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Wednesday, April 22, 2009, 05:00 am PT (08:00 am ET)

AT&T activates 1.6M more iPhone 3Gs as data revenues jump

AT&T said Wednesday that although first quarter profits slipped 9 percent, its wireless data revenues grew nearly 40 percent as it was able to achieve its third consecutive quarter of double-digit postpaid net subscriber additions on the back of 1.6 million new iPhone 3G activations.

For the quarter ended March 31, 2009, AT&T reported a profit of $3.1 billion or $0.53 per diluted share on consolidated revenues of $30.6 billion, down from $3.5 billion or $0.57 per share on sales of $30.74 billion during the same quarter of 2008.

The Dallas, Texas-based telecommunications firm said the quarter was highlighted by improved postpaid wireless growth with a substantial step up in penetration of integrated devices such as smartphones, double-digit increases in revenues from IP-based and strategic business services, and further AT&T U-verse TV subscriber gains.

In particular, AT&T grew its wireless subscribers by 1.2 million in the first quarter to end with 78.2 million subscribers, up 6.9 million over the past year. The gains were driven in large part by a significant rise in retail-based net subscriber additions, which were 24.1 percent higher at 875,000 than in the year-earlier quarter.

Postpaid subscriber growth also reflected robust demand for Apple's iPhone 3G. Quarterly iPhone 3G activations totaled over 1.6 million, down from 1.9 million during the December quarter, though more than 40 percent of those activations continue to come from customers who were new to AT&T.

"I am particularly pleased with the success of our iPhone 3G initiative, which has driven strong high-end customer growth and delivered financial benefits ahead of our original outlook," said AT&T chief executive Randall Stephenson. "Business and consumer expectations for mobility are on the rise, wireless innovation is flourishing and the opportunities ahead are substantial.”

AT&T's exclusive deal as Apple's U.S. iPhone service provider also continues to attract subscribers with ARPUs (average monthly revenues per subscriber) that are approximately 1.6 times higher and churn rates that are significantly lower than the company’s overall postpaid subscriber base.

The arrangement helped boost the providers wireless data revenues by $884 million, or 38.6 percent, versus the year-earlier first quarter to $3.2 billion. All told, data service revenues represented 27.2 percent of AT&T’s first-quarter wireless revenues, up from 21.5 percent in the year-earlier quarter and 16.0 percent in the first quarter of 2007.

During the quarter, AT&T said it facilitated the transmission of more than 94 billion text messages, or more than double the total for the year-earlier quarter. Internet access and media bundle revenues also continued to rise.

The number of 3G devices on AT&T’s wireless network also more than doubled over the past year, and at the end of the first quarter, 40.8 percent of postpaid wireless subscribers had a 3G device, up from 19.5 percent one year earlier. Similarly, the number of integrated devices on AT&T’s network has more than doubled over the past year. At the end of the first quarter, 31.7 percent of its 61.0 million postpaid subscribers had integrated devices.

The carrier's activation of 1.6 million iPhones during the quarter suggests Apple may report a sequential drop in iPhone 3G shipments for its second-fiscal quarter, which also ended in March. During the previous quarter, the iPhone maker shipped 4.36 million of the touch-screen handsets on 1.9 million domestic activations by AT&T.

Apple will report its results following the close of the stock market this afternoon. AppleInsider will provide in-depth coverage.