 745,000 contract subscribers. Todd Rethemeier, a Hudson Square Research analyst in New York, estimated AT&T would add 750,000 contract users.

AT&T declined 27 cents to $28.34 at 4 p.m. in New York Stock Exchange composite trading. The shares have added 1.1 percent this year.

Verizon Competition

The carrier boosted iPhone activations by 63 percent from a year earlier. About 24 percent of the activations were for new customers, compared with 40 percent a year earlier. Apple introduced the iPhone 4 in June and the iPad tablet computer in April, linking both devices to AT&T’s network.

Verizon Wireless, the largest U.S. mobile carrier, may begin selling the iPhone on its network as soon as January, two people familiar with the plan said in June. The Basking Ridge, New Jersey-based company has said it will start selling the iPad this month, gaining access to a device that AT&T started providing wireless service for earlier this year.

Data-Revenue Focus

AT&T’s revenue from wireless subscribers on data plans grew about 31 percent to $4.8 billion. The carrier this year stopped offering unlimited data plans in favor of so-called tiered pricing starting at half the price.

The company will focus more on attracting existing and new customers to its data plans, which result in high average revenue per user, Brooks McCorcle, senior vice president of investor relations, said in interview. “It’s not just about adding more and more customers every quarter,” she said.

Wireless churn, or the rate at which customers leave AT&T, was 1.32 percent, compared with 1.42 percent a year earlier and 1.29 percent in the second quarter.

Net income in the three months through September rose to $12.3 billion, or $2.08 a share, from $3.19 billion, or 54 cents, a year earlier. The results include a one-time $8.3 billion gain related to the depreciation of assets from the 2006 acquisition of Cingular Wireless. Excluding one-time items, earnings a year earlier were 53 cents.

Verizon Communications Inc., which co-owns Verizon Wireless with Vodafone Group Plc, reports third-quarter earnings tomorrow.

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