As someone once put it, AT&T may not be addicted to the iPhone, but it’s nursing one heck of a habit. The iPhone has accounted for an ever-increasing percentage of AT&T’s new subscribers since it inked an exclusivity agreement with Apple in 2007.
If the carrier’s second-quarter results are any indication, that trend hasn’t changed one bit. Extrapolating from figures provided by the company, about 70 percent of the carrier’s 1.15 million postpaid net adds were iPhone subscribers new to AT&T. That’s 800,000 new customers lining up to buy the trendy device in the second quarter.
So it’s no wonder that AT&T has begun calling itself the “smartphone carrier.” The number of postpaid subscribers with integrated devices on AT&T’s network has more than doubled to 22.35 million over the past year, and AT&T activated 2.4 million iPhones in the second quarter alone.
To put matters into further context, the number of integrated devices running on its network grew by more than 3.5 million units in the second quarter. The percentage of the carriers’ 62.1 million postpaid subscriber base with integrated devices like the iPhone now stands at 36 percent.
But for all the benefits of the iPhone – which has lower churn and ARPU standing 1.6 times higher than the company’s postpaid subscriber base – AT&T’s dependency on the iPhone has some financial side effects.
The carrier heavily subsidizes the device, a cost which noticeably bit into profits this quarter. AT&T’s operating expenses rose almost 5 percent in the second quarter to $12.48 million, a rise it attributes to “increased acquisition costs from the company’s iPhone 3GS launch.”
Although the company continues to deal with wireline defections and underfunded pension benefits, costs from the iPhone were the main contributor to a 15 percent decline in AT&T’s profits, which fell to $3.2 million from $3.77 million last year.
Of course, the revenue that the device brings in can’t be ignored. AT&T’s postpaid wireless subscriber ARPU increased 2.3 percent $60.21 over last year. Postpaid data reached $17.72, an increase of $3.66 over the year-earlier quarter and up $1.24 from the first quarter of this year – a rise largely attributed to the iPhone and other integrated devices.