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Wednesday, April 20, 2011, 05:40 am PT (08:40 am ET)

AT&T iPhone activations up 33%, unaffected by Verizon, but 3G tablets prove weak

AT&T reported its quarterly earnings on Wednesday, revealing that it activated 3.6 million iPhones in the first quarter of 2011, a 33 percent increase from a year prior. Tablet activations, however, were much lower, at just 322,000.

iPhone activations increased by a million in the first quarter of 2011, with 23 percent of those subscribers new to AT&T. iPhone subscriber churn, or customer turnover, was unchanged from a year ago.

The numbers suggest that the immediate impact of the Verizon iPhone launch during the quarter was not as great as some had predicted. AT&T has long been maligned for the performance of its network, particularly by iPhone owners.

Though Verizon has a larger 3G network footprint and its customers experience fewer dropped calls, it also has a 3G network that is much slower than AT&T. In addition, Verizon's CDMA network does not allow simultaneous voice and data connections, while AT&T's does.

Though iPhone sales at AT&T were strong, sales of 3G-capable tablets, including the iPad, disappointed. AT&T reported that only 322,000 new tablet subscribers were added in the quarter, with more than 80 percent of those booked to the prepaid category.

Considering the strong debut for the iPad 2 during the quarter, the numbers would suggest that the 3G-capable iPad is not a popular option for consumers. Apple and its carrier partners sell different iPad models with integrated 3G radios for the AT&T and Verizon networks.

AT&T added 62,000 customers in the quarter, which beat analyst expectations. According to analysts polled by Reuters, Wall Street watchers expected AT&T to report a net loss of 83,000 customers following the launch of the Verizon iPhone.

Still, Apple's new partnership with Verizon clearly had a impact, as AT&T's new activations were significantly reduced from 400,000 in the previous quarter. Verizon will report its own earnings on Thursday, while Apple is set to reveal its earnings this evening in a conference call at 5 p.m. Eastern.

AT&T's earnings increased to $3.4 billion, or 57 cents per share. Revenue was up 2.3 percent to $31.25 billion.

"We delivered another robust mobile broadband growth quarter for a very solid start to the year," said Randall Stephenson, AT&T chairman and chief executive officer. "We posted double-digit wireless revenue growth, and we set new first-quarter records in total net adds, connected device net adds and smartphone sales. Growth in tablets and other branded computing subscribers also continues to be strong."