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The news is mostly good for America's second largest carrier, despite Apple's misfortune

AT&T, Inc. (T) ended 2011 on a high note.  Despite the loss of its bid to take over the nation's fourth largest carrier, T-Mobile USA (a Deutsche Telekom AG (ETR:DTE) subsidiary), at the hands of the U.S. Department of Justice, AT&T's fourth quarter earnings beat estimates on strong sales of the Apple, Inc. (AAPLiPhone 4S.

I. AT&T Posts Bullish Profit, But Stagnate Phone Subscriber Figures

Now it's delivered another blockbuster quarter, hinting that the failed deal will not stymie the carrier's bid for market dominance.  Revenue checked in at $31.8B USD, squarely in line with the $31.85B USD analyst consensus, but profits handily beat estimates, coming in at $0.60 USD/share (versus a consensus of $0.573 USD/share).

The profit win represents a 4.7 percent surge over the analyst estimates and a 5.3 percent rise from Q1 2011.  As if that wasn't enough good news, AT&T added 726,000 wireless service subscribers (about the same number that T-Mobile recently lost), taking its total to 103.9m subscribers up from 103.2m in Q4 2011.

AT&T glass
AT&T posted a strong profit, but failed to grow its cellular phone subscribers.
[Image Source: Reuters/Shannon Stapleton]

AT&T and rival Verizon Wireless -- a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD) remain far ahead of third-place Sprint Nextel Corp (S) and fourth place T-Mobile USA.  Together, AT&T and Verizon control over two-thirds of American wireless subscribers.

The only trouble spot in AT&T's earnings came on the cellular front.  While its wireless contracts grew (see above), the numbers were a bit deceptive as only 187,000 of those new subscribers were postpaid (cell phone or tablet) and nearly all of those customers were tablet plan subscribers.

In other words AT&T added no actual phone customers, versus Verizon Wireless, who added 501,000 new plan customers in Q1 2012.  Verizon Wireless has 88m post-paid customers, while AT&T has 69.5m post-paid subscribers.

II. It's Sophomore Slumpsville for iPhone 4S's Second Quarter

AT&T, the original carrier of Apple iPhone, did outsell Verizon Wireless in iPhones, posting 4.3 million activations vs. 3.2m activations.  The numbers are good news for AT&T, but bad news for Apple, hinting at a lackluster quarter and sharp drop in iPhone 4S sales after a record setting holiday quarter.

While iPhone sales are still up on a year-to-year basis, they are unquestionably a letdown for the company, which has grown accustomed to beating sales on both a consecutive quarter and year-to-year basis.  They hint that Apple's revived ambitions to challenge Android for market dominance may have been short-lived.  The weaker sales hit Apple's stock this morning, putting on hold its bid to become the first company with a $1T USD market cap.

iPhone 4S
iPhone 4S sales have failed to sustain their early sprint. [Image Source: The Tech Journal]
 

In the good news department AT&T recently earned high praise from PC World as the "best" 4G carrier.  The publication raised an interesting point, in that AT&T's HSPA+ 3G network -- much faster than Verizon's CDMA 3G -- makes service less painful when a fast LTE (4G) connection drops out.  

In January AT&T switched on a number of new cities -- New York City, NY; San Francisco, CA; Oakland, CA; Los Angeles, CA; San Diego, CA; San Jose, CA; Austin, TX; Phoenix, AZ; Raleigh, NC; Chapel Hill, NC; Orlando, FL -- bringing its total LTE coverage to 26 markets and 76m Americans.  

Since then it's picked up the pace, adding more cities, including Sarasota, FLTampa/St. Petersburg, FLDurham, NCStaten Island, NYSt. Louis, MOAkron, OHCanton, OHLafayette, IN.

AT&T reports that approximately 30 percent of its contract customers now have LTE-capable smartphones.

AT&T is trying to remain diverse, pushing new entrants like the Lumia 900 LTE from Nokia Oyj. (HEX:NOK1V), a Windows Phone handset which launched Easter weekend, in what AT&T called its most important market launch to date.

The service provider also continues to quietly grow its cable TV and internet offerings.  Its Uverse branded services are up to 6 million internet and 4 million TV subscribers, although availability remains limited to certain markets.

Sources: AT&T [1], [2]



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Wheres Fonzie?
By Mitch101 on 4/24/2012 1:53:03 PM , Rating: 1
Apple selling 4.3 Million iPhones in the past quarter.

Microsoft Windows Phone - Nokia 900 selling on AT&T at an estimated rate of 1-1.2 million for the coming quarter.
http://www.intomobile.com/2012/04/24/nokia-lumia-9...

That means Windows Phone is selling at 25% of iPhone sales on AT&T.




RE: Wheres Fonzie?
By mondo1234 on 4/24/2012 2:44:01 PM , Rating: 4
According to the release, Iphone sales were down, but ATT sold a total of 5.5 million smartphones in total while activating 4.3 million Iphones. You do the math.


RE: Wheres Fonzie?
By datdamonfoo on 4/24/2012 3:03:12 PM , Rating: 2
That's not really relevant to Mitch101's point. The Lumia is this quarter, your stats are from last quarter.


RE: Wheres Fonzie?
By Nortel on 4/24/2012 3:09:32 PM , Rating: 2
This was exactly going to be my point. Out of 5.5 million smartphones sold, 4.3 million of those were iphones... It's Apple vs every other handset manufacturer and Apple manages to hold almost 80% of the market... and somehow the article makes it seem like Apple is headed down the toilet.


RE: Wheres Fonzie?
By Mitch101 on 4/24/2012 3:30:32 PM , Rating: 1
When your expected to sell 22 million in the 1st quarter and you only sell 17.1 million. Missing the sales forcast by 23% is pretty big.


RE: Wheres Fonzie?
By mondo1234 on 4/24/2012 3:44:49 PM , Rating: 2
By using Jasons math, ATT smartphone sales were down by 40% compared to the previous quarter. Since he didnt tell you the whole story, it is harder to draw an informed picture of the quarter. Approx 1.2 million smartphone sales from ATT were handsets other than Apple.

Apple will announce earnings today, they are typically lower in this quarter than in the holiday season. It just depends on how it compares to the same quarter last year and what analyst were estimating. Apples growth cant go on like it has forever.


RE: Wheres Fonzie?
By EnzoFX on 4/24/2012 4:20:13 PM , Rating: 2
Yeah... pretty lame title


RE: Wheres Fonzie?
By Solandri on 4/25/2012 3:04:38 AM , Rating: 2
Year over year (e.g. 1Q2011 vs. 1Q2012) is really the way you have to compare. And according to the article it's up. So it's actually a gain for the iPhone.


RE: Wheres Fonzie?
By Phynaz on 4/24/2012 4:42:19 PM , Rating: 2
Not sure where you are getting your numbers from, but they sold 35.1 million iPhones last quarter.


RE: Wheres Fonzie?
By Mitch101 on 4/24/2012 4:56:21 PM , Rating: 2
35.1 includes China and 21 other countries but in the US its on the decline.


RE: Wheres Fonzie?
By Nortel on 4/24/2012 7:42:03 PM , Rating: 2
I have no idea why you made up this "22 million" estimate for iPad's.

"The company sold 11.8 million iPads last quarter, just shy of the 11.9 million projected by analysts."

Yes, Apple sold 11.8 million iPads which is a 151% increase year-over-year and this is a bad thing?


RE: Wheres Fonzie?
By mondo1234 on 4/24/2012 2:52:54 PM , Rating: 2
Last Quarter, ATT sold 9.4 million smartphones, compared to this quarter of 5.5 million.


RE: Wheres Fonzie?
By corduroygt on 4/24/2012 3:27:28 PM , Rating: 2
Estimating that sales for the first two weeks of any new tech product/software that's not supply constrained can be applied to the rest of the quarter is extremely flawed. Sales are always much higher at launch and then they go down.


Subsidies
By amanojaku on 4/24/2012 1:54:24 PM , Rating: 3
My take on this is that subsidies hurt more than they help. AT&T made more money despite a drop in iPhone sales, because the increase in subscribers came from tablets, which aren't subsidized. Carriers are in a bind because they have to pay for your phone every time you sign on or upgrade. Customers are in a bind because carriers cut services while raising fees to cover the subsidies. The only ones who win are the makers of popular handsets.




RE: Subsidies
By nafhan on 4/24/2012 3:06:13 PM , Rating: 2
quote:
My take on this is that subsidies hurt more than they help
This statement is only really true for the iPhone because the subsidy is exceptional on that device. The carriers do VERY well on profitability with, basically, every other phone model as can be seen by ATT's 1st quarter profits.

The way subsidy model DOES hurt consumers is by locking people into contracts.


RE: Subsidies
By Solandri on 4/25/2012 3:01:56 AM , Rating: 2
quote:
The way subsidy model DOES hurt consumers is by locking people into contracts.

Not necessarily. If the subsidy were broken out into a separate loan, you'd still be locked into repaying the loan.

The way the subsidy hurts customers is by distorting the market for phones. Apple demands a greater wholesale price for the iPhone from the carriers than Android phones, but the carriers sell it for the same price. Effectively, Android customers are subsidizing iPhone customers.


RE: Subsidies
By nafhan on 4/25/2012 10:21:01 AM , Rating: 2
If the subsidy were broken out into a separate contract (i.e. loan), I think it would cause people to think about what they're doing a little bit more. It'd be a similar situation, but the customer would have more clarity regarding what's actually going on. It'd also put people who "bring their own" in a better place. Right now, you're basically throwing away a few hundred bucks by doing that with the major carriers.

Also, good point about everyone else subsidizing iPhone customers. Blame the carriers, for that, though - they're collectively accepting Apple's terms.


Something does not add up here...
By Shadowself on 4/24/2012 2:33:52 PM , Rating: 4
Did *anyone* -- really, any sane person -- expect iPhone sales to NOT go down in the first calendar quarter of this year as compared to the last calendar quarter of last year?

In the last calendar quarter of last year there were several factors boosting iPhone sales that are not in the most recent quarter:
1. Brand new model. Some people (too many, in my opinion) have to have the latest model of everything.
2. Delayed iPhone causing pent up demand (some people were actually holding off buying *any* phone while waiting for the new iPhone. Many people that might have bought in August through early October waited
3. Holiday sales!

Remove these factors and the number of iPhones sold had to go down quarter over quarter. This isn't a "sophomore slump". This is simply reality that hits all consumer gadget makers.

It will be interesting to see what the year over year sales are when Apple reports later today.




By Mitch101 on 4/24/2012 3:18:52 PM , Rating: 2
Its not that sales went down compared to holiday sales its because the iPhone didn't meet the expected sales for first quarter.

iPhone unit sales were 17.1 million for the quarter, versus 22 million expected.

An iPhone 5 might have closed that gap but still that is taken into consideration when these estimates were generated.


By Commodus on 4/24/2012 3:15:24 PM , Rating: 2
The article is a bit misleading here. For Apple, the raw numbers don't matter as much as relative performance.

Apple sold fewer phones at AT&T -- but so did everyone else in a post-holiday lull. It doesn't change that, if you go by pure activations, about 75-78% of AT&T's smartphones sold were iPhones; it's probably a bit less due to hand-me-down device activations.

Android on AT&T, therefore, is still insignificant. A speck. Remember, that remaining 22-25% has to be split between Google, Microsoft, and RIM. And on Verizon, over half of all smartphones sold are iPhones, this despite its being the premier Android carrier in the US. Sprint will take awhile to report, but should have a similar story.

If Apple is hurting, it's internationally, but we have yet to see world market share reported and won't for at least a little while.




By mondo1234 on 4/24/2012 4:49:27 PM , Rating: 2
Earning are out, they blew out the quarter with almost $40b in sales and 35 million phones.


are you embarassed yet?
By ptmmac on 4/24/2012 9:56:08 PM , Rating: 4
I just wondered if you can recognize your own bias in reporting this"news"?

Any one who has taken even a short look at Apples financials over the last ten years knows that Apple sales go down in the second quarter. Why did you ignore the yoy comparison that is commonly used to counter this bias? Could you perhaps be less then objective in your views of Apple and global warming?

I seem to remember several articles about how Android was destroying the iPhone in all market share numbers. Did you notice how the iPhone is dominating Android at ATT?

I will leave Global warming out because it seems to make grown men act like kids. Maybe you really are just feeling the scientists dont know what they are doing. I am no cap and trade flaming liberal. I would rather people get fed before money is set aside to combat global warming.

Objectivity is not a journalistic value because it makes people feel warm and fuzzy. It is a value because it keeps journalists from eating crow. The really scary journalists are he ones who can't even taste it when they are eating it.




By drycrust3 on 4/24/2012 2:36:06 PM , Rating: 1
quote:
pushing new entrants like the Lumia 900 LTE from Nokia Oyj. (HEX:NOK1V), a Windows Phone handset which launched Easter weekend, in what AT&T called its most important market launch to date.

So how many have they actually sold or contracted out?
Maybe I'm sticking my head on the block, but I would say the first Apple iPhone was the most important market launch ever. It was the product that really brought the whole smartphone concept to the public's attention.




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