AT&T results raise doubts over iPhone deal
Published: 24 October, 2008
Questions over whether the famous AT&T exclusive for the iPhone was really such a good deal grew louder as the operator announced its third quarter results, revealing that the subsidies it pays for the handset have damaged its margins.
The plus side of the Apple deal for AT&T has been a huge boost in subscriber numbers, at the expense of other providers. The largest US telco said it sold 2.4m iPhones in the third quarter, and these were a major factor in its addition of 2m new net customers during the period (960,000 new customers signed up for the iPhone). The total wireless customer base is now 74.9m. Ralph de Vega, who heads up AT&T's mobile and consumer activities, also pointed to the increased data revenues that the iPhone drives, and said the product will provide "substantial long term value". Data revenue was up over 50% on last year, at $2.7bn, though ARPU only rose 2.6% (to $59) and the key factor in the data change was the expansion of 3G/HSPA.
The dark side of this sunny story is the pressure on profitability. iPhone 3G subsidies reduced pre-tax earnings by $900m or 10 cents a share, and wireless operating margin fell from 26.4% a year earlier to 22.8%. This was on wireless revenues up 15.4% year-on-year to $12.6bn, with wireless service revenues accounting for $11.3bn of that.
AT&T hopes for a further boost to data usage when it finally releases the BlackBerry Bold, RIM's first 3G device, on November 4. The phone, which has been delayed by technical hitches, will be sold for $299.99 with a two-year contract and after a mail-in rebate.
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