Thursday, July 23, 2009, 05:25 am PT (08:25 am ET)
AT&T quarterly earnings fall on cost of iPhone subsidyAT&T's second quarter earnings beat Wall Street estimates, but still fell 15 percent year over year, as the highly successful launch of Apple's iPhone 3GS — a phone subsidized by AT&T — affected the company's bottom line.
With $0.54 earnings per share reported, AT&T stock fell from $0.63 earnings a year prior. The company's overall revenue fell less than a percent to $30.7 billion.
More than 2.4 million iPhones were activated in the quarter, with more than a third of those new customers.
In all, AT&T gained 1.4 million wireless subscribers. Its total number of customers sits at 79.6 million, which is 6.7 million higher than last year.
The iPhone helped AT&T reach a 3.5 million user increase in devices with 3G capabilities. That resulted in the carrier seeing a 37.2 percent increase in wireless data revenues, including Internet access and text messaging, totaling $3.4 billion. That's more than double the total for 2Q 2007.
"Our wireless momentum is excellent, operational execution and cost management continue to be strong, and in a challenging economy we delivered solid results," said Randall Stephenson, AT&T chairman and chief executive officer.
Net income was $3.2 billion, down from the $3.8 billion a year prior, due partially to the increased operating expenses associated with subsidizing the sale of the iPhone.
"Increased operating expenses in the second quarter of 2009, in part, reflect volume-based acquisition costs associated with the success of the iPhone 3GS launch, which started June 19," a statement from the company reads. "AT&s iPhone customer characteristics are attractive, with (average revenue per user) significantly higher than and churn rates well below the companys postpaid averages; as a result, robust iPhone demand drives strong recurring revenues and substantial long-term value."
When the iPhone 3GS launched on June 19, it was the best sales day ever for the company's retail locations and Web site.
Despite the initial investment on the part of AT&T in iPhone customers, the company said it remains confident that those consumers will bolster the company in the future.
"AT&T iPhone subscribers, both new customers and upgrades, take two-year contracts with data packages," the company said. "As a result, robust iPhone demand drives strong recurring revenues and substantial long-term value."
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