AT&T’s first-quarter profit fell 9 percent on continued wireline defections and underfunded pension benefits. Not surprisingly, the iPhone continued to boost AT&T’s balance sheet.
More than 1.6 million iPhone 3G devices were activated in the first quarter, adding to the company’s high-value customer base. iPhone customers have significantly lower churn and deliver ARPU that is approximately 1.6 times higher than the company’s overall postpaid subscriber base. More than 40 percent of the new iPhone activations were by new customers.
The device also contributed to a 38.6 percent increase in wireless data revenue, which hit $3.2 billion as messaging, applications and Internet usage soared. Postpaid ARPU rose for the fifth consecutive quarter to $59.21. Almost 41 percent of AT&T’s postpaid wireless subscribers had a 3G device by the end of the first quarter, more than double last year’s figure of 19.5 percent.
The company’s subscriber base hit 78.2 million on a 24 percent net increase in postpaid customer additions; the company added 1.2 million net customers in the quarter. Churn held steady at 1.2 percent.
“AT&T is becoming more like a public utility during recessionary times. More people are using AT&T services more efficiently and more people simply cannot lose the connectedness they are receiving,” says analyst James Brehm at Frost and Sullivan.
Still, the company has not been completely immune to recessionary pressures. AT&T faces increased competition from low-price carriers like Leap Wireless International and MetroPCS, whose discount plans are attractive to cash-strapped consumers.
In a conference call with analysts, AT&T CEO Randall Stephenson said that the company “had some impact in gross sales from new offerings in the marketplace.” AT&T would be testing some new low-cost plans in select markets, he said, but would proceed with caution: “We’ll be very careful not to do something that could cannibalize our post-paid base, that’s really where our bread and butter is.”
Overall, AT&T posted a net income of $3.2 billion, or 53 cents per diluted share, compared to last year’s figure of $3.52 billion, or 57 cents per diluted share. Retiree benefits cut into profits by $400 million, or 5 cents per diluted share. Revenue dipped 0.6 percent, to $30.6 billion.
AT&T has struggled to offset declines in its wireline segment, which have accelerated as cash-conscious consumers cancel home phones in an effort to cut household expenses.
The company is shutting down its Internet-based CallVantage phone service, making U-verse AT&T’s only VoIP offering. The service will be completely disconnected by the end of the year. The termination of the service was expected: AT&T stopped offering it to new subscribers last summer.