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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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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.


"And boy have we patented it!" -- Steve Jobs, Macworld 2007














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