Sales of smartphones that incorporate Google’s three-year-old operating system, Android, more than doubled year over year. Meanwhile, AT&T activated 2.7 million iPhones, down from 3.6 million activations in the previous quarter. AT&T activations of Apple’s popular smartphone could grow in the fourth quarter now that the wireless giant has begun selling the newly released iPhone 4S.
In the third quarter, AT&T – the nation’s second-largest wireless provider behind Verizon Wireless – courted 2.1 million customers to reach a total of 100.7 million in service. That included 319,000 new subscribers on contract, 239,000 prepaid customers, 473,000 reseller customers and 1.038 million connected device additions such as sales of automobile monitoring systems and security systems.
More than half (52.6 percent) of AT&T’s 68.6 million postpaid subscribers use smartphones, up from 39.1 percent a year earlier. Such growth is important to AT&T because it significantly improves its sales: The carrier revealed that average revenue per user (ARPU) for smartphones on its network is 1.9 times that of the company’s non smartphone devices.
Thanks to data growth, postpaid subscriber ARPU rose 1.4 percent vs. the year-earlier to $63.69.
Meanwhile, postpaid churn remained constant. It was 1.15 percent last quarter compared to 1.15 percent in the previous quarter and 1.14 percent in the year-ago quarter.
In the consumer wireline business, AT&T reported a fifth straight year-over-year growth thanks to its U-Verse services. But the growth was negligible. Revenues from residential customers grew to $5.3 billion, up 0.2 percent versus the third quarter a year ago.
AT&T U-Verse TV added 176,000 subscribers to reach 3.6 million in service while the company added 504,000 U-Verse high-speed Internet customers to end the quarter with 4.6 million subscribers. Total consumer revenue connections fell as a result of a continuing decline in traditional phone lines, reflecting an industry trend that has been ongoing for several years as a result of alternatives like wireless and Internet-based calling.
That sequential dip hurt the company’s wireless (postpaid) revenue. AT&T’s average revenue per user (ARPU) figure of $63.69 represents year-over-year growth in this category but missed consensus estimates, which were $64.13.
AT&T’s overall results largely matched analyst expectations. The telco reported revenues of $31.5 billion and earnings of 61 cents per share. Most analysts had expected earnings of that amount on slightly higher revenues of $31.6 billion.
AT&T also added 2.1 million wireless subscribers in the quarter, which the company said pushed it past the 100 million subscriber mark.
AT&T’s iPhone results come two days after Apple disappointed some analysts with weaker than anticipated third-quarter iPhone sales. Apple’s miss was a positive sign, in the short term, for AT&T and Verizon Wireless, which both support iPhones. The way Apple shares revenue with its carrier partners means iPhone sales tend to depress operators’ wireless margins before ultimately helping them.
IPhone additions are expected to be much higher in the fourth quarter for both AT&T and Verizon Wireless. That quarter will include sales of Apple’s newly-released iPhone 4S. Credit Suisse analyst Jonathan Chaplin expects AT&T to activate 5.5 million iPhones in the fourth quarter and Verizon to activate 3.5 million iPhones. Despite the disparity in number of overall iPhone activations, Chaplin believes Verizon will lure more net add subscribers with the iPhone 4S while AT&T will mostly see existing subscribers upgrading their phones.
AT&T’s wireline division showed surprising strength in the quarter with revenue of $14.96 billion that exceeded most analyst forecasts. Mizuho Securities analyst Michael Nelson attributed the growth to sales of strategic business services, which offset a continuing decline in consumer use of wireline communications.
More information will be available when the company holds its earnings call, at 10 a.m. Eastern Time. Beyond predictions of the iPhone’s impact on fourth-quarter results, analysts will be looking for an update on AT&T’s pending acquisition of T-Mobile USA, which has run into regulatory hurdles in recent weeks. The $39 billion deal will significantly affect AT&T’s overall financials as well as its spending on network infrastructure.
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