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Thursday, January 27, 2011, 09:00 am

AT&T activates 4.1M iPhones but subscriber growth misses expectations

By Katie Marsal

AT&T said Thursday that it activated over 4.1 million iPhones during the final quarter of its exclusive U.S. deal with Apple on the handset, though shares of the carrier suffered in early morning trading as overall subscriber growth came in under expectations.

For the fourth fiscal quarter of 2010, AT&T reported a profit of $1.09 billion, or 18 cents per share, well short of its $2.7 billion, or 46 cents per share profit in the same quarter last year. And although it activated over 4 million iPhones, the No. 2 U.S. wireless carrier said that it netted just 400,000 new contract customers during the quarter.

That figure missed Wall Street's consensus view by more than 100,000 subscribers. It also fell short of Verizon's net adds during a similar time frame, which totaled roughly 572,000 after subtracting activations from roughly 300,000 tablets, MiFi devices and other devices that Verizon books as post paid compared to AT&T's booking as pre-paid. As such, shares of the Dallas, TX-based carrier slipped more than 3% in early morning trading Thursday.

On a brighter note, AT&T demonstrated that it retains other areas of potential growth outside of the iPhone. In particular, the carrier said its addition of 442,000 wireless 3G data customers using tablets like the iPad were much higher than it had expected.

It also reported that wireless data revenues -- driven by messaging, Internet access, access to applications and related services -- increased $1.1 billion, or 27.4 percent, from the year-earlier quarter to $4.9 billion. Postpaid wireless subscribers on monthly data plans also increased by 20.4 percent over the past year, while text messages carried on its network increased by nearly 29 percent to 173.1 billion. At the same time, multimedia messages increased by 75.0 percent to 3.9 billion.

Looking ahead to 2011, AT&T said it expects consolidated revenue growth but offered no formal estimates as it's likely taking a wait-and-see approach to the impact Verizon's iPhone launch will have on its wireless business when the rival carrier begins offering the iPhone to its own customers on February 10th.
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