AT&T scores in first head-to-head iPhone quarter

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AT&T scores in first head-to-head iPhone quarter

Activates 1.3m more new Apple handsets than Verizon, though its rival manages higher overall net adds with its LTE system

By CAROLINE GABRIEL

Published: 25 July, 2011

READ MORE: Financial | US | Verizon Wireless | iPhone

In their first full quarter in a head-to-head iPhone battle, AT&T managed to outdo Verizon in activating the Apple phones, despite the history of complaints about its network quality. The carrier has invested heavily in upgrading its 3G systems to HSPA to support data-intensive devices like the iPhone and its efforts to market those changes as '4G' seem to be paying off.

During the second quarter, the first full period when Verizon Wireless also had an Apple smartphone, AT&T activated 3.6m new units, while its rival was well behind on 2.3m. While AT&T's advertising of its network improvements are likely to have helped, perhaps more important was its heavy discounting, offering the ageing 3GS model for just $49 with contract.

Verizon does not have a low cost iPhone to offer, since the current iPhone 4 is the only CDMA model, and it also has a more complicated set of priorities at the high end, since it is heavily promoting its LTE products, from HTC, Samsung, LG and Motorola. It needs to encourage users to migrate to its new 4G services as it aims to migrate its 3G base in a remarkably short period - and the LTE system is more cost efficient for supporting data services.

Despite these factors, the iPhone still had a strong impact on Verizon's respectable quarterly results. Overall, Verizon Wireless added a net total of 1.3m postpaid customers, well above market expectations, mainly because of the iPhone and the LTE handsets. In total, Verizon Wireless added 2.2m net new customers, double the 1.1m achieved by its rival, which indicates how over-reliant on the iPhone AT&T remains, despite its broadening base of Android phones and other connected devices. Verizon's mobile base now totals 106.3m. However, the fact that the iPhone did not boost Verizon's postpaid base even further indicates that the majority of the activations are coming from within the carrier's own customer ranks, with users migrating from other devices.

Parent firm Verizon Communications, which owns 60% of Verizon Wireless (a joint venture with Vodafone), is pursuing a dual strategy of investing in fiber and advanced wireless to support new data-focused revenue streams. It reported profit of $1.61bn, reversing a year-ago loss of $1.19bn and slightly topping Wall Street estimates, on sales up 2.8% year-on-year to $27.5bn. The wireless arm saw a 6.6% increase in service revenue to $14.7bn and a 22% rise in data revenue to $5.8bn, which is now 39.5% of the total.

Verizon Wireless' other parent, Vodafone, said its second quarter revenue rose by 3.5% year-on-year to £11.66bn, though it does not report a profit figure at this stage. Data revenue was up by 24.5% in organic terms to £1.5bn, or 13.7% of total service revenues, and European smartphone penetration has risen from 13.6% a year ago, to 19.5%. Vodafone's revenue performance was very regionally mixed, reflecting the eurozone crisis and its rising concentrate on emerging economies. The strongest organic revenue growth was seen in Turkey (32.1%), India (16.8%) and the Vodacom group of companies in Africa (7.8%). The UK saw 1.7% growth and, along with a virtually flat Germany, was described as "resilient". But southern Europe was "challenging", especially Spain, where service revenues fell by almost 10%, and Italy, which dropped by 1.5% amid a price war. The Australian joint venture with Hutchison, VHA, also suffered a decline in revenues.