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AT&T's Cingular Success Story

The wireless unit's record earnings seem to vindicate its parent's competitive strategy. The iPhone deal should help propel the telecom even further

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By Steve Rosenbush

January 25, 2007 at 10:00 AM UTC

This article is for subscribers only.

AT&T's (T) Cingular Wireless unit reported the best earnings in its history on Jan. 24, demonstrating that the telecom giant's aggressive acquisition strategy is working. Once regarded as a clumsy runner-up to rival Verizon Wireless (VZ), former Cingular Wireless owners BellSouth and SBC decided to assert themselves in 2004 with a $41 billion acquisition of the old AT&T Wireless. SBC went on to buy the separate AT&T landline business for $16 billion and BellSouth for $86 billion in separate deals (see BusinessWeek.com, 12/29/06, "AT&T-BellSouth: Together at Last"). It changed its name to AT&T as well.

Cingular performed successfully across the board. It reported annual revenue of $37.5 billion, up 9% for the year 2006, and quarterly revenue of $9.8 billion, up 10% for the period. The company added a record 2.4 million subscribers during the quarter, reaching 61 million. Operating margins rose about one-third of a percentage point, to 34.4%. And the percentage of customers who switched to a rival company dropped to 1.8%, down from a problematic 2.1% in the fourth quarter of 2005.